Kathy Hochul faces tough decisions on real estate
Issues crucial to industry on deck for incoming governor
Real estate has a lot riding on Kathy Hochul.
Billions of dollars in rent aid. An expiring ban on evictions. Big development projects. And a huge tax break that’s about to run out.
When the lieutenant governor takes over for Gov. Andrew Cuomo in two weeks, she will be met on day one with a $2.7 billion rent relief program mired in delays and technical glitches. Last month Cuomo vowed to speed up the distribution of funding, saying the state would pay it all out by Aug. 31, when the eviction moratorium expires.
But state officials yesterday admitted they will miss that deadline, and landlords and tenant advocates say the system is still a mess — and some industry insiders are doubtful that a change in leadership will make much difference.
Some blamed the delays on the program’s incentives. Landlords have been less likely to submit applications because that requires keeping their current tenants for another year. Over $460 million in rent relief has been approved for tenants but has not been distributed because their landlords haven’t filled out their part of the application, the agency that runs the program said Tuesday.
Still, Jay Martin, president of the Community Housing Improvement Program, said he is hopeful Hochul will reform the Emergency Rental Assistance Program, or ERAP.
“This program has been a failure, creating stress and anxiety for tens of thousands of renters and property owners. It must be fixed immediately to make sure people are housed as they rebuild their lives after the Covid-19 pandemic,” he said in a statement.
An Albany insider noted that Gov. Cuomo was too distracted by scandals to address the program when it failed upon launch, but Hochul would have bandwidth to give it her attention.
In any event, the source noted, “Nothing can be done to screw up ERAP further. Any change has to be beneficial.”
Hochul will also be assuming office one week before the state’s eviction protections expire. Real estate groups say city property owners cannot weather another extension. They are already drowning in arrears, utility bills, repairs and property taxes. Extending the moratorium could mean alienating a major potential fundraising source ahead of the 2022 election.
“Kathy Hochul is going to have to raise a lot of money quickly,” said one Albany operative. “Real estate is one of the best ways to do that, but it certainly comes with a political price.”
Joshua Simons, senior research associate at the Benjamin Center for Public Policy at SUNY New Paltz, said Hochul will have to extend the moratorium, regardless of burning potential donors.
Allowing the ban to lapse Aug. 31 risks burdening the courts with a deluge of eviction cases and the rental market with an influx of cash-strapped tenants.
“If people get evicted they don’t really have a place to go,” said Simons. “Right now the eviction moratorium and relief funds are triage. They’re not going to solve any long-term housing issues in New York.”
Last week, Sen. Alessandra Biaggi and Assembly member Yuh-Line Niou introduced a bill to extend eviction protections through the end of October. But the legislature would need to be called back into session — which the governor can do — to pass it.
Hochul would infuriate landlords but impress renters, a huge chunk of the electorate, if she extends the moratorium.
“She’s got to be a better dancer than Fred Astaire,” said longtime political consultant Hank Sheinkopf.
The Affordable New York tax break, formerly known as 421a, expires next year. When it last expired, in 2015, Cuomo forced developers to grant the construction trades new wage provisions. If the program is renewed, it will surely be reformed again. Progressives have called for its termination, saying the $1.7 billion a year property tax abatement for projects with some affordable units could be better targeted. Where Hochul will fall on the issue is anyone’s guess.
Brett Gottlieb, special counsel at Herrick who focuses on property tax incentives, is hopeful that the 2022 election — which already has a long list of potential candidates — will be a “net positive” for 421a.
“It may bring a fresh set of eyes and a fresh set of perspectives,” he said. “It may push a newcomer, on the Democratic side, a little more to the center.”
Cuomo was an ally to construction unions, prioritizing massive infrastructure projects in addition to the prevailing wage requirements in 421a. In a statement, Gary LaBarbera, who heads the state and city chapters of the unions’ umbrella group, noted that Hochul “has been a longtime ally of organized labor and recognizes and respects the dignity of working people.”
Construction unions are also counting on Hochul to continue Cuomo’s big projects, such as the controversial, $2 billion-plus AirTrain from LaGuardia Airport and the redevelopment of Penn Station and the surrounding blocks. Vornado Realty Trust would erect several towers as part of that endeavor, which faces resistance from community groups and transit advocates, as well as some owners of buildings on West 31st Street between Seventh and Eighth avenues, which Cuomo proposed razing to build a terminal.
Hochul, the lieutenant governor since 2015, is a moderate Democrat. After spending more than two decades in local leadership positions upstate, she won a special election in the 26th Congressional District in 2011.
Scott Mollen, a partner at Herrick, said Hochul can play “a very important role as a mediator in helping balance the many competing interests.”
“The new governor is not someone who has been parachuted in from left field,” he said. “The new governor came with a resume. She had a history of being a responsible, thoughtful leader. Presumably, that is why the governor chose her to be lieutenant governor.”