City Comptroller Says BLDG Management Failed to Pay $40M in 421a Construction Wages

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City Comptroller Brad Lander’s office is suing developer and landlord BLDG Management after the comptroller claimed BLDG failed to pay construction workers on an East 44th Street rental tower more than $32 million in wages required by the 421a tax exemption program, Commercial Observer has learned. 

Lander’s office alleges that BLDG shorted workers at 222 East 44th Street roughly $32.3 million in wages that were required by the 421a tax exemption program over the course of the building’s four-year construction. The suit also seeks $8 million in penalties.

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Under the most recent 421a law, BLDG was supposed to pay its workers an average of $60 per hour, but the comptroller’s office said it instead paid them an average of $31.88 per hour. The comptroller’s office estimated that BLDG underpaid hundreds of workers on the site, which employed 40 different contractors.

“My team uncovered significant underpayments in our investigation of BLDG,” said Claudia Henriquez, the director of workers’ rights at the comptroller’s Bureau of Labor Law, which filed the suit at the city’s Office of Administrative Trials and Hearings (OATH). “If you want to build under 421a, then adhering to its labor rules is non‐negotiable. Our office will continue to ensure developers prioritize fair labor practices.”

A representative for BLDG did not respond to a request for comment.

The version of 421a that began in 2017 and expired in June 2022 mandated that developers building projects with 300 units or more must pay construction workers an average hourly wage of $60 or more in Manhattan south of 59th Street or $45 an hour along the waterfront in Brooklyn and Queens. In this case, the pay gap exceeded 15 percent of the required wage, forcing the Bureau of Labor Law to impose a 25 percent penalty of $8 million, as the law mandates, according to the comptroller’s office. 

BLDG started construction on the 42-story, 429-unit building, dubbed The Summit, on East 44th Street in June 2015 and finished in June 2019. In return for renting 20 percent of the building’s units at below-market rates, BLDG received a 35-year, 100 percent tax exemption on the Turtle Bay property. 

BLDG opted into the 2017 version of the program, despite having received city approval for a shorter, 20-year tax exemption under the 2016 iteration of 421a. 

Under the terms of the 421a program, developers must also appoint an independent monitor and submit a project-wide certified payroll report within a year of completing construction to the comptroller’s Bureau of Labor Law for review and approval. The city’s Department of Housing Preservation and Development (HPD) also handles tax exemption compliance, but is primarily concerned with whether developers follow their regulatory agreements and rent units for the agreed-upon rents.

Every New Yorker deserves a fair wage and an equitable work environment, especially those that lay the foundation for affordable housing across NYC,” said HPD Commissioner Adolfo Carrión Jr. “HPD believes in accountability and agrees with the comptroller that adhering to the 421a program’s labor rules is non-negotiable.” 

Prior to filing the suit with OATH, attorneys and staff in the comptroller’s office spent two years negotiating with BLDG over its payroll report, which had errors and missing documents, according to the court filing.

A tentative hearing date in the case has been set for Feb. 28. 

Rebecca Baird-Remba can be reached at rbairdremba@commercialobserver.com.