Housing is a no-go: Lawmakers set to leave Albany empty-handed

Legislative session was a big flop for real estate and tenants

New York Housing Compact left out of the budget during legislative session despite efforts by Carl Heastie and Andrea Stewart-Cousins and Governor Hochul

100th Speaker of the New York State Assembly Carl Heastie and Majority Leader of the New York State Senate Andrea Stewart-Cousins along with the New York State Capitol (Getty, New York State Assembly)

This legislative session seemed poised to be a banner year for housing policy. Instead, the most ambitious measures — along with several less controversial bills — were left on the cutting-room floor.

After Gov. Kathy Hochul’s New York Housing Compact — a plan that included housing targets for every municipality in the state — was left out of the budget, the governor identified a series of more attainable measures that she called “low-hanging fruit.”

They included extending the construction deadline for 421a and making it easier to convert offices to apartments.

After months of negotiations, lawmakers formed a working group in the final days of the session to negotiate a housing package that incorporated some of these measures. But talks devolved into a blame game.

Senate Majority Leader Andrea Stewart-Cousins and Assembly Speaker Carl Heastie said in a joint statement Thursday that their chambers had worked toward an agreement on a 421a extension, office conversions and good cause eviction. But they said the governor was not on board and vowed that “all three chambers must immediately redouble our efforts and come up with a plan that the governor will sign into law.”

A spokesperson for the governor fired back, saying, “No housing package was ever even introduced, let alone passed, for the governor’s review.”

It is not clear how far along the housing agreement was, given that the Senate and Assembly leaders indicated that they were “working toward” a deal. Bill language was not available for many of the items enumerated by Heastie and Stewart-Cousins in their statement.

Tenant advocates said the chambers had sufficient votes to move forward, although industry sources believe that was not the case.

Housing Justice for All demanded lawmakers call Hochul’s “bluff” by passing a bill and daring her to veto it.

“Anything short of immediate action on this package would amount to a colossal failure of leadership during an unprecedented time of suffering for millions of tenants from all corners of New York state,” the tenant group said in a statement. “Ending the legislative session without having passed any meaningful housing initiatives is a reality that no member of the public will accept.”

The Homeowners for an Affordable New York, a coalition that includes landlord groups the Rent Stabilization Association, the Real Estate Board of New York, Small Property Owners of New York, released a statement saying they were thankful lawmakers and the governor “held their ground, and common sense prevailed.”

“It is now clear that a majority of lawmakers understand that good cause eviction would increase homelessness, devastate New York’s future housing supply, and wreck local budgets,” the coalition said in the statement.

Good cause, 421a and conversions may have dragged other, less controversial issues down with them.

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“It is bleak that New York seems to be throwing up its hands and doing nothing,” Andrew Fine, Open New York’s policy director, told The Real Deal last month.

His group had pushed for some less controversial bills in the final weeks of the session, including one to extend the lending authority for the city’s Department of Housing Preservation and Development. Sen. Brian Kavanagh said Thursday he was hopeful the measure would advance.

“These should not be controversial in a housing crisis,” he said. “But unfortunately, everything related to housing has become controversial, it seems.”

Here is the litany of legislative dead ends this session, barring last-minute action on Friday:

421a extension 

The property tax break expired in June 2022 and lawmakers have shown little interest in reviving or replacing it. They shot down Gov. Kathy Hochul’s proposal to replace the program last year and did not fulfill her request in January to propose an alternative.

Projects that managed to qualify for the break before it expired — by having at least foundation footings in the ground by June 15, 2022 — must be completed by June 15, 2026, to receive the exemption. Hochul pitched extending the construction deadline by four years, but that also failed to gain traction.

Developers scrambled to install footings, but that hardly guaranteed they could get construction financing to meet the 2026 deadline. Lenders have required even shorter timelines, and interest rates remain high. Without that extension, as many as 32,000 planned apartments may not be built, according to the Real Estate Board of New York.

In the final weeks of the legislative session, the Adams administration ramped up its advocacy for the extension, emphasizing that housing planned under the Gowanus rezoning was imperiled by the 2026 deadline.

Though Hochul characterized the extension as “low-hanging fruit,” the measure remained contentious among lawmakers. The tax break and good cause eviction — policies each supported by groups that do not see eye-to-eye — held up negotiations.

Good cause eviction

During budget negotiations, the Senate and Assembly voiced support for tenant protections, but did not explicitly include good cause eviction in their budget resolutions. The measure would prevent landlords from evicting tenants for failing to pay an “unreasonable” rent increase.

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It defines “unreasonable” as exceeding 3 percent or 1.5 times the regional inflation rate, whichever is higher. Owner-occupied buildings with fewer than four units would be exempt.

Albany became the first New York municipality to pass its own form of good cause eviction, but it was thrown out by the courts, as were similar policies in other jurisdictions.

The measure’s path forward likely involves changing what constitutes an “unreasonable” rent increase. Gothamist also reported that lawmakers were considering limiting the measure to the five boroughs, but allowing other jurisdictions to opt in.

Thursday’s announcement by Senate and Assembly leaders marked the first time they explicitly acknowledged a willingness to pass the measure. Their proposal allowed for increases of up to 10 percent or or 5 percentage points greater than the inflation rate, according to Crain’s.

Office-to-residential conversions 

For more than two years, state officials have considered making it easier to convert offices into residential space. The proposals have taken different forms — former Gov. Andrew Cuomo pitched a temporary zoning override that included affordability requirements — and have failed for various reasons.

This year, Hochul proposed a tax break and extending the city’s most flexible conversion rules to buildings constructed before 1990. But the Assembly pushed for requiring developers to set aside a certain percentage as affordable without offering additional subsidies, which industry sources said would accomplish nothing. The proposal did not move forward.

Absent state action, the city can still extend its most flexible zoning rules — which allow conversions of office buildings constructed pre-1971 without capping residential density — to more areas of the city. Dan Garodnick, director of City Planning and chair of the City Planning Commission, indicated that these changes would be part of the Zoning for Housing Opportunity text amendment to begin the public review process next year.

The city-level changes, however, do not address office buildings constructed post-1971, which must abide by the city’s cap on residential floor-area ratio.

Floor-area-ratio

For years, state officials have proposed lifting the city’s residential FAR, which is capped at 12 — meaning a building’s floor area can only be 12 times that of the lot. Though the metric controls density, rather than height, opponents claim it would yield more ultra-luxury supertall towers.

Removing this restriction would not by itself allow denser towers, though it would pave the way for more office-to-residential conversions because many office towers exceed 12 FAR. Outside those conversions, city officials would need to rezone areas of the city to allow for greater residential density.

Vacancy reset

The landlord group Community Housing Improvement Program pushed for a measure that would allow landlords of rent-stabilized apartments to reset rents in certain vacant units. If an apartment were vacated after being continuously rented out for 10 or more years, a landlord could increase rents by first renovating the apartment.

Though the measure garnered some support, several sponsors publicly denounced the bill amid pressure from tenant advocates.

Thursday’s failed agreement included an increase to the amount that rent can be raised on a rent-stabilized apartment to pay for its renovation — a cap reduced to less than $90 a month by the 2019 rent law.

The Community Housing Improvement Program was encouraged by the brief inclusion of such a measure.

“While we are disappointed this session may end without further legislative action to protect tenants, build more housing, and lower housing costs, we are grateful that for the first time, the state legislature has universally acknowledged the growing problem of vacant rent-stabilized apartments caused by restrictive policies,” Jay Martin, executive director of CHIP, said in a statement. 

J-51 

Editor’s note: After publication, and two days after the session was scheduled to end, the state legislature passed a measure to renew J-51. The abatement and exemption program, which incentivized apartment renovations and conversion of commercial space into multifamily, lapsed last year. The governor proposed limiting it to an abatement that would only apply to rental buildings with 50 percent or more affordable units, in the Mitchell-Lama program, or receiving “substantial government assistance.”

Three different bills were proposed to replace the tax break, including one by Sen. Brian Kavanagh that closely followed the governor’s bill. Before its expiration, participation in the program had waned, and some industry professionals felt the proposed changes would not have enticed more landlords to participate.

Lower-hanging fruit

Efforts to create a state-based housing voucher program also failed, despite widespread support among tenant advocates and landlord groups. The last-minute agreement between the Senate and Assembly included a voucher program.

A measure that would allow the city to legalize basement and cellar apartments did not advance out of committee.

The Housing Affordability, Resiliency, and Energy Efficiency Investment Act of 2023 would have expanded the Department of Housing Preservation and Development’s lending authority. It would have allowed HPD to finance to ground lessees that support community land trusts.

It also would lengthen loan terms from 30 to 40 years, a change the agency estimates would allow it to preserve 500 to 1,000 more units each year, according to the New York Housing Conference. The measure would also increase the amount the agency could lend builders per unit on renovation projects.

Another bill would have required localities to report the number of housing units they approve each year to the state.