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Exposé Suggests Prevailing Wage Abuse at Buildings Benefiting from NYC’s 421-a Tax Break

SEIU 32BJ 421-a previaling wage

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A recent ProPublica piece on the 421-a tax abatement program in New York highlights some of the abuses workers face due to a lack of enforcement by the agencies charged with ensuring regulations are followed. 

The controversial program is the city’s largest housing subsidy and has faced increased scrutiny since the state forced trade unions and the Real Estate Board of New York (REBNY) to negotiate its extension.  If they cannot reach a deal by January 15th, the city will lose its authority to approve new 421-a projects.  

The basis of the program is this: in exchange for building affordable housing units, and in many cases for paying workers the prevailing wage, companies receive hefty tax abatements.  For example, one of the main companies featured in the ProPublica piece, Forest Properties, receives a $900,000 tax break annually on its 421-a building, The Exo.  But the company fails to properly pay its concierges the prevailing wage, which should exclude it from the tax break. Through a lack of regulation, however, it continues to skimp on nearly $1 million of taxes without repercussions.  

The abuses to the system by those who enjoy its benefits run deep:

As ProPublica has reported, thousands of building owners have failed to register their apartments for rent limits, as required by law. Landlords also have banked the 421-a tax breaks unabated while overcharging tenants with bogus “preferential” rents and abusing other rules meant to protect tenants.

When it comes to prevailing wages, there’s little debate that enforcement has been lacking. The city agency that administers 421-a — the Department of Housing Preservation and Development (HPD) — says that it has no authority pursue employers and readily concedes that it hasn’t done so.

Oversight of the wage requirement was transferred to city comptroller’s office under a reauthorization of the 421-a program that lawmakers approved last summer in Albany.
Comptroller Scott Stringer told ProPublica he will use the “full weight and resources” of his office to hold building owners accountable, but how far his reach will extend remains to be seen.

One method of helping workers receive the pay and benefits entitled to them through the 421-a tax program has been educational outreach, spearheaded by the 32BJ Service Employees International Union.  Their efforts have included launching a campaign to identify all buildings that are covered by the tax abatement program and educate the workers in that building of their rights.  As part of extension negotiations, the union has put in place clear procedures to ensure the effective enforcement of prevailing wages for service workers.

“We have to be like your neighborhood police,” 32BJ President Hector Figueroa said, “because prevailing wage laws have very little meaning if they’re not enforced.”

Up until 2007, no such standards were attached to the program. Now, the future of these standards — not only for workers at the buildings but for the tradesmen who build these projects in the future — is at the core of negotiations between construction unions and REBNY.

Somewhere in the minutia of legal jargon lies a confusing grey area that can be manipulated by companies with the financial firepower to employ big shot legal teams.  The workers whose financial futures are at stake, of course, are not afforded the same luxury.  Many wish to unionize, while others are completely unaware that they are being taken advantage of.  The 32BJ SEIU may be their best bet, and the union is busy reaching out to employees to let them know their options.  A 2013 audit by the union found that nearly half of the buildings surveyed were underpaying their employees.

“New York taxpayers are subsidizing low quality jobs with little or no benefits, which further widens the income gap in the city,” the union noted at the time.

Read the ProPublica piece in its entirety, and visit this curated We Party Patriots search query for more on the 421-a tax abatement program and its shortcomings.   


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