Policy Pro: City spells out SEQRA shortcuts, data centers hit a snag

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Hello, let’s get into today’s news at the intersection of policy and real estate:

• City planners unveil a roadmap for SEQRA exemptions.
• Gov. Hochul hit the brakes on large data center development with a one-year moratorium, but state lawmakers are still looking to impose steeper restrictions.
• An appeals court dealt REBNY another loss in its effort to overturn the FARE Act.

In this edition we mention: General counsel for the Department of City Planning Alec Schierenbeck, Herbert Smith Freehills Kramer Partner Nicole Fenton, Assembly Speaker Carl Heastie, Real Estate Board of New York President James Whelan and others.

We Heard

• Regulatory reset: New York’s real estate industry and city planners are wasting no time tapping into the state’s biggest overhaul of environmental review rules in nearly 50 years. The changes, approved as part of the state budget in late May, carve out SEQRA exemptions for certain housing projects, potentially removing one of the city’s most notorious development bottlenecks. The Department of City Planning has already cleared 12 projects for the faster track, shrinking pre-certification timelines from roughly two years to about six months for qualifying developments. DCP General Counsel Alec Schierenbeck said the agency is seeing “a tremendous amount of curiosity” from developers on how to qualify for the SEQRA exemptions. To help navigate the process, the city this week published guidance outlining which projects are eligible and how applicants can seek a “Qualified Action Determination” for a SEQRA exemption. Under the new rules, housing developments with up to 500 units in medium- and high-density districts, or up to 250 units in low-density areas, can bypass SEQRA if they meet certain criteria. Those projects are unlikely to create significant environmental impacts, allowing DCP to focus its resources on larger and more complex developments that warrant deeper review, added Schierenbeck. The streamlined process could also deliver “astounding cost savings” for builders, he added. For a 500-unit residential project, the city’s typical two-year pre-certification period adds an estimated $41 million in costs — roughly $82,000 per apartment — according to an analysis by the Citizens Budget Commission. Those expenses are often passed on to future tenants or offset through city subsidies. Among the other criteria hurdles projects must clear are having existing public water and sewer system connections and being located on “previously disturbed” sites where development has occurred before. Projects on manufacturing-zoned land or in flood zones would remain subject to state environmental review. The exemptions also do not override other environmental regulations or city approvals, including the Uniform Land Use Review Procedure, or ULURP. Meanwhile, DCP is combing through the city’s existing housing pipeline to identify projects that could benefit from the streamlined rules. The agency estimates the changes could speed up environmental reviews for potentially hundreds of already proposed developments. “We’re excited that a very healthy amount of our more modest applications are going to qualify,” said Schierenbeck.
  
• Plug pull: New York is hitting pause on large-scale data center development. Gov. Kathy Hochul Tuesday issued an executive order imposing a one-year moratorium on new data centers that still require construction permit approvals, making New York the first state to temporarily halt large-scale data centers while officials develop a regulatory framework for the industry’s energy use and environmental impact. The move comes amid growing community concerns that the power-hungry facilities are driving up electricity costs and straining water resources. The moratorium is a setback for developers pursuing projects in New York and is likely to redirect investment to competing markets, said Nicole Fenton, a real estate transactions attorney at Herbert Smith Freehills Kramer whose clients include data center developers. “I don’t think you’re going to push people away from New York entirely, but you’re just going to encourage people to go to states that are more data center friendly,” said Fenton. “You can just as easily build in New Jersey or Connecticut. There are a lot of states that are competing for this kind of business.” Steeper restrictions may be on the way. The state Legislature last month passed sweeping legislation that would extend the one-year moratorium to smaller data center projects, though lawmakers haven’t sent the bill to Hochul's desk for review just yet. Assembly Speaker Carl Heastie told reporters Tuesday that the bill remains in play despite the governor’s executive order. “We are still going to negotiate the bill that we passed and I’m hoping the governor will sign the bill,” Heastie said.
  
• Court rebuff: The Real Estate Board of New York suffered another setback this week in its bid to overturn the city’s broker fee law. The U.S. Court of Appeals for the Second Circuit rejected the trade group’s attempt to revive claims that the Fairness in Apartment Rental Expenses, or FARE, Act violates the First Amendment and is preempted by state law, affirming a lower court’s dismissal. The appeals court also upheld the lower court’s refusal to block the law while the case proceeds. In November 2024, the City Council approved the FARE Act, banning tenant-paid broker fees for brokers they did not hire. The law, which took effect in June 2025, was designed to reduce renters’ upfront costs and shift leverage in lease negotiations away from landlords. REBNY sued almost immediately, arguing the law chills brokers’ speech by discouraging them from advertising rentals because posting a listing signals the broker was hired by the landlord. The trade group argued that premise breaks down for open listings, where brokers are not necessarily retained by landlords. The organization also claimed that the law is preempted by state law and unlawfully interferes with private contracts. A federal judge previously dismissed the free speech and state law claims but allowed REBNY’s Contracts Clause challenge. That claim remains alive, though it applies only to exclusive tenant-paid listing agreements signed before Dec. 13, 2024, that remained in effect after the FARE Act took effect. REBNY President James Whelan said the group is “disappointed by the appellate court decision and will explore pathways to continue our legal challenge against this misguided law.”

Have a tip or feedback? Reach me at caroline.spivack@therealdeal.com. 

The Catch-Up

Mamdani handed an NYPD parking lot to a community land trust, paving the way for 131 permanently affordable apartments, reports The Real Deal’s Ben Miller.

New York City’s new pied-à-terre tax is another example of elected officials pursuing a political headline before thinking through how the surcharge will actually function, writes Policy Pro columnist and commercial real estate broker Bob Knakal.

Greystar, the nation’s largest apartment owner, is facing fair housing complaints alleging discriminatory rental practices, reports The New York Times.

A power line meant to bring hydropower from Canada to New York City has been out of service for 10 days with no end in sight as another heat wave sets in, reports The City Reporter.

The Kicker
“NYC’s housing affordability crisis is at DefCon 1,” city Comptroller Mark Levine wrote on X. 

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