The future of affordable housing in New York City is in the hands of Albany now, as the debate over whether to renew the 421-a tax abatement — the key city program promoting low-cost residential development — gets fully underway. As the state reviews ways to reform the program, legislators must avoid proposals to link prevailing wage to 421-a projects.
Mandating prevailing wages on 421-a construction projects will severely limit the creation of new rental housing in New York City — especially affordable units.
It is no secret that New York City is experiencing a severe housing crisis. Today, more than half of the city’s renter households struggle to pay the bills. Affordable housing lotteries regularly receive tens of thousands of applications for a fraction of available units.
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The city’s homeless shelter population has swelled to nearly 60,000. Rising construction costs and unprecedented land prices are making it even harder to build the housing that most New Yorkers need. At the same time, there has been a steady retreat by the federal government from financing these projects.
Given the magnitude of the crisis, New York must use every available tool to serve the needs of the city’s residents — and 421-a is one such critical tool. The program offers property tax abatements of between 10 and 25 years for new rental buildings, encouraging the construction of new multi-family housing that would otherwise be impossible to build given the city’s high tax rate on rental buildings.
The program has been a huge success. It has led to the creation of more than 70,000 affordable housing units in the last three decades, helping revitalize neighborhoods throughout the city. And it is the only tax abatement available as-of-right for mixed-income affordable housing.
But that success would be drastically undermined if prevailing-wage rates were required on all projects built under the program. Proponents claim a mandate would ensure good-paying jobs that offer career paths into the middle class.
But New York City is already the top-paying metropolitan area in the country for construction occupations. Supporters rarely define “good-paying jobs,” nor do they provide any context for how prevailing wages are determined.
The fact is, there is virtually no transparency in how prevailing wages rates are set. Collective bargaining agreements negotiated between unions and private employers without government input, and unavailable for public inspection, are adopted as the prevailing wage rate without question.
“Prevailing wage” does not actually represent the mean wage in the construction industry. Rather, it mirrors the current union wage, which is significantly higher than the even the upper end of the Bureau of Labor Statistics reported scale paid in New York City.
For example, this translates to an average state prevailing wage of $45 per hour for a carpenter, not including an additional $41 per hour fringe or overtime.
Requiring the prevailing wage would result in a huge jump in wages at affordable housing projects — and leave these projects with huge funding gaps. The result would be many projects unbuilt, employees out of work and residents left without new homes.
Even if city resources were available to fill those gaps, wouldn’t it be better to use those taxpayer funds to create more housing and well-paying construction jobs than artificially inflating wages for a chosen few?
A prevailing wage mandate would also make it more difficult for affordable housing developers to hire local workers and help keep wages in the community — an important issue since many affordable projects are built in neighborhoods with high unemployment.
Income inequality has rightly become a major topic of public debate. But requiring the prevailing wage on 421-a projects would only exacerbate the problem and kill job growth in the affordable housing industry.
That, combined with dramatically less housing, is something the city truly cannot afford.
Milstein is president and CEO of the New York State Association for Affordable Housing.
