Affordable housing developers slam wage requirements of new tax break

A recent spate of 99-unit buildings does not sit well with affordable housing developers.

A group of affordable housing executives slammed the new state tax break that has given rise to this recent trend at a legal panel hosted by the New York City Bar Association. The developers gathered at the bar association’s Midtown headquarters Tuesday to discuss challenges in their sector — regulatory hurdles key among them.

New York City has seen a surge in developers proposing buildings with exactly 99 units due to the new tax program known as 485-x, a replacement for a popular policy called 421-a, which requires a $40 hourly construction worker wage for buildings with 100 or more apartments.

“It’s decimating affordable housing where it’s probably most needed,” said John Valladares, an executive with the Slate Property Group.

Some developers and their legal teams have begun to get creative — with some starting to propose projects that split larger developments up into discrete 99-unit towers to skirt the wage requirements.

“That’s why you need lawyers,” quipped moderator Max Rayetsky, a construction lawyer with Meltzer, Lippe, Goldstein & Breitstone.

The broader issue for housing affordability with the new tax incentive is that the new 99-unit projects are being filed in areas of the city that are zoned for higher density. The effect is that developers are leaving units on the floor, panelists said.

“We’re being asked to solve one of the most historic housing crises of the country 25 units at a time,” said Eli Weiss, principal at Joy Construction.

It’s not all doom and gloom for the affordable housing sector, panelists said. Some praised the passage of the New York City Council’s “City of Yes” zoning plan, which loosens zoning regulations across the city, and charter reforms on housing that voters approved in November, which are designed to shorten the timeline for government approvals for affordable housing.

Peter Procida, a principal of Procida Development Group, said that last year most projects seeking city approvals had a minimum three-year timeline. Now with the approvals process getting fast-tracked in some cases, it will put pressure on the attorneys managing the city’s environmental review process to finish the process quicker.

While Valladares agreed that City of Yes is a good first step for the city to increase housing supply across the city that’s needed to bring down the cost, he said that 80,000 additional units it’s estimated to bring in is merely “a drop was a drop in the bucket” of what’s needed.

“It’s like pissing in the swimming pool and trying to change the temperature,” Valladares said.