Union Labor Likely to Curtail 421-A Development in Less Affluent Areas, Study Finds

The 421-a program, a controversial affordable housing tax abatement which is set to expire this December, will most likely be renewed pending a deal between the real estate industry and construction trades. (If no deal is reached, the program, which has been in existence since 1971 and received a six-month extension this June, will end)

The use of union labor, however, which been never before been a component of 421-a, is almost certain to increase construction costs. A new study from the Furman Institute at NYU that looks at possible outcomes of the program’s revision, finds that higher construction costs could significantly hinder the program’s effectiveness as a generator of affordable rental housing, particularly in low- to moderate-income neighborhoods.

“In the less strong rental markets, a rise in construction costs could leave mid- and high-rise rental development uneconomic at current market rents even if land were free,” the study notes, adding that deeper and/or additional cross subsidies may be necessary to spur construction in these cases.

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