Developers have spoken: building rental housing in New York simply won’t happen without tax cuts.
Now the city comptroller’s office is proposing the rules to implement New York’s latest tax cut program, 485x.
The program has drawn attention for its requirement that projects of 100 or more units pay a minimum construction wage of $40 per hour. That minimum wage increases even higher for even larger projects. In response, developers have pulled back from large-scale projects.
The comptroller’s proposal deviates from the law on a number of points. And industry organizations are already expressing their concerns.
A sticking point for both developers and construction industry representatives is the timeline for obtaining an exemption from the rules.
The regulator proposes that developers who have an employment contract must apply to the agency for an exemption five months before construction. This goes further than the law, which prescribes a notice period of three months.
Alvin Schein, a partner and attorney at Adler & Stachenfeld, called the requirement “extremely burdensome.” The requirement would mean project owners would have to wait to award labor bids or make them subject to controller approval, Schein said in written public comment.
Felice Farber, executive director of the Subcontractors Trade Association, said she doesn’t think it should be up to the comptroller’s office to approve exemptions; they should be granted automatically.
Another sore point for the sector lies in the definition of wages in the proposal. The auditor proposes to limit the wage definition to hourly wages only. This excludes payroll taxes and other legally required contributions. The Real Estate Board of New York disagreed, saying the statute explicitly includes employee benefits and employer taxes.
In addition, the comptroller’s office seeks to define what the law calls the “greater prevailing wage.” The agency defines this as the highest rate for classification in the Comptroller’s schedules, without regard to experience levels. “Applying the highest rate, regardless of an employee’s experience, will increase costs and deviates from prevailing wage standards that tie rates to experience or internship development,” REBNY said in a written comment.
This is just a proposal and will be tweaked. But the cost of any mistakes can be high for developers. The law says that after three violations in five years, the comptroller can terminate and take back benefits 485 times. Losing the benefit would be the difference between making money and not for many projects.
Building Trades Employers’ Association, which represents union employers in the construction industry, said it supported the comptroller’s efforts to “provide meaningful oversight and hold developers accountable.”
What we’re thinking about: The Justice Department has released a trove of documents related to the Jeffrey Epstein investigation. We went through those and published a number of stories, including one about Epstein’s connections to Core Club and Jennie Enterprise. But there are thousands of documents. Something you notice? Send me a message at lilah.burke@therealdeal.com.
Something we learned: The Big Apple is in for a big freeze this weekend, with a low of -1 on Sunday. But this is 14 degrees warmer than the coldest Central Park ever recorded, which was -15 degrees in 1934.
Elsewhere:
– Brooklyn Democrats are once again backing Gov. Kathy Hochul’s re-election after withdrawing support. Political reports that leadership initially gained support for Hochul due to her choice of Adrienne Adams as her potential second-in-command. Sources told the newspaper that Brooklyn party chairman Rodneyse Bichotte Hermelyn has long harbored a personal vendetta against Adams. Bichotte Hermelyn has insisted that there is no bad blood.
– Mayor Zehran. executive order Friday underscored the policy of New York’s sanctuary city. He directed city agencies to review their internal policies regarding federal immigration enforcement, reiterating that city data cannot be shared except when required by law.
– In the Tristate area, progressive candidate Analilia Mejia maintains a narrow lead over rival Tom Malinowski in the Democratic primary for New Jersey’s 11th District. Democrat Mikie Sherill vacated the seat when she was inaugurated as governor. The special election is April 16.
Closing time
Residential: The highest residential deal recorded on Friday was $13.4 million for 50 West 66th Street, 11D. The new construction condo unit on the Upper West Side is 3,900 square feet. Douglas Elliman has the listing through developer Extell Marketing Group.
Commercial: The best recorded commercial deal was $31.8 million for Greenestraat 67. The Soho building is a mixed-use rental property for four families with an office component. It is more than 10,000 square meters.
New on the market: The highest price for a home to hit the market was $19.5 million for 763 Greenwich Street. The West Village townhome is 5,500 square feet. Sotheby’s International Realties Chris Poore and Serena Boardman have the mention.
— Joseph Jungerman
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