NYC Lets Luxury Building Owners Stiff Workers And Still Get A Tax Break
by Cezary Podkul and Marcelo Rochabrun ProPublica, Dec. 30, 2015, 11:03 a.m.

When Isaac Bowman got a concierge job at a luxury Queens apartment building last year, he hoped it would be his ticket out of a homeless shelter and into New York City’s middle class.

The pay was low at only $10 an hour. But at least it was a start toward getting his partner and three stepchildren into an apartment of their own, Bowman reasoned.

Bowman took the job 2014 and became a victim of wage theft.

Under terms of a large city tax subsidy, owners of the 117-unit building, The Exo, were legally bound to pay Bowman $16.88 an hour 2014 almost 70 percent more than he got 2014 plus benefits now worth $10.13 per hour.

The higher pay is required at bigger buildings that benefit from the city’s 421-a housing program, which grants about $1.1 billion in tax breaks each year to owners. In return, they must pay service employees the “prevailing wage” 2014 a rate set by the city comptroller that is benchmarked to union contracts so that non-union workers get comparable pay for similar work.

Paying less than the law requires can subject employers to losing their tax break. But city officials haven’t enforced the rules on compensation at 421-a buildings, leaving workers like Bowman vulnerable to abuse.

“They’re stealing from people like me,” said Bowman, who only learned of the requirement from union organizers this year. “I don’t think it’s fair.”

Forest Properties, which owns The Exo, did not respond to requests for comment. Neither did the building manger. Tax bills show The Exo has been receiving an annual 421-a property tax break worth about $900,000 since 2011.

The failure to police the prevailing wage mandate is one more in a series of oversight lapses by city and state officials who regulate the 421-a program, which is New York City’s biggest housing subsidy.

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 2014 the Department of Housing Preservation and Development (HPD) 2014 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.

That’s because lawmakers, as part of the reauthorization, required the city’s real estate lobby and building trades unions to agree on an expansion of prevailing wages to construction jobs on new 421-a buildings. Without a deal by Jan. 15, the city will lose authority to approve new 421-a projects.

The two sides aren’t discussing details of the talks. But Gary LaBarbera, the lead union negotiator, said regulators need to act because wage theft is already “an epidemic problem” for nonunion construction workers.

As is, it’s up to workers to bring wage-theft allegations to the attention of authorities. But employees are caught in a Catch-22: They often have no idea that they’re entitled to the prevailing wage, and finding out if they are isn’t easy.

Smaller 421-a buildings are exempt from the requirement, and while HPD keeps a list of the buildings that are covered, the agency doesn’t disclose it. HPD turned down ProPublica’s requests to release the list, and officials in Stringer’s office also declined to provide it, saying the list is not yet finalized.

To fill the gap, 32BJ Service Employees International Union has launched a push to identify buildings that are covered and to educate workers about their rights. The Real Estate Board of New York, which represents large developers and building owners, said it is working with the union “to put in place clear procedures to ensure the effective enforcement” of prevailing wages for service workers.

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

For most of the 44 years the 421-a tax break has been around, there were no wage requirements. That changed in 2007, when lawmakers also expanded the areas in the city where developers getting the tax break had to include reduced-rent apartments for lower-income tenants.

Sponsors of the change estimated that up to half of large 421-a buildings did not pay prevailing wages and benefits. By comparison, about 4 in 5 building workers citywide earned those amounts.

The 2007 law explicitly stated that “no benefits” would be granted to 421-a buildings that didn’t offer prevailing wages, whether workers were employed directly or by outside contractors. The requirement was limited to buildings with 50 or more units that started construction after December 2007.

The measure was a big win for labor unions like 32BJ, but it contained one big flaw: enforcement.

HPD, which determines eligibility for the 421-a tax break, was given authority to sanction building owners who didn’t comply. But according to HPD, that didn’t include the power to investigate building owners or to act on complaints. Typically, those duties have fallen to the comptroller’s office.

It is unclear if the missing enforcement authority was an oversight or an intentional omission. “The original statute as it was drafted had a lot of holes in it,” said James Murphy, a labor lawyer at the firm of Virginia & Ambinder in New York.

Regardless, HPD continued to approve 421-a tax breaks with little attention to the prevailing wage provision. Since the 2007 law came into effect, up to 400 buildings have come under the 421-a wage requirement, according to a preliminary estimate by the city.

The number of workers affected is uncertain, although in 2013, the 32BJ union found that nearly half the 421-a buildings it surveyed had underpaid 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 said then. It organized protests to bring attention to the issue and criticized HPD for “refusing” to enforce the law, but the agency maintained it had no authority to do so.

This year, as the 421-a program again came up for renewal in Albany, New York City Mayor Bill de Blasio said he would support extending the prevailing wage for service workers to cover buildings with just 30 units or more rather than 50.

“Folks who are making $10 to $12 an hour as porters, as security guards, et cetera, will now be making good wages,” de Blasio’s deputy, Alicia Glen, told lawmakers during a June 1 hearing on 421-a.

As Glen spoke, one person waited his turn to testify but didn’t get a chance: Isaac Bowman had to leave to

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