One year ago, Gov. Kathy Hochul had had enough.
“We’re a national leader in blocking housing,” she declared from the dais at the New York Housing Conference’s annual award ceremony in December 2022. “New York is in a league of its own in terms of restricting new housing.”
“There’s no kicking this can down the road,” she said. “I’m picking that can up right now.”
But in the year that followed, the can rolled so far down the hill that Hochul didn’t even mention it when she briefly teleconferenced into the advocacy group’s award ceremony in December 2023. She had no policies to unveil or progress on her plan to require towns and cities to build more housing. Mayor Eric Adams rattled off what New York City needed from Albany to build housing at scale and bowed out from the ceremony after five minutes.
For a while early in 2023, elected officials seemed to commit to the kinds of policies that planning nerds put in white papers. A surge of optimism followed among housing advocates that New York would adopt pro-development policies, including some — like builder’s remedy, a penalty that allows certain projects to override local zoning in cities that fail to pass a state-approved housing plan — being tested out elsewhere in the country.
Those hopes were deflated as 2023 wound down, because of opposition from New York suburbs, a lack of action by the state legislature and the specter of upcoming statewide elections. The mayor and the governor are using what authority they have to increase housing stock incrementally, but whether the legislature will enact broader change is up in the air.
“The urgency from last year remains,” said New York Assembly member Linda Rosenthal, a Democrat. “We need to respond to that.”
A similar story is playing out in other cities. While political will to support housing construction grows on some fronts, resistance to significant policy change persists.
Gov. Gavin Newsom is helping builder’s remedy take root in California, but new construction is stunted by a recently increased transfer tax — a sales tax on high-priced properties. Chicago is contending with a potential increase in the transfer tax of its own, while also trying to take down barriers to new housing in the city. In Austin, Mayor Kirk Watson brings hope that YIMBY policies will gain traction, but the hope is frequently dashed by litigation and red tape. Gov. Ron DeSantis has signed a law in Florida allowing for taller and denser housing developments, but some municipalities are fighting back with building moratoriums. Outside of major cities, rent regulation, which developers say chills new construction, is headed for the ballot in several smaller cities in the Bay Area and will soon become reality in Newburgh, a city in New York’s Hudson Valley.
These are some of the political battles and big challenges that will determine the nature of housing production in 2024.
AUSTIN
Not in y’all’s backyard
Austin YIMBYs thought they had scored a major win on Dec. 7 when the city council voted to allow developers to build three homes on any single-family zoned lot. Most of the city’s residential land is zoned single-family. The dream of a denser Austin — the country’s fastest-growing metro area for more than a decade — seemed within reach.
Not so fast.
Austin — the state capital, where ambitious developers come up against zoning policies more stringent than elsewhere in the Texas Triangle — is a place where YIMBY policies keep ending up mired in litigation or stifled by bureaucracy.
On Dec. 8, as if to say “thanks for trying,” a district judge struck down three 2022 ordinances the Council had passed to ease construction of affordable, transit-oriented housing. The whiplash was a familiar feeling for pro-building advocates. Time and again in the Texas capital, one step forward turns into several steps back.
CodeNext, a 2018 rewrite of the entire land development code that cost the city $8.5 million, died after years of public hearings, reports and lawsuits. Project Connect, a plan to expand light-rail infrastructure and spur development, has shrunk to half its initial scope, while its estimated cost has ballooned, going from $5.8 billion at the outset to $10.3 billion now.
For 2024, political will really might make housing development easier. In 2023, the Council passed a raft of reforms aimed at cutting away some of Austin’s more onerous restrictions.
A year ago, the city re-elected Watson, who served his first term as the city’s mayor from 1997 to 2001. In a city that was much smaller and a lot less expensive, he managed to get a group of developers and environmentalists to support Smart Growth, a plan that encouraged center-city development while preserving open space and parkland elsewhere.
It was an unlikely marriage of opposing interests, one that seems even less likely today than in the early aughts.
This time around, Watson won on a more moderate approach to building than his opponent, Celia Israel, though both said they wanted to ease the affordability crisis.
Watson’s current plan is to allow Council members to propose district-specific land use codes. That way, those who want to encourage more development can move forward without waiting for citywide reform.
The approach has led to a handful of meaningful reforms over the last year, though they are not across the finish line just yet.
In late July, the Council passed a resolution to decrease the minimum single-family lot size, from 5,750 square feet to 2,500 square feet. It has also passed resolutions to eliminate citywide parking mandates and reduce the city’s “compatibility” standards, which limit building heights depending on how close they are to single-family homes.
The city still has to translate the Council’s resolutions into amendments to the city’s land development code. Inertia weighs heavily against change in Austin, even when change is relatively popular.
— Joe Lovinger
LOS ANGELES
Gov. Newsom backs YIMBY dream
On Dec. 12, backers of builder’s remedy, a relatively unknown concept praised by YIMBYs across California, got a big boost.
Newsom said he and state Attorney General Rob Bonta would intervene in Cedar Street Partners’ application to build an 80-unit mixed-use project in La Cañada Flintridge.
“La Cañada Flintridge is another community making excuses rather than building their fair share of housing,” Newsom said in a statement.
The wealthy city, at the western edge of the San Gabriel Valley, isn’t the only one. “Since California strengthened its housing laws, cities have attempted, unsuccessfully, to skirt these rules,” Newsom said.
In California, cities that fail to adopt a certified housing plan by a state-mandated deadline face a penalty usually called builder’s remedy, which means they lose the right to reject a project based on local zoning rules.
Though it has existed since the 1980s, last year was the first time the concept has rippled through the court system. Developers really took advantage, filing a barrage of projects in cities that have lost their right to oversee what gets built.
Newsom and Bonta’s declaration marked the first time the two powerful political players addressed the measure — and the first time they slammed a city for trying to skirt it.
Developers love builder’s remedy because it prevents local communities from killing projects that they, and the state, would like to get built. It also saves time, guaranteeing that these projects won’t end up in a city-developer back-and-forth.
Los Angeles Mayor Karen Bass, who took office last January, has enacted her own directives in an effort to boost housing production across the city.
In November, Bass ordered departments to figure out ways to cut permitting time for mixed-income housing, reduce discretionary review in order to “incentivize more housing to be built” and look at ways to convert more commercial buildings into housing.
“Another community making excuses rather than building their fair share of housing.”
But the mayor’s new efforts face a hurdle, one enshrined in city regulations. Los Angeles’ newly hiked transfer taxes, dubbed Measure ULA, took effect in April and have caused apartment construction to dry up since.
That could shift in the months ahead. A number of developers are trying to take advantage of the penalty, especially in cities like Beverly Hills, La Cañada Flintridge and Santa Monica, which have been called out for their insufficient plans to build more housing.
Leo Pustilnikov, a developer who has filed a number of builder’s remedy projects in the city, wants to build more than 1,000 housing units in Beverly Hills. Max Netty, another developer, has proposed a 17-story tower with almost 60 units just south of Rodeo Drive’s main retail strip.
Alexandra Hack’s Cedar Street filed a preliminary housing application to trigger the builder’s remedy provision because the city of La Cañada Flintridge was out of compliance regarding its housing plan.
With Newsom on their side, the plans might have legs.
Builder’s remedy is now “a real penalty that cities face if they don’t follow through on their housing commitments,” said Dave Rand, an attorney at Rand Paster Nelson who has focused on builder’s remedy projects for the last year and a half.
“This normalizes this process,” he added. “It’s significant backing from the highest possible levels of state government. Your spine is stiffened a bit now, and you’re a little bit more confident to be able to go forward and utilize this strategy than you were yesterday.”
As of mid-December, about a third of all California cities still did not have a compliant housing plan, meaning they were vulnerable to builder’s remedy projects. Some, including the city of San Francisco, narrowly avoided a pile-on of builder’s remedy cases this past year. Under Mayor London Breed, San Francisco got the state to sign off on its housing plan after the city approved measures that would streamline permitting for housing.
The changes are happening against the backdrop of Measure ULA — a tax on expensive sales not unlike the proposed “Bring Chicago Home” tax.
Measure ULA adds a 4 percent transfer tax on all commercial and residential sales over $5 million and 5.5 percent on sales above $10 million.
The city projected, based on historical sales, that the tax would generate $900 million per year. All the money would go toward affordable housing development and rental relief. That was before the tax, and high interest rates, caused buyers and sellers to freeze up.
As of September, the city said it had collected just $99 million from the taxes.
For developers and owners, transfer taxes make it difficult to estimate what a property’s value will look like over the next three, five or 10 years — typical hold periods.
And for construction loans, lenders may not want to convert the loan into a traditional commercial loan when construction is finished, given the uncertainty around how much the asset will be able to sell for once it’s finished. The conditions put a NIMBY slant on the politicians’ YIMBY ambitions.
“I think developers are feeling like they’re getting squeezed on all sides, and it’s very difficult to make deals pencil in today’s market,” said Sean Burton, who runs multifamily developer Cityview. “ULA, in many ways, was the straw that broke the camel’s back.”
— Isabella Farr
NEW YORK CITY
The watered-down version
An electric sign blared in neon green capital letters on the side of a truck: “MARJORIE VELAZQUEZ = BENEDICT ARNOLD OF THROGGS NECK!”
Velázquez’s act of treason? The City Council member supported a rezoning in the Bronx neighborhood that would pave the way for 348 apartments, nearly half of which would be permanently affordable.
While some city lawmakers have stepped up their support for residential development, the state controls the city’s zoning and therefore has the final say on large-scale housing reform. For the year ahead, the governor won’t have her foot on the gas, cautious about election-year politics and subject to the impulses of the legislature on the 421a property tax break.
Velázquez was originally against the rezoning but reversed her position after the development team agreed to put union labor on the project. Observers cite her change of heart as a reason why she lost her Council seat in November to Republican Kristy Marmorato — the first time in decades that the GOP has won in the borough.
If the rezoning is responsible for her loss, the former Council member is OK with it.
“I’m owning it, that I took this vote, and I did it for the right reason,” she said. “The title will come and go; housing will not.”
Velázquez urged her former colleagues to focus on how their actions, such as approving rezonings, can have lasting implications and help build up a community.
Her loss seemed a step back for pro-housing sentiment in the city after a promising year, when Queens Council members Julie Won and Tiffany Cabán threw their support behind proposed residential developments — Silverstein Properties’ Innovation QNS, a 3,200-unit project in Astoria, and the 1,400-unit Halletts North, respectively.
They both won reelection, though the end of 421a has imperiled the projects they backed.
Former Council member Kristin Richardson Jordan, on the other hand, opposed a planned project in her Harlem district as not affordable enough. She dropped her bid for re-election last year amid backlash to that position. Her opponents, sensing that the project was a lightning rod, voiced support. Manhattan Borough President Mark Levine believes the takeaway from the race is that favoring development is now good politics.
“Eventually some of these localities will need to be dragged, I have no doubt.”
“It’s proof of just how quickly in the span of 18 months that issue has moved in one district,” he told Politico New York.
The mayor, for his part, is pushing a series of zoning changes aimed at boosting housing, including a public review of a text amendment to eliminate parking requirements in new housing development and enable more conversions of office buildings. Late in the year, Adams introduced a subsidy for building affordable housing in wealthier neighborhoods.
He has also proposed allowing some housing projects to avoid environmental review, a step that can add months or even years to the timeline and drive up costs dramatically. Adrienne Adams, the City Council speaker, has also emerged as a builder, putting forward a program that will set housing targets for each district in the city every five years. Unlike in California, there would be no penalty for failing to hit the marks.
No matter how much they’d like to build housing, city officials have limited power. Developers say they cannot build rental housing without 421a, and state legislators will decide whether to replace or revamp the existing program.
Even the city’s own affordable housing program, Mandatory Inclusionary Housing, does not work without 421a. It is also up to the state to lift the city’s cap on residential density, necessary to increase the number of office-to-residential conversions.
Hochul said she hopes legislators will move on 421a.
But she won’t pursue housing growth mandates as called for in the New York Housing Compact she laid out at the start of 2023. It’s an election year, she pointed out, and lawmakers are focused on other priorities: Democrats are vying for control of the House of Representatives, and the suburban ones don’t want to talk about housing mandates.
Hochul is instead moving forward with executive-level action, including building affordable housing on state-owned land, offering incentives for communities that commit to housing growth and providing a 421a alternative in some parts of the city. The state has received 19 applications for projects in Gowanus seeking the 421a alternative; they could yield as many as 5,500 apartments. The state is expected to announce this summer which projects will receive the benefit.
Slowing down appeals to some politicians.
“I think last year, there was way too much on the table,” said Rosenthal, who chairs the Assembly’s Committee on Housing. As a first step, at least, the state should focus on the “easy pickings” by offering incentives to localities that are willing to build more housing, she said.
“Eventually some of these localities will need to be dragged, I have no doubt,” she said.
Long Island, for example, bars construction of two-family housing on 92 percent of the island’s buildable land, according to an analysis by the City University of New York. Three- or four-family homes are prohibited on 96 percent.
In the details
The debate over good cause eviction, which would allow tenants to challenge any rent increase of more than 3 percent or 1.5 times the regional inflation rate, whichever is higher, is expected to be tied, once again, to the fate of 421a in 2024.
Sen. Brian Kavanagh, who chairs the Senate’s Committee on Housing, Construction and Community Development, thinks a housing deal involving both policies could get done this year.
“Those are both things that a lot of people want to see action on,” Kavanagh said. “I think there is a deal to be had that could get majority support in the legislature and get the governor’s signature.” The governor has not been supportive, and the industry does not share Kavanagh’s optimism.
Real Estate Board of New York President James Whelan said he saw no signs going into the new legislative session that state lawmakers are eager to produce rental housing.
“It is just going to get even worse before folks start getting serious,” Whelan said during an event. He thinks good cause eviction will lead to more homelessness because developers will stay away from rental housing if rent increases are restricted.
Incremental action is not all bad, said Annemarie Gray, executive director of the pro-housing group Open New York. She said her disappointment about the governor’s stalled housing plan was tempered by a newly proposed bill to make it easier for faith-based organizations to build housing on their land.
“Decades of bad policy decisions won’t be fixed in one go,” Gray said. “But I think we’re really seeing momentum in New York for the first time.”
At least by now there is widespread acknowledgment that the state needs more housing, said Howard Slatkin, executive director of the Citizens Housing & Planning Council. The governor’s Housing Compact persists, as does the state’s affordable housing crisis.
“It’s sort of a pessimistic way to stay optimistic,” he added. “The problem isn’t going to solve itself.”
— Kathryn Brenzel
SOUTH FLORIDA
Long live Live Local?
Local governments and developers will likely clash in 2024, as plans are filed for taller and denser projects allowable under Florida’s new affordable housing law.
Gov. Ron DeSantis signed Senate Bill 102, known as the Live Local Act, into law in March. Development proposals have been trickling in across the state.
Not every municipality is happy about it. Some have tried to fight the law, passing building moratoriums or setting up guardrails because new rules will supersede local height and density regulations and could lead to historic properties being demolished.
It’s the latest fight in a state where politics frequently intertwines with scandal — as in Miami, where two recently elected city commissioners are already calling for the mayor’s resignation because of his side gig at a development firm.
In part because it is a state legislative election year, lawmakers will probably avoid trying to tweak the affordable housing law in their January session, experts say, leaving towns and cities that oppose the density bumps on their own for the year.
The legislature has been “very forthright [that] they’re not planning on addressing any adjustments to Live Local,” said Annie Lord, executive director of Miami Homes For All.
The Live Local Act stripped municipalities of the ability to enact rent control, but it also earmarked more than $700 million in funding for affordable developments. It’s an interesting contrast to New York: Florida’s measure incentivizes affordable housing but bars rent control, while in New York, a hoped-for tax incentive for developers may only get through the legislature if accompanied by a rent cap in the form of good cause eviction. Because of the way Florida’s legislation was structured, it will likely result in more workforce housing as opposed to low-income housing.
The next piece of the building puzzle comes from DeSantis’ proposed budget, released in early December, which sets aside close to $209 million for low-income families to help them purchase or repair homes, and incentivizes local governments to partner with developers preserving or building housing.
If the legislature approves DeSantis’ budget, his administration would direct $84.5 million to the State Apartment Incentive Loan Program, which provides low-interest loans to workforce housing projects.
A laundry list of other measures could incentivize new housing or help keep existing residents in their homes.
State Sen. Rosalind Osgood wants to reward any builders who propose residential developments in which 75 percent of units are affordable. Under this plan, if developers can do this within a half-mile of a major transportation hub, they won’t have to follow county parking requirements. Because construction and land costs are so high in South Florida, a developer would have to purchase land at well below market prices or secure other incentives to build such a project.
Lawmakers could also take another crack at ending fraud in condo and homeowner associations in a state where little to no enforcement exists, even after laws that promised protection were passed last year.
Sen. Ileana Garcia filed Senate Bill 426, which would set up a pilot program directing allegations of criminal activity to the state attorneys’ offices. It would also create some oversight for association elections and require the state to create an online database of communities, including contact information and property records.
The legislature is also expected to tackle insurance in the upcoming session after forgoing the subject during the special session that ended in November. A year ago, it passed laws that made it harder for homeowners to sue insurance companies and eliminated insurers having to pay one-way attorneys’ fees and assignment-of-benefits contracts under property insurance policies. A handful of insurers have begun writing new policies in the state since then, though others have also stopped writing new business in the state.
This year, the legislature is expected to consider a one-year tax break on residential property insurance that could save homeowners up to 6 percent in taxes, totaling more than $400 million, according to the governor’s proposed budget. DeSantis is also backing a permanent premium tax exemption for flood insurance policies.
A shakeup in politics on the local level could affect what projects and policies end up passing in Miami.
Voters elected two new members, Damian Pardo and Miguel Gabela, to the City Commission in November, beating the real estate industry-backed Sabina Covo and Alex Diaz de la Portilla. (Diaz de la Portilla had been removed from his seat by DeSantis following his arrest on public corruption charges in September. He allegedly orchestrated a no-bid deal for a pair of private school owners to take over a public park and build a $10 million recreation center next to one of their schools. He has pleaded not guilty to felony charges that included bribery.)
Pardo and Gabela don’t appear to be wasting time. Since their election, they have called for Miami Mayor Francis Suarez’s resignation.
Suarez is wrapped up in a separate set of scandals involving real estate. He’s at the center of ethics and criminal investigations for his side gig as a private consultant for Location Ventures, the development firm previously led by Rishi Kapoor, as well as for allegedly accepting free tickets to pricey events like the Formula One Miami Grand Prix race.
—Katherine Kallergis
CHICAGO
What’s in a name?
For a moment in mid-December, Chicago Mayor Brandon Johnson captured the attention of the real estate industry with what seemed like an attempt at finding some common ground with the business community, which had loudly opposed his election bid last spring. It took the form of an executive order requiring 14 city departments to come up with a list of ways to speed building permit approval processes in the next 90 days.
Real estate had good reason to be skeptical of the progressive former teachers’ union organizer, who made an exponential increase of the city’s property transfer tax a central promise of his 2023 campaign.
After winning election, Johnson took just a few months to usher that proposal through the City Council. The measure, dubbed Bring Chicago Home but controversially referred to by many as a “mansion tax,” now goes to the voters, who will decide its fate in a March 19 ballot referendum. Revenue from the tax would go to combating homelessness.
The relatively quick push to pass the measure through direct democracy stands in contrast to the backroom deals that have become standard in the Windy City, a place where elected officials wield immense power over real estate thanks to ward politics and aldermanic privilege.
It’s also a very different approach from previous Mayor Lori Lightfoot’s handling of a similar proposal. Early in her term, Lightfoot backed a transfer tax hike. She wanted to raise the tax rate for sales over $10 million to 2.55 percent of the price, and looked to the state legislature to help get the law on the books. That proposal never came to fruition, and her support for similar ideas appeared to wane toward the end of her term.
Going to the voters for a transfer tax hike is also a departure from how other big real estate proposals are handled in Chicago: through the unwritten rule that lets local aldermen determine the fate of zoning approvals in their wards, regardless of how popular or unpopular a development plan may be with the rest of the city.
That system is up against increasing pressure.
“Let’s stop calling it the name the mayor gave it — that’s a political tactic to simply call it a tax on the ‘rich.’”
In November, the U.S. Department of Housing and Urban Development criticized this system for holding back affordable housing development, especially in majority-white wards. The assessment came in a letter from Lon Meltesen, the regional director of HUD’s Office of Fair Housing and Equal Opportunity, to the mayor. (In New York, it’s also standard for the local City Council member to make the final call in land use decisions.)
Meanwhile, as both the industry and Johnson’s supporters await the March transfer tax vote, they sought bigger donations in December.
The real estate business has also spent the time polishing its argument against the proposal.
“We must acknowledge broader commercial real estate trends that have led to a recent decrease in permit applications,” said Amy Masters of Chicago’s Building Owners and Managers Association, a trade group that represents commercial real estate interests. “While this challenge isn’t unique to Chicago, excessive real estate taxes play a significant role in our city’s competitiveness and ability to attract vital investments.”
The industry is also wary of Johnson’s ambivalence about a program, begun by Lightfoot, called LaSalle Street Reimagined. It aimed to bring affordable housing to Chicago’s downtown, the Loop, by offering developers subsidies for the conversion of outdated office buildings. At least five development teams submitted bids, and planned to spend a total of $1.2 billion to pull off the projects while delivering thousands of apartments downtown.
But the initiative took a blow in December when developers Corebridge Financial and Golub rejiggered plans for 30 North LaSalle, eliminating the affordable units that would be required to get city subsidies for the conversion.
Instead, the firms are moving forward with solely market rate units, which they say they can build by right under current zoning.
The change underscores the industry’s lack of confidence that the Lightfoot-era program will proceed in the fashion that developers had hoped.
The Johnson administration’s focus remains on bringing more affordable housing and businesses to neighborhoods outside the central business district.
“Chicago is grappling with an affordable housing shortage and disinvested business corridors disproportionately located on the South and West sides,” Deputy Mayor Kenya Merritt said while announcing the effort to streamline building permits.
The mansion tax could make things worse, business leaders say.
The measure would quadruple the tax on deals worth more than $1.5 million, to 3 percent of the sale price, which threatens to deter investments in housing and real estate across the city.
Johnson tweaked the proposal to lower the rate on deals less than $1 million — a threshold that includes the vast majority of Chicago’s residential transactions — and industry lobbyists fear that their arguments, however logical, will be rendered ineffective, given that most voters who own homes would be charged the lower transfer tax rate.
Commercial real estate players are leading the charge against the transfer tax hike, starting by calling out the inaccuracy of framing it as a “mansion tax,” since they say commercial property sales will almost certainly generate most of the revenue.
The total of Chicago’s commercial deals priced at $1 million or more normally far outweighs the sum for residential deals over that threshold.
“First, let’s stop calling it the name the mayor gave it — that’s a political tactic to simply call it a tax on the ‘rich,’ which will provide a simple binary decision for most voters who have no empathy for the business community, small or large,” Greenstone Partners broker Danny Spitz wrote on social media. “Most voters won’t care about the math and logic.”
A heftier transfer tax on the city’s priciest commercial real estate trades, the industry says, will drive the value of those properties down at a time when the office market is already vulnerable from rising interest rates and waning demand.
In addition, Cook County Assessor Fritz Kaegi will have to account for the transfer duty’s impact on the values of big commercial buildings. If they are worth less, they’ll end up shouldering a smaller slice of the overall property tax burden. That would leave homeowners to make up the difference — even those whose homes are worth less than $1 million.
“If the progressive community would see that a bigger pie helps everybody, we could do so much more in the city of Chicago,” said Paul Colgan, government affairs director for the Building Industry Association of Greater Chicago.
— Sam Lounsberry and Miranda Davis