Housing crisis

How will Hochul respond to New York’s housing crisis?

Upon re-election, Governor Kathy Hochul pledged to jump-start construction of 500,000 to 1 million new homes to address a housing crisis that stretches from New York City to the suburbs, and even north of the state.

But first, in the two months before she sets out her priorities in her state of the state address and budget plan, she will have to choose from a dizzying list of proposals from Mayor Eric Adams, real estate interests, tenant groups and others . They are calling for tax breaks, new grant programs, changes to override local zoning rules and more.

What is certain is that housing will be one of the most, if not the most important, issues facing the newly elected governor and legislature when the new session opens in January.

“Governor Hochul campaigned on housing. More and more elected officials are focused on housing, for example Queens Borough Speaker Donovan Richards and Rep. Alexandra Ocasio-Cortez,” said James Lloyd, Director of policies of the New York State Association for Affordable Housing, which represents for-profit developers, “A growing chorus says we need to build now and in every community.”

What’s not even clear to insiders is what policies Hochul favors and what will win support from Democrats in the legislature, where progressives dominate the Democratic caucus that still holds a supermajority, allowing them to override the Governor’s veto if they wish.

A Nehemiah housing estate in East New York on March 12, 2021.

Hiram Alejandro Durán/THE CITY

By any measure, New York is facing a housing crisis. Rents have skyrocketed for market-priced apartments over the past year as the city recovers from the pandemic. A third of New Yorkers spend half their income on rent. And the city is simply not building enough housing to keep up with population growth or moderate price increases.

The Adams administration has already laid out its wish list of possible solutions, during an appearance by Housing Director Jessica Katz at a Citizens Budget Committee breakfast last month.

The city wants lawmakers to enact a replacement for the controversial 421-a property tax relief for real estate developers, which expired in June. He also wants tax relief to replace the also expired J-51 program, which provided an incentive for apartment rehabilitation but had not been used in recent years.

Adams wants the legislature to provide a pathway to legalize the thousands of illegal basement apartments and give homeowners simplified ways to create additional units on their property. And he wants the state to lift a cap on the overall height of residential buildings, which is in place even in areas where commercial buildings can be much higher.

“There was a lot left on the table in Albany last year,” Katz said at CBC’s breakfast, “and we’re gearing up to get there.”

Quest for tax relief

The Real Estate Board of New York (REBNY), among other industry groups, will throw its considerable weight into finding a replacement for lapsed tax breaks. Hochul had proposed a replacement for 421-a in his budget proposal earlier this year that made only modest changes to the abatement, which provides property tax relief for up to 35 years. In exchange, developers are expected to create affordable low-income housing in new residential buildings.

Insiders say the proposal is no longer viable but no one knows what the next plan would look like. City Hall declined to comment on details it backs in a new tax break.

Developers say hefty property taxes and high construction costs make building homes unprofitable without something like 421-a.

“New York City urgently needs to produce more rental housing, including a significant number of below-market units,” said James Whalen, president of REBNY. “We hope the Legislature now takes a different approach by focusing on common-sense policies that produce more of the rental housing that New Yorkers desperately need.”

Opponents of 421-a, including the Legal Aid Society, Community Service Society and progressive Democrats in the Legislature, should strongly oppose any tax relief, saying it’s an unnecessary giveaway to well-developed developers. haves. The abatement program cost the city $1.8 billion in lost tax revenue last year — the city’s largest tax break — according to the city comptroller’s recently released annual financial report. It will be years before that number decreases as benefits are phased out.

Instead of reinstating 421-a or creating a similar replacement, City Comptroller Brad Lander wants the legislature to focus more broadly on addressing inequities in the city’s property tax system, which imposes much higher taxes on rental properties than on other types of housing. The system also protects property owners in gentrifying neighborhoods from steep increases while overtaxing residents of working-class neighborhoods.

He formed a coalition that includes elected officials from each borough to push the idea. “We want to show broad support and make sure property tax reform is part of the mix,” he said.

But real estate groups are divided in their priorities. The Community Housing Improvement Program, which represents landlords of rent-regulated buildings, is putting all its efforts behind what it calls a vacancy reset.

As THE CITY reported, as many as 89,000 rent-stabilized units were vacant in New York City last year. Landlords say that after 2019 Rent Law reforms capped how much they can charge new tenants for apartment improvements, they can no longer afford to fix them when long-term residents date are moving.

CHIP wants the legislature to allow rent to be reset to market rates in such circumstances. Tenant groups oppose such a move, arguing instead for a tax penalizing landlords who house vacant homes.

In the meantime, tenants’ groups plan to renew their push for an expanded voucher program to provide housing assistance to more tenants and their ‘good cause’ eviction bill, which would set strict limits on increases rent at all levels.

The Housing Voucher Program would provide vouchers to low-income New Yorkers at risk of homelessness and reduce their rent to 30% of their income. The groups are seeking $200 million next year to launch the program, with the idea that it would span five years at $1 billion a year and help 75,000 families. It would reach people who are not eligible for federally funded Section 8 bonds, which have many restrictions.

“There are programs to help people get out of shelters, but they’re leaving a lot of people out,” said Ellen Davidson, a lawyer at Legal Aid. “People from mixed families; people who may have worked but no longer have it, and others who do not have permanent housing.

Legal Aid and Housing Justice for All, a tenant advocacy group, are working to win the governor’s support for their Good Cause eviction bill, which says landlords can only renew leases for a good raison. It would also cap rent increases at 1.5 times the annual increase in the consumer price index.

“Expelling Good Cause is common sense policy and it’s very popular with Democrats and Republicans alike,” said Cea Weaver, an organizer for the group. And she has a warning for the governor: “Kathy won this election because progressive voters pushed her across the finish line.”

The real estate groups told lawmakers they would not accept a compromise in which one of their priorities – such as reducing property taxes – is approved with Good Cause.

Shift to the suburbs

Housing groups expect Hochul to resubmit legislation inspired by recent moves in California that allow developers to build despite local zoning restrictions, around transit centers, for affordable housing and zoned areas. for single-family homes.

With one eye on the gubernatorial election, she withdrew that previous plan earlier this year, just 30 days after submitting them amid a storm of opposition on Long Island and criticism from her Republican opponent, Rep. Lee Zeldin, who said it was a “blatant attack on suburban communities.

While the legislation targets the suburbs, many housing advocates say more construction is needed there to help reduce pressure on housing prices in the city. These groups argue that suburban New York has strangled housing construction and prioritized single-family homes, resulting in exorbitant prices in these areas, limited access to these areas for people with moderate incomes or people of color.

“New York lags behind other states in using its zoning powers to unblock housing, create fair sharing rules and limit exclusionary zoning,” says Rachel Fee, executive director of New York Housing. Conference, which advocates for affordable housing developers.

The conflict of interest in Albany comes as the economic fundamentals of housing have changed dramatically, with a sharp rise in interest rates making construction much more expensive. Additionally, Wall Street profits have fallen and this is expected to strain state and city budgets, which will be worse if the country slips into a recession.