What the State Budget Means for Real Estate Community

As we continue to weather the effects of the Coronavirus (COVID-19) crisis, New York elected officials are taking the necessary steps to keep our State moving forward.

Most notably, Governor Andrew Cuomo and the New York State Legislature recently announced the 2021 fiscal year (FY21) State budget agreement.

The Real Estate Board of New York (REBNY) thanks Governor Cuomo and the State Legislators for passing a timely budget that will allow key services to continue to operate as New Yorkers confront the Coronavirus crisis.

Some of the state budget provisions serve as an important reminder that the job creation will be essential to New York City and State’s economic recovery. Specifically, the State made the important decisions to strengthen key economic incentive programs for development and deepen its commitment to sustainable green development.

The decision by State leaders to renew economic incentive programs will play a pivotal role in regenerating prosperity. The new state budget agreement extended the Relocation and Employment Assistance Program (REAP), which creates approximately 11,000 jobs annually.

This incentive, coupled with the Industrial and Commercial Abatement Program (ICAP), will stimulate outer borough commercial development. Additionally, the Energy Cost Savings Program was extended, which reduces energy costs for companies relocating outside New York’s central business district. The positive effects of these economic incentive programs will be felt across the five boroughs.

The new State budget also included comprehensive reforms to the way we develop renewable energy projects, allowing New York to more effectively reach its shared climate goals.

These changes include expediting the review and permitting period for green energy projects to help new wind and solar projects get up and running. These new renewable projects help to meet the State’s clean energy goals, improve the overall air quality, and drive economic activity by creating sustainable jobs for New Yorkers.

However, REBNY believes the State’s decision to expand the application of construction prevailing wage was a mistake.  The new law will require that the “prevailing wage” be paid projects that are worth more than $5 million and receive at least 30 percent of their financing from public funds.

REBNY supports organized labor and is not opposed to the concept of prevailing wage.  Our members employ the overwhelming share of 32BJ SEIU workers in New York City.  When construction is performed by union contractors in New York City, it is customarily occurring on a site owned by a REBNY member.

With respect to construction prevailing wage in New York City, the numbers simply do not add up.

The way construction prevailing wage is calculated in New York City bears no relationship to market reality. For example, according to federal data, the typical plumber in the New York City metropolitan area costs around $100,000 per year.  When New York City prevailing wage rates are applied, the plumber position costs over $210,000 per year!

This law will hinder the creation of new construction jobs.  State leaders implicitly acknowledged that by holding off the law’s application until 2022 – at the earliest.

At a time when we need to be looking for ways to jumpstart the economy, this expanded application of construction prevailing wage will lead to less work for both union and non-union construction workers.

As we continue to navigate the Coronavirus crisis, it is encouraging to see New Yorkers taking certain steps to ensure future economic growth while adhering to the guidelines presented by elected officials to keep us healthy and safe.

The FY21 New York State budget’s provisions to strengthen key economic incentive programs for development and deepen its commitment to sustainable green development are no exception.

The real estate industry will be essential to reviving New York City’s economic recovery. REBNY will continue to advocate for policies that will create long-term success.