Hochul Shelved Undisclosed Plans for Housing Tax Break After Union Outcry

Kathy Hochul proposed an executive order to extend the controversial 421-a tax break. Labor unions shot it down.

Sam Mellins   ·   July 7, 2023
Governor Kathy Hochul sits in a chair at a breakfast meeting and looks up.
Kathy Hochul at a breakfast hosted by the Building Trades Employers Association, a construction industry group, on June 22. | Darren McGee / Office of Governor Kathy Hochul
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Governor Kathy Hochul proposed using an executive order to extend a controversial housing development tax break last week, New York Focus has learned, but the plan appeared to stall after New York City’s major construction unions demanded wage provisions that Hochul and real estate industry groups weren’t willing to accept.

The proposal would have created a program similar to the 421-a property tax break, which has helped pay for nearly every major housing development in New York City in the past half century and expired last summer. It would allow specific developments already approved for the tax break to qualify.

Hochul’s office did not respond to multiple requests for comment.

Buildings that qualified for 421-a before it expired in June 2022 can still reap its benefits, but they have to complete construction before June 2026. The Real Estate Board of New York, the city’s flagship developer and landlord group, claims that many developments won’t be able to meet that deadline, potentially imperiling over 30,000 new apartments in a city facing a dire housing shortage. Hochul’s proposal would have extended the 2026 deadline for projects that are already underway, though it’s not clear by how much.

“It would be very helpful, but only for the existing projects, which are a drop in the bucket compared to the scale of the housing crisis,” said Tucker Reed, co-founder and principal of real estate development firm Totem, when asked about the proposal by New York Focus.

The legislature has renewed the program several times since it began in 1971, but in the past two legislative sessions, state lawmakers have rebuffed Hochul’s efforts to extend and tweak it. The governor’s latest strategy — effectively continuing the program through executive order — was a new one, and it rubbed some lawmakers the wrong way.

“It would be very helpful, but only for the existing projects, which are a drop in the bucket compared to the scale of the housing crisis.”

—Tucker Reed, Totem

“Since the legislature wasn’t able to do anything on housing, this is her trying to show that she’s the governor,” one legislator said, referring to the body’s lack of action to address the housing crisis. “I’m disgusted by this.”

Proponents say the program is critical for building both affordable and market-rate rental housing, and that its expiration could threaten tens of thousands of new apartments in a city that desperately needs them. Critics charge it’s an ineffective, poorly targeted giveaway to real estate developers, and doesn’t produce enough bang to justify nearly two billion city bucks annually.

Last week, Hochul sought the blessing of the Building and Construction Trades Council, a coalition of the city’s major construction unions, for the executive order. They were open to the idea — but only if it came with substantial wage guarantees for their members.

“We want to get something done, but not if it’s not the right thing,” Rebecca LaMorte, spokesperson for the New York labor management fund of the Mason Tenders’ union, told New York Focus. “Unfortunately, the wage that we came to was not tolerable.”

“Our union will not support any extension of 421-a unless it is updated to include reasonable labor standards,” said Joseph Azzopardi, business manager and secretary treasurer of District Council 9, the local chapter of the Painters and Allied Trades union. “We are strong proponents of affordable housing, but if the people who build this housing are not paid fairly enough to afford it themselves, it’s not really affordable.”

LaMorte and Azzopardi didn’t specify what wage level they were seeking. Another individual familiar with negotiations said that the demands centered on guarantees that payment would be distributed evenly across unions, and that wage floors would apply to all projects that were granted the tax break. (The expired program guaranteed a certain wage level for construction workers, but only for large developments in specific high-value neighborhoods.)

The Trades Council told Hochul’s office that these conditions were non-negotiable last week. Hochul’s staff hasn’t advanced the proposal since, multiple sources said.

“My understanding from the governor’s office is that there’s no date right now to sign an executive order,” said one individual in contact with the governor’s staff.

LaMorte said that the Real Estate Board of New York, which has a close relationship with Hochul, was involved in negotiations and opposed the unions’ demands. The board did not respond to requests for comment.

“Unfortunately, REBNY was not on board with what we were comfortable with,” LaMorte said. “That’s when we went to the governor and we said, ‘We’re not going to be good with this.’”

“It did not seem like the real estate industry was willing to give a quarter on making any modifications to the labor standards,” the individual familiar with negotiations said.

“Our union will not support any extension of 421-a unless it is updated to include reasonable labor standards.”

—Joseph Azzopardi, District Council 9

Both the real estate industry and the construction unions were major supporters of Hochul’s campaign leading up to last year’s election. Real estate industry players contributed over $5 million, and the state building trades council chipped in nearly $1.9 million.

Hochul has been hinting at executive action on housing since May, when she broached the idea after the legislature shot down her signature plan to boost the state’s housing supply by hundreds of thousands of units.

Labor unions were lukewarm on that plan — which did not include any union protections or guarantees — too, though some union leaders called on her to add them to the final state budget before the plan was scrapped entirely.

“We were in a position of wanting to be supportive,” LaMorte said of Hochul’s housing supply plan. “But without wage standards, without responsible contracting standards, without project labor agreement standards for projects of a certain size, we didn’t have that comfort level to come out fully and support it.”

The episode is the latest development in the governor’s sometimes rocky relationship with labor. But the source familiar with negotiations suggested that the decision to approach unions before advancing the tax break plan may reflect a growing awareness of political dynamics after several high profile negotiating failures this year, including her housing plan and her failed nomination for chief judge.

“I think that after repeated trial and error, the governor has learned not to announce things that no one supports,” they said.

Sam Mellins is senior reporter at New York Focus, which he has been a part of since launch day. His reporting has also appeared in The San Francisco Chronicle, The Intercept, THE CITY, and The Nation. 
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