The Real Deal New York

Albany’s 2015 real estate agenda, sans Silver

Issues to watch as state lawmakers scramble to organize
in the wake of speaker’s downfall

March 01, 2015
By Tess Hofmann

From left:

From left: Dean Skelos, Gov. Andrew Cuomo and Carl Heasie

Sheldon Silver’s resignation from his post as speaker of the Assembly, after 21 years as one of state government’s three most powerful men (its oft-criticized modus operandi), left a gaping hole in the center of Albany.

Where once stood a man seen as a reliable tenants’ ally and an expert deal broker, now stands a question mark. Even more disorienting, revelations since Silver’s arrest on Jan. 22 are forcing tenants’ activists to reconsider whether they ever had an advocate, or merely the appearance of one. The indictment alleges that Silver lined his pockets by helping real estate interests seek tax abatements. (See related story, page 52.)

“What we know now that we didn’t know a year ago is, that Silver is on the payroll of a large real estate interest, and was not just the defender of the common man and of rent stabilization,” said John Kaehny, executive director of government watchdog Reinvent Albany.

Silver’s replacement as speaker, Carl Heastie, said that strengthening New York City’s rent regulations is the Assembly’s first priority this year. However, Blair Horner, legislative director at the New York Public Interest Research Group, said Heastie has not had time since winning the Speaker post early last month to unify the Assembly on tenants’ issues, a fact that could help landlords. “If you’re a lobbyist for the real estate industry, you might find [Assembly members] more sympathetic now than you would have,” he said.

It will likely take a lengthy trial to peel back all of Silver’s layers. But while the state is reeling, a session jam-packed with important real estate issues is unfolding in Albany, and it’s anything but business as usual.

Here are some legislative items to keep an eye on for the current session:

The budget

Gov. Andrew Cuomo’s 2015-16 budget proposal includes $1.7 billion in proposed tax credits for homeowners and renters, based on a formula that limits property tax burden according to income. Kaehny said that because this proposal is a new concept for the majority of New York State, it isn’t garnering much attention from groups with an established interest. Last year, a similar “circuit breaker” tax plan was passed for New York City only. The measure is largely supported by the Democratic-majority Assembly and has been advanced by various members of the Republican-controlled Senate in the past, though the upper chamber as a whole has not made clear whether it will support the plan this time around.

The budget also sets forth the idea of modernizing the state’s airports, which are consistently ranked among the worst in the country, and spending $450 million to build an AirTrain to LaGuardia Airport that would connect to the subway and Long Island Rail Road at Mets-Willets Point Station. Some say the plan is questionable because no one exactly knows how much the train line would cost the Port Authority and the underfunded MTA. Susan Lerner, the executive director of Common Cause, called the AirTrain proposal a classic example of an issue that will be decided by “three men in a room,” with Heastie now taking Silver’s place.

Rent regulations

In 2011, when the current rent laws were modified and extended, Silver issued a press release framing it as a victory for housing advocates and the public. “This measure, while not all that we pushed for, is a huge relief for tenants and a significant improvement over what is currently in place,” he said. That spin is now being questioned due to a section of the government’s case against Silver that says prior to the Rent Act of 2011’s passage, Silver met with the phantom “Developer 1” (believed to be Glenwood Management’s Leonard Litwin) and ultimately incorporated many of the developer’s suggested changes in the law’s language.

If you’re a lobbyist for the real estate industry, you might find [Assembly members] more sympathetic now than you would have.” Blair Horner, New York Public Interest Research Group

The current rent regulations expire June 15, and while they are expected to be extended in some regard, the particulars are up in the air. Of major concern this year is high-rent vacancy deregulation. “The most important thing to tenants this year is [repealing] vacancy deregulation,” said Ilana Maier, program director for the Metropolitan Council on Housing. Vacancy deregulation allows landlords to remove apartments from rent regulation if they become vacant and the legal regulated rent reaches $2,500. “It’s not just about losing units. There’s a huge incentive to harass tenants out of the buildings,” Maier said.

Maier said that Heastie has been talking the talk of a tenants’ rights advocate and advocates are cautiously optimistic, but it’s too early to tell if Heastie can be hold sway on the issue. Real estate attorney Adam Leitman Bailey, who believes the current system of rent regulation is broken, said, “The question with Heastie is, does he have the ability to galvanize the electorate? Or will they be frozen?”

Tax abatements

Both the 421a and J-51 programs, among others aimed at developers, are set to expire in June, and questions are swirling around their renewal. Some feel that Silver’s arrest has added to the stigma around 421a, because a portion of the alleged kickbacks that Silver was receiving came from referring real estate clients seeking 421a abatements. Maier’s view illustrates this point. “Now we have a really shining example showing this is why we have the 421a program. It’s because of money in Albany,” she said. “There really is no public benefit.”

The 421a program was conceived as an incentive for developers to build on unused or underutilized land, and was augmented in 2008 to include a requirement that 20 percent of units receiving the abatement be affordable. But the perception of those public benefits is increasingly turning toward a view that the program is largely subsidizing luxury condos like Gary Barnett’s One57 and Joseph Sitt’s mixed-use 520 Fifth Avenue. “As an accountant, I would suggest [Heastie] can do the math. I think anybody can see that 421a isn’t a good deal for New York,” said Ron Deutsch of the Fiscal Policy Institute, an Albany-based nonpartisan research group.

Democratic political strategist Hank Sheinkopf said the industry should expect to see changes in the program, but not big changes. “With the constant talk of investigations swirling around it, it will probably keep things static, because politicians are risk averse,” he said.

The final results may well be a tradeoff between the separate-but-related issues of rent regulation and real estate tax abatements, as the two are perpetually held up