Fighting over a lapsed tax credit just cost the city 1,600 badly needed housing units — and an innovative $43 million co-generation project.

The Durst Organization announced last week that it’s scaling back plans to build a $1.5 billion, 2,000-unit development known as Hallets Point on the Astoria waterfront.

The planned co-generation facilities were environmentally responsible and would have made the housing development energy-independent, taking stress off of Con Edison. But as the tax credit, known as 421a, was expiring, Gov. Cuomo lobbed a hand grenade — insisting on a prevailing-wage rule — that blew up talks last year.

Cuomo’s requirement would bump up housing costs 23 percent, or $80,000 per unit.

The 421a tax break — which basically bribes developers into building subsidized housing — is a key component in Mayor de Blasio’s affordable-housing plan.

Since 1985, the 421a credit has stimulated the construction of 150,000 units, including some 37,000 below-market-rate apartments.

The impasse between developers and unions needs to be resolved — and quickly.

If other developers follow Durst’s lead and no new developments break ground, the city may see a major dropoff in new middle-class housing when the present construction cycle ends in the next 24 months.

Expect non-regulated rents to spike.

John Banks, president of the Real Estate Board, says 421a accounted for half the affordable-housing projects in the city over the last two years and that “reviving the program will produce even more affordable housing.” So why wait?

Part of the problem, of course, is the war between Cuomo and de Blasio. But the tax break is too vital to be caught in the crossfire. Cuomo should stand down — or be ready to take the rap for fewer city apartments.

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Photo: STUDIO V Architecture/James Corner Field Operations