Hochul: Supersize NYC apartment buildings, replace 421a

UPDATED Jan. 5, 2022, 3:53 p.m.: Gov. Kathy Hochul wants to repeal a key property tax break, lift a cap on apartment building density in New York City and provide free lawyers to tenants upstate.

The governor will propose a replacement to the 421a tax exemption, requiring deeper affordability and mandating green building systems, such as carbon-neutral technologies and electrification.

She also will call for the creation of an affordable homeownership option in the program, which has been primarily for rentals. The tax break is slated to expire June 15 and is often cited by developers as crucial to the construction of multifamily housing in the city.

But tenant advocates and some elected officials have called for its repeal, saying the $1.7 billion in property taxes forgiven annually is a giveaway to real estate developers.

Details on Hochul’s proposed replacement — which would require passage of a law by the legislature — were not released by the governor’s office, but she included bullet points on desired changes to the tax break in a policy book ahead of her first State of the State address this afternoon.

The real estate industry has expected changes to the program, which was last renewed in 2017 and dubbed “Affordable New York.” Two sources told The Real Deal that developers would likely support adjusting area median income requirements, as well as additional sustainability mandates and requirements to hire local construction workers.

Cea Weaver, campaign coordinator of tenants group Housing Justice for All, called the governor’s proposed changes “lipstick on a pig” and said the tax break should be scrapped.

“She tinkered at the edges of the 421a program, while making it clear she will still send billions in tax abatements to corporate landlords,” Weaver said in a statement.

Hochul is also pitching a repeal of the state’s cap on residential density, which is limited to a floor area ratio of 12 — a restriction that economists say has contributed to the high cost of housing in New York City. Similar proposals have been floated in the past but most recently failed to garner support from the Assembly.

Eliminating this restriction, according to a policy book laying out Hochul’s agenda, would enable the conversion of office buildings into residential space.

James Whelan, president of the Real Estate Board of New York, said getting rid of the cap would pave the way for the city to rezone areas with good mass transit. In a statement, he also said REBNY supports “creating a new program that incentivizes the development of rental apartments and produces more affordable housing for New Yorkers,” referring to whatever replaces 421a.

The book also indicates that Hochul will propose legislation to further ease zoning restrictions to make it easier for these conversions to move forward.

The proposal echoes a measure introduced by Manhattan state Sen. Brian Kavanagh last year, which allowed certain hotels within 800 feet of residential districts to use their existing certificates of occupancy for full-time residential use. Such hotels would be subject to rent stabilization and other housing agreements.

The governor’s proposal would also allow offices constructed before 1980 or those south of 60th Street in Manhattan to be converted to housing until December 2027.

Former Gov. Andrew Cuomo had pitched a workaround of local zoning rules to allow hotel and office conversions, but the proposal was ditched in favor of a measure that prioritized housing for low-income and homeless individuals and would be overseen by nonprofits. No conversions have yet been initiated under the program.

The governor also plans to introduce an upstate version of Right to Counsel, which would provide free legal assistance to tenants facing eviction if they make 200 percent of the federal poverty line or less.

The state’s eviction moratorium expires Jan. 15, and advocates have been pushing for passage of good cause eviction before that happens. The governor did not mention the legislation, which would bar rent increases of more than 3 percent or 150 percent of the inflation rate, whichever is higher, in her policy agenda. A hearing on good cause is slated for Friday.

The governor also wants to create 2 million electrified or electrification-ready homes throughout the state by 2030, and plans to introduce legislation that would require new construction to produce zero emissions on-site by 2027.

New York City recently passed a measure that will require all new buildings to go electric by 2027, and smaller projects by 2024. A pending state bill would require all new buildings to go electric by 2024.

Hochul also will push legislation that requires municipalities to allow at least one accessory dwelling unit on owner-occupied, residentially zoned lots. Local governments would set the size requirements for those ADUs, sometimes called granny flats.

Last year, Assembly member Harvey Epstein and Sen. Pete Harckham introduced legislation that would require municipalities to legalize ADUs. The measure would have also barred landlords from evicting tenants from them for nonpayment of rent or after imposing a modest rent increase, similar to good cause eviction.

The governor’s proposal would also create an amnesty program for existing illegal basement apartments in the city, “with an expectation that they be brought into compliance with key building code requirements to ensure resident safety.”

The de Blasio administration’s plan to legalize basement units, which number in the hundreds of thousands, has stalled. Following Hurricane Ida, which resulted in the death of a dozen people in basement apartments, the mayor announced the formation of a task force to create new evacuation rules.

Hochul also wants to launch a pilot program to explore different homeownership models, including community land trusts.

Some of the proposals laid out by the governor are likely to be included in her executive budget, which will be hashed out by legislators in advance of its April 1 due date. Hochul, who is running for a four-year term, indicated that she would not take a steamroller approach in Albany or pick fights with Mayor Eric Adams, as her predecessor Andrew Cuomo did with Bill de Blasio.

“What I am proposing is a whole new era for New York,” she said. “The days of governors disregarding the rightful role of this legislature are over. The days of the governor of New York and mayor of New York City wasting time on petty rivalries are over.”

This story has been updated with comments from Cea Weaver and James Whelan.