The Real Estate Board of New York to The Committee on Housing and Buildings of the New York City Council Regarding Intro. No. 165

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REBNY thanks the committee for the opportunity to provide testimony on Intro 165, which seeks to conduct a feasibility study on the creation of a linkage fee.

Intro 165 would mandate the Mayor to appoint an office or agency to perform a feasibility study on implementing a linkage fee in New York City. The linkage fee would be imposed on developers for residential or commercial construction projects exceeding 100,000 square feet. The funds generated from this fee would be allocated towards job training for workers on the project site and contributions to a community trust benefiting the area within a 2-mile radius of the site.

REBNY shares the City Council’s commitment to expanding opportunities for workforce development and employment training. Our experience in this space with Building Skills NY has taught us that these types of programs are most effective when they are implemented in close coordination with employers so that program participants are ensured a job upon completion of their training. Further, providers need to be transparent about the populations they serve and the outcomes of their programs to assess whether program objectives are successfully being met. We look forward to working with the Council should any program be established to ensure that funds generated from a linkage fee are used with these principles in mind.

While it is always appropriate to fully study a new policy or program before it is implemented, it is important to be mindful that New York City construction and development has some of the highest costs in the country. According to the most recent New York Building Congress Construction Outlook report, the average cost of construction in New York City was approximately $362 per square foot in 2020, compared to the national average of $237 per square foot. According to the Citizens Budget Commission, high rise development can average over $700 a square foot and construction costs in New York City increase faster than the rate of inflation.

New York City is also an extremely complex environment for construction. This includes extensive land permitting processes that, according to the Adams Administration’s Get Stuff Built report, combine to increase monthly rents by $430 in new residential buildings.

Linkage fees would only add to these costs. Linkage fees enacted in other jurisdictions can be significant. For instance, a recent report by the City of Oakland notes that a typical fee for large apartment projects is $39,264 per unit. In San Francisco, this fee can amount to upwards of $74,597 per unit. Because of these costs, a study by the Lincoln Institute of Land Policy found that certain types of linkage fees reduce the prevalence of multi-family housing developments. This concern is particularly significant for New York City, which is already facing a housing crisis driven by a lack of supply.

Therefore, any study of a linkage fee program requires caution and a clear understanding of the potential unforeseen consequences of imposing higher costs on developers. Additionally, funds must be spent on programs that are open, transparent, and data driven and generate concrete job opportunities.

Thank you for your consideration of these points.