Clifton Budd & DeMaria, LLP

New York City Changes Prevailing Wage Credit for Rent-Free Apartments

Historically, employers that had an obligation to pay New York City’s prevailing wage to building service employees and provided a rent-free apartment to a covered employee could take a credit against the prevailing wage’s supplemental benefit rate. The credit was equal to the fair market monthly rent for the apartment. In most cases, the apartment’s rental value exceeded the applicable supplemental benefit rate, fully satisfying the employer’s full supplemental benefit rate. Based on actions taken by the New York City Department of Housing Preservation and Development (“HPD”) and the New York City Comptroller’s Office (the “Comptroller”), that credit has come to an end for certain employers of building service workers that are subject to the prevailing wage.

Owners and employers that have prevailing wage obligations under NY RPTL §§ 421-a, 467-m, and 485-x are no longer permitted to take a credit against the supplemental benefit rate for the value of an apartment provided rent-free to a building service employee. Many employers with prevailing obligations have been satisfying their supplemental benefit obligation for superintendents or other resident employees, in whole or part, by using this approach so the City’s elimination of the credit will have a meaningful impact for the labor costs associated with those resident employees.

At this point, the credit still exists for condominiums and cooperatives obligated to pay prevailing wage under NY RPTL § 467-a. But changes to the rules related to credits for NY RPTL § 467-a, how those rules are interpreted, and/or the viability of the credit may be on the way.

This is a significant change in the application of the prevailing wage schedule. A more detailed summary of the relevant history of the prevailing wage and the background for the change follows. If you have questions about this update or prevailing wage obligations, please contact  an attorney at Clifton Budd & DeMaria, LLP.

 

Prevailing Wage Background

The Comptroller issues annually, with periodic interim updates, a Building Service Employee Prevailing Wage Schedule (“PW Schedule”). The PW Schedule sets forth various economic terms and conditions that apply to building service employees that work at buildings that have a prevailing wage obligation, including a minimum wage rate, supplemental benefit rate, overtime, and paid time off. There are a few ways that employers may comply with the supplemental benefit obligation under the PW Schedule: 

  1. Provide bona fide fringe benefits that cost the employer no less than the applicable supplemental benefit rate;
  2. Supplement the employee’s hourly wage rate no less than the applicable supplemental benefit rate; or
  3. Provide a combination of #1 and #2 which cost the employer no less than the applicable supplemental benefit rate.

Employers have long been entitled to take a credit – equal to the fair rental value of the apartment – against the PW Schedule’s supplemental benefit rate when they provide a rent-free apartment to a covered building service employee. The rental value of the apartment typically exceeds the applicable supplemental benefit rate, eliminating any obligation to pay a supplemental benefit rate to covered employers.

 

Change in PW Rules

In 2025, HPD amended its prevailing wage rules with respect to prevailing wage obligations under NY RPTL §§ 421-a, 467-m, and 485-x. In the amended rules, HPD removed language that designated a dwelling unit an employer provides to the employee rent-free as a “bona fide fringe benefit” that may be applied as a credit against the applicable supplemental benefit rate.

The Comptroller is now stating that it has interpreted HPD’s removal of that sentence to mean that employers may no longer consider a rent-free apartment a “bona fide fringe benefit” and, hence, may no longer apply the rental value as a credit against the supplemental benefit rate. To that end, the Comptroller has updated its Frequently Asked Questions on its website to specifically address this change: Providing an apartment unit to a building service employee, such as a porter or superintendent, to reside in no longer discharges or satisfies the obligation to pay the employee a supplemental benefit.

 

Impact on Condominiums and Cooperatives Receiving an Abatement under NY RPTL § 467-a 

At this point, it is unclear whether the change is applicable condominiums and cooperatives in New York City that are obligated to pay the prevailing wage because they receive a tax abatement under NY RPTL § 467-a. That is, the fair market rental value credit may still exist for those buildings. These buildings are covered by rules issued by the City of New York’s Department of Finance (“DOF”), not HPD. The DOF’s rules still allow for employers to take a credit against the supplemental benefit rate for the value of an apartment provided rent-free to a covered building service employee. This certainly suggests that the credit is still available to these buildings. But the Comptroller enforces the prevailing wage obligation under NY RPTL § 467-a, so it may apply its interpretation to NY RPTL § 467-a condominiums and cooperatives without a change to the DOF regulations or it may be compelled to apply the same interpretation if the DOF’s changes its regulations to conform to HPD’s updated rules.