State Bill Speeds Mall, Office Housing Conversions

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A state bill that already has the backing of top lawmakers, construction power players and local business groups would fast-track developers’ ability to turn underused malls, office buildings and parking lots into housing across New York.

The measure, introduced in mid-March by State Sen. James Skoufis and Assembly member Michaelle Solages, would create a streamlined process for certain commercially zoned, mostly empty properties to be redeveloped into housing or mixed-use complexes.

The Redeveloping Empty and Vacant Infrastructure for Vibrant Economies Act — or REVIVE — aims to do two things: convert so-called stranded assets into apartments to chip away at New York’s housing shortage and revive commercial corridors hollowed out by the rise of e-commerce. Because the proposal focuses on repurposing defunct properties, Skoufis said he expects less of the fierce community opposition that often dogs new housing proposals.

“I think we’re able to thread a needle here,” said Skoufis. “This is not the wilderness we’re building on. You’re turning an already paved-over blight that exists in a commercial part of town, or a city, into a viable place where people can live and then walk to opportunities.”

The effort has the attention of State Sen. Brian Kavanagh, who chairs his chamber’s housing committee and told The Real Deal that he’s “very interested in advancing the bill.” A spokesperson for Gov. Kathy Hochul, Kassandra White, emphasized the governor’s support of zoning changes that enable offices and other commercial spaces to convert into housing in New York City. “The Governor will review any bill that passes both houses,” said White.

In the two weeks since Skoufis and Solages introduced the bill, a coalition of influential construction, commerce and housing policy groups — including New York Builders Association, the Greater New York Chamber of Commerce and Open New York — has begun to coalesce around the proposal.

“These are projects and housing that would not be built otherwise, or would be built much quicker than in the past,” said Michael Fazio, executive director of the trade group and lobbying force the New York Builders Association. “It’s not a silver bullet, of course, but we need a multi-pronged approach toward solving this housing crisis.”

Under the bill, parcels eligible for redevelopment must be at least 15,000 square feet, designated for commercial use (such as offices or retail), and have a minimum vacancy rate of 50 percent for at least one year before submitting a project application. A parcel must also have an existing connection to water and sewer infrastructure.

The REVIVE Act outlines relatively basic rules around density, height and parking. In cities, a redevelopment must include at least 20 units per acre, while projects in smaller communities would need at least 15 units per acre. Local governments would be blocked from requiring more than one parking space per unit.

A project’s maximum density could be the greatest allowed for a residential or mixed-use lot in a town or county. Or, if the project is within a city, developers could build up to ten feet above the site’s maximum height. And if the land is located within 800 feet of a zoning district that permits a greater height or density for housing, the project could rise to those neighboring limits. The provision, said Skoufis, was written with New York City in mind.

As written, the bill doesn’t require projects to include a certain amount of affordable housing. That’s in part to preempt a narrative that the proposal is about usurping a community’s ability to shape a project, said Assembly member Michaelle Solages.

“We actually leave it to the local community to decide what they want,” said Solages.

Most notably, the legislation hits the gas on project approval timelines.

In the five boroughs and other urban areas, projects would go through what the bill describes as “an approval process based on objective planning standards without public hearings or subjective local review.” Officials would have 60 days to review a project with fewer than 150 units, and 90 days for those that exceed that amount. If the bill passes, the accelerated timeline would shave off at least four months of reviews for conversion projects that may otherwise go through New York City’s ULURP process for a zoning change. While it would vary depending on the project, market rate conversion projects that require a major zoning change wouldn’t be eligible for the city’s new expedited review processes as a result of last year’s ballot measures.

If officials fail to meet the deadlines, the legislation would consider a project automatically approved. The sped-up process is designed to at least partially mitigate politically fraught reviews that can make developers and owners give up on projects before they even begin.

“It allows folks to get from maybe we can do this to yes or no. That is what consistency and a streamlined process does,” said Moses Gates, vice president for housing and neighborhood planning at policy thinktank the Regional Plan Association. “It does help with the financing because time is money in the development world. But I would say it’s designed more to give greater certainty.”

That’s not to say it’ll make actually converting a site easier. Redeveloping underutilized malls, for instance, can be especially tricky because anchor tenants often have complex legal agreements that can make it a challenge for owners to take away parking spaces or do anything else that makes it harder for the shops still at a property to do business.

“Existing leaseholders have a lot of leverage,” said David Garcia, deputy director of policy at the Terner Center for Housing Innovation at the University of California, Berkeley, who has studied adapting commercial properties into housing. “But really the first step is creating a regulatory structure to transform the property.”

If the REVIVE Act passes, New York would join at least seven other states with similar programs, including California, Florida and Texas. How such initiatives have fared elsewhere offers lessons for New York. For example, in 2022 California Gov. Gavin Newsom signed a bill into law that reduced rezoning requirements for developers looking to convert office and retail properties into housing.

At the time, supporters said it would spur a glut of new housing. But through 2024 the law has only been invoked to build 5,000 new units, said Garcia. Developers have pointed to certain requirements that make it a challenge to take advantage of the law, he said, namely that builders must pay a prevailing wage to labor on the projects and adhere to affordability requirements (provisions the REVIVE Act currently lacks). California lawmakers are in the process of exploring changes to the law to increase its use.

“These programs need to be calibrated with the markets otherwise you risk having a program that will not be used,” said Garcia. “Understanding how any requirements that a bill has for developers impacts the feasibility of a project is really critical.”