Kathy Hochul Pitches $260B Budget

Gov. Kathy Hochul’s opening salvo of budget negotiations leaves tax hikes off the table and suggests tweaks to a tax incentive for renovating multifamily housing.

Hochul on Tuesday proposed a $260 billion state budget for fiscal year 2027. Despite pressure from the left to increase corporate and income taxes, the governor kept rates flat, only proposing to extend the top corporate tax rate (7.25 percent) through 2029, according to an overview provided by the governor’s office. The corporate tax rate was slated to expire at the end of this year.

“This is not an austerity budget, but it is a disciplined one,” Hochul said during an address on Tuesday.

During his campaign, Mayor Zohran Mamdani called for tax increases as a way to fund his key campaign promises, including free buses and city-owned grocery stores. The city is also staring down an estimated $12 billion budget gap this and next fiscal year.

“It is time to ask New York City’s wealthiest and large corporations to pay their fair share, while also working toward a fiscal relationship with the State that better reflects New York City’s status as the economic engine of the state,” Mamdani said in a statement, noting that he rejects “austerity politics.”

The executive budget includes a proposal to reform the tax break J-51, according to a budget book released on Tuesday. The tax abatement is provided to certain owners who renovate their multifamily properties in exchange for keeping the apartments rent-stabilized at least through the duration of the incentive.

The City Council renewed the incentive in 2024, more than a year after the state approved a new version of the tax break that limited what buildings would be eligible. The abatement is available for owners of apartment buildings that are at least 50 percent affordable, part of the state’s Mitchell-Lama program or otherwise receiving “substantial government assistance.” Co-ops and condos are only eligible if each unit’s assessed value does not exceed $45,000.

The budget book doesn’t provide details on how the abatement would be changed, however. Landlord groups have criticized the changes to the program made by the state legislature in 2023 that further restricted what buildings qualify for the incentive.

This is the final year of the governor’s $25 billion five-year housing plan. The state has created or preserved more than 70,000 housing units so far, and is on track to reach 100,000 by the end of the year. The executive budget includes $250 million to “accelerate new construction of affordable housing units,” and to get a jump on the state’s next housing plan.

The new funding will also supplement the expansion of federal housing credits.

Details of other major initiatives remain unclear. During her State of the State address last week, Hochul unveiled a proposal to exempt most housing projects from the State Environmental Quality Review Act, or SEQRA.

The budget book doesn’t include more specifics of this program, though it indicates that she wants to increase Department of Environmental Conservation staffing to “address general permitting timeframes and backlogs.” Details on non-fiscal policy proposals in the executive budget will be released separately on Tuesday.

The proposed budget includes $50 million for the Housing Voucher Access Program, a state-based housing voucher program that serves families or individuals who are homeless or in imminent danger of losing their homes. The funding level is the same as last year’s allocation, which fell significantly short of the $250 million sought by advocates.

As revealed during her State of the State address, the executive budget incorporates legislation introduced last year that would upgrade felony charges against landlords who systematically harass rent-regulated tenants across multiple buildings or are “repeat serious offenders.”

The budget book doesn’t mention property tax reform, nor additional relief for rent-stabilized landlords. Landlord groups have pushed for legislation to allow one-time rent resets in vacant stabilized apartments, but such proposals haven’t progressed in recent years.

The majorities in the Senate and Assembly will put forward their own budget proposals before a final spending plan is hashed out.