Two years after abandoning a program that aimed at requiring all localities to pull their weight in addressing New York’s housing shortage, Gov. Kathy Hochul is continuing to pitch regulatory tweaks and incentives to encourage more construction, rather than require it.
“Housing is the number one driver of our affordability crisis,” Hochul said. “And the only way to decrease housing costs is to increase supply. We need to build, and build, and build some more.”
Hochul laid out her agenda on Tuesday in her State of the State address, which appeared to pick up on two priorities identified by Vice President Kamala Harris on the campaign trail: Curb the use of “price-fixing algorithms” used to set rents and restrict the ability of institutional investors to scoop up single- and two-family homes.
Unlike Harris, however, the governor did not set a new housing unit goal (Harris promised to build 3 million homes in her first four years). Instead, Hochul proposed changes to make it easier to build, as well as new funding sources to pad out developers’ capital stack.
(In her first State of the State in 2023, Hochul pledged to build or preserve 100,000 in the next five years. The administration says it is halfway to that goal.)
According to this year’s State of the State book laying out her agenda, Hochul wants to speed up construction approvals by exempting some small housing projects, potentially those spanning no more than 10,000 square feet, from the state’s environmental review process.
Such a move would follow a similar change made by the city, which exempted certain housing projects from environmental review last year. Sen. Rachel May previously proposed an exemption for much larger projects, those consisting of up to 1,000 units, from environmental review; in contrast, Hochul’s proposal exempts projects totaling around 14 units.
Hochul also pitched the creation of a revolving loan fund for developers of mixed-income housing. Sen. Rachel May has a bill that would create such a fund that would provide low- and no-interest loans to developers building affordable housing. Under the measure, the fund would provide mezzanine debt or full construction financing to projects where at least 20 percent of the apartments are rented to those earning at or below 50 percent of the area median income.
When the project is completed, the developer can secure other financing to pay the state back, likely at a cheaper rate because the risk of construction and leasing will be out of the way. The fund is replenished when the developer pays the loan back.
The measure calls for an initial investment of $1.5 billion. Projects that are using low income housing tax credits would not be eligible for the loans.
On Tuesday, Hochul also pitched expanding the state’s version of low income housing tax credits. The administration estimates that doubling the amount of such credits would spur $210 million in private investment in affordable housing per year.
As previously announced, Hochul also plans to propose legislation that would create a 75-day waiting period in which certain institutional investors cannot bid on single- and two-family homes. The governor wants to further disincentivize large investors from buying these homes by decreasing their access to interest and depreciation deductions.
“When institutional investors hold a disproportionate share of a local housing market, it removes opportunities for homeownership, exacerbates the existing scarcity, and drives up prices for remaining homes in the area,” the State of the State reads.
It is not clear that that is the case in New York, however. Reports have repeatedly pegged the share of single-family homes owned by institutional investors at between 2 and 3 percent, though the percentages are higher in parts of the Sun Belt. Anecdotally, a December report by CoreLogic showed mom-and-pop investors made up the lion’s share of so-called investor deals in New York City between January and June, as was the case in the 19 other top metro areas.
Hochul also pledged to work with New York’s congressional delegation to fight for a full restoration of the deduction for state and local taxes, which was capped at $10,000 under the first Trump administration. Trump has reportedly signaled a willingness to increase the cap.
That, along with other elements of the federal tax bill that could have wide-ranging implications for New York, is ultimately out of the governor’s hands. The governor has pitched cutting taxes for New Yorkers earning up to $323,200 per year for joint filers, expanding the state’s child tax credit and cutting “inflation rebate checks” of up to $500 for some taxpayers.
In 2023, Hochul unveiled her “New York Housing Compact,” which would have set targets of 3 percent growth in housing stock every three years for downstate localities and 1 percent upstate. Those that failed to meet the targets would have been subject to a builder’s remedy-type process.
That proposal was shelved amid backlash in the suburbs and reported lack of support from Democratic leaders in the Assembly. Instead, the governor put forward a Pro-Housing Communities program that certified communities that were able to show growth or at steps toward allowing the growth outlined in the Housing Compact. Those localities get priority access to $650 million in discretionary funding. So far, 270 communities have been certified.
Her agenda this year includes creating a $100 million fund to help pro-housing communities pay for infrastructure upgrades. The governor will also seek to provide more grants to communities in need of technical assistance in encouraging housing growth.
In November, the state pledged $1 billion to the city to help finance the City of Yes for Housing Opportunity, zoning changes that the city estimates will add 80,000 homes over the next 15 years.
The governor’s agenda includes two of Open New York’s three top legislative priorities. It leaves out the Faith-Based Affordable Housing, which would make it easier for religious institutions to build affordable housing on their property. The State of the State book also does not mention creating a state-based voucher program, which Democrats in the legislature have said is a priority.
Open New York’s Annemarie Gray said that if state lawmakers are serious about addressing the housing crisis, they need to be looking at more ways to eliminate restrictive zoning. Last year, as part of the state budget, lawmakers lifted the cap on residential density in the city. That change is expected to open the door to upzonings in Manhattan and other high-density areas.
“Coming off the heels of City of Yes at the city level, we’ve seen how imperative it is for leadership in different arms of government to say everywhere has to build housing, everywhere has to be part of the solution,” she said.
Gray added, “State leaders must recognize that housing is a statewide problem, this requires a statewide solution.”
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