Governor Cuomo Wants You to Pay Developers' Labor Costs

 You guys got it, right? (truthaboutguns)

You guys got it, right? (truthaboutguns)

Housing construction is complicated in New York City, but leave it to Governor Cuomo to make a bad thing worse.  The Governor had already single-handedly killed negotiations on 421a, the infamous tax subsidy to developers who agree to construct some affordable housing units, in the midst of Mayor de Blasio’s push to pass his ambitious housing plan.  As a result, hundreds of affordable units, and perhaps the Mayor’s entire housing plan, have remained in limbo. The Governor’s recently proposed solution makes matters worse.

Readers of this blog will be familiar with the problems that arose through the implementation of 421a since it was passed in 1971.  It was conceived while the NYC market was at its nadir, but quietly became a massive cash-transfer for developers when the market rebounded.  It has cost the city hundred of millions of dollars in lost tax revenue over the last decade’s hot market run, prompting many housing advocates to call for it to be abolished outright when it was set to expire last year. 

Mayor de Blasio took a different approach when putting his two major housing policy initiatives together last year.  The Mayor’s plan relied heavily on remodeling 421a with input from developers and construction union leaders.  He appears to have understood the political need for developers and construction unions to buy into his plan and the economic need for some type of tax benefit to spur development with his new requirements.  At the time that the law was up for renewal, the mayor was working with unions and developers on a compromised 421a version that would allow some non-union labor on certain housing projects that fell under the proposed guidelines.

It would be one thing if the Governor was against 421a from a policy standpoint but, in many circles, the governor’s last minute insistence on prevailing wage levels was seen as a direct attempt to kill the mayor’s plan for personal reasons.  The long-simmering tensions between the Governor and the Mayor, despite both being Democrats and broadly agreeing on policy, has been a major impediment to state and city policy-making on a number of issues.  Given the Governor’s track record, it’s hard not to look at his action as a petty lashing out.  The situation may be petty but the stakes are real - over the last eight months, a number of developments have been put on hold or out right cancelled over the 421a uncertainty.

To some degree, Governor Cuomo had political coverage at the time because he promised to announce his own detailed $2b housing plan.  The Governor created the impression that, if he was blocking Mayor de Blasio, it was because his plan was bigger and better. We’ll never know because he has never revealed his plan.  It, along with the $2b, quietly got pushed from the agenda until next year.

Instead, Governor Cuomo sent out a one-page outline to developers that suggested restoring 421a with prevailing wave requirements with the state directly subsidizing the differences for developers.  This type of direct wage intervention is virtually unprecedented. Taxpayers will literally be writing checks to construction workers to the tune of millions of dollars.

At least we think.  We don’t really know the true cost of this proposal because there aren’t many details about where the money would come from, what projects would get covered, who would administer and monitor the payments, and what if any restrictions or caps would be installed.  Although some numbers have been mentioned under some circumstances, the publicly available information is sparse.

To the extent that other parties are able to comment on the proposal as it stands, developers appear to be open to further consideration (as you would expect) and even Mayor de Blasio has offered support if the state holds to its obligation of paying those wages instead of the city.  We can expect a lot of closed-door talks to take place into the fall.

Governor Cuomo’s political antics against the Mayor and NYC in general have always appeared petty and vindictive to me.  It’s not the first time a governor has been nakedly jealous or resentful towards a mayor of NYC, but given the stakes of this particular issue – lest we forget this is about addressing the affordable housing crisis – the governor’s actions are a stunning failure of leadership.

Simply put, no taxpayer should support a vague plan to directly subsidize a developer’s construction costs.  Taxpayers should support the right to fair wages and safe working conditions for construction workers, but these are not, nor should the governor try to make them into, related issues.  This type of policy proposal is ill-conceived and potentially reckless.

If 421a is necessary for all parties to move forward right now, fine.  There will need to be complicated discussions and complicated agreements.  I certainly concede that there are no simple solutions to creating more housing under the existing framework. Though I argue that there are more options to consider and more ideas to explore to improve the creation of affordable housing in NYC, we must get the best possible agreement from all invested stakeholders.  If the Governor is secretly setting on a much better plan, I am all ears.

The Governor should be held accountable for holding up progress on affordable housing in the state.  He should be held accountable for promising then punting on a major $2b housing proposal.  And he should be held accountable for continuing to operate behind closed-doors and in vague terms.  Every stakeholder in the housing market, whether public or private, corporation or citizen, deserves better leadership.