Can Kathy Hochul Get Her Ambitious Housing Policies Passed?

Gov. Kathy Hochul revealed an ambitious list of housing proposals at her State of the State speech earlier this month, but it’s difficult to predict whether they have enough political support — particularly in the state legislature — to become a reality. New York City Mayor Eric Adams is on Hochul’s side, however, which inspires hope among real estate industry types and pro-housing groups.

Hochul called for the construction of 800,000 homes in the next decade, along with setting housing production goals for towns and cities. While that policy would mostly target the suburbs, her office has pitched many New York City-specific proposals, including changing state housing laws to allow for more office-to-residential conversions, lifting the floor area ratio cap that prevents larger residential buildings, and allowing new basement and accessory dwelling units.

Hochul tried to push a similar set of policies in last year’s budget, but they didn’t gain much traction with the state legislature.

The new housing production proposal would allow the state to interfere in a town’s zoning if that town was not meeting its goals or making policy changes to do so. Towns served by the Metro North and Long Island Rail Roads would have to grow their housing stock at a rate of 3 percent over the next three years, while upstate cities would be expected to add 1 percent more new housing in the same period.

Although it’s not clear exactly what would happen in towns that don’t meet their production targets, Hochul’s policy book describes “fast-track approval mechanisms for mixed-income, multifamily projects only in localities that do not meet their targets (and that also fail to adopt certain targeted approaches with a proven record for facilitating housing growth).” The state court system would handle appeals and approvals for towns that don’t want to add more housing.

New Jersey has a similar setup across the river, and it results in affordable housing projects getting built via court order in towns that refuse to comply. Suburban legislators in Westchester or Long Island likely won’t be happy with the proposal, which would push many of their towns to produce more housing than they have been producing for the past decade or two. Long Island, for example, has increased its housing stock by only half a percentage point, which was the lowest rate of regional housing growth in the entire state, Hochul’s briefing book notes.

Even among real estate observers, reactions to the regional housing targets were mixed.

“I would defer to local planning departments and local authorities,” said land use attorney Mitch Korbey, who’s a partner at Herrick Feinstein and a former city planner. “I would do an analysis to see if their opposition to housing is because of real infrastructure issues, like sewers or schools. The same sort of thing can be happening on the outer edges of the city. If they do support infrastructure, there’s no reason to say no to more development.”

Members of the real estate industry were heartened to hear the governor talking about housing production, and to see the mayor and the governor on the same page about policy after nearly a decade of Mayor Bill de Blasio and Gov. Andrew Cuomo going at each other.

“The governor and the mayor have the same vision, which is something we haven’t seen in years,” said Shimon Shkury, head of Ariel Property Advisors, an investment sales brokerage. “The fact that the two leaders understand that in order to have affordability of rent, we need to build more, I think that’s a great step in the right direction. It seemed like they both understood they couldn’t do it alone — that they need the help of developers and outside capital, and incentives to build more housing. Overall, big picture, I think this is a great move in the right direction.”

Valerie Campbell, a partner at Kramer Levin, predicted that the housing production targets would be “very, very controversial. It could well end up being litigated. There is a provision in [Hochul’s] plan that would allow the state to step in. I have a hard time thinking that’s going to pass the state legislature. I think municipalities are going to be just apoplectic about that. A lot of the suburban communities have never been that welcoming to multifamily development, and this brings more people to neighborhoods, which they don’t seem to want.”

Still, Campbell was optimistic about the mayor and the governor teaming up on housing.

“I think it’s a positive sign that the governor and the mayor are actually cooperating on these initiatives, which will require a combination of state and city action,” said the attorney.  “There’s a lot more recognition that the city has to provide more housing, more income bands in the city.”

Tenant and affordable housing advocates were more concerned about Hochul’s focus on housing production over subsidized development, vouchers or tenant protections.

“There was no discussion of homelessness, and we thought that was remarkable,” said Emily Goldstein, director of organizing at the Association for Neighborhood Housing and Development. “We can’t keep siloing housing and homelessness in this way. The people who are experiencing homelessness are people we should be prioritizing in terms of needs.” She added, “I think it’s dangerous when we conflate general housing production with affordable housing production.”

However, Goldstein said her organization — which represents nonprofit developers in the five boroughs — was supportive of efforts to overturn restrictive single-family zoning.

“We definitely think that exclusionary zoning in many communities is very problematic, and efforts to push inclusion and ensure that communities that have been exclusionary are doing their part is a positive step,” Goldstein said.

Her group hopes to see the legislature ratify more tenant protections, especially good cause eviction and right to counsel in housing court, along with expanded voucher programs for the homeless. She noted that a state-funded voucher program could help the tens of thousands of undocumented migrants flooding into the city from the Mexican border, who aren’t eligible for federal housing vouchers.

“Undocumented folks are the people that are in New York City shelters the longest because they have the fewest resources available to find housing,” Goldstein said.

Other big-ticket items in Hochul’s housing proposal include resuscitating the 421a tax exemption for new construction — which expired in June — and the lifting of the residential floor area ratio (FAR) cap, which has long been set at 12. That means a building cannot be any larger than 12 times the square footage of the lot on which it stands.

“A lot of preservation groups, like Municipal Arts Society and Landmarks Conservancy, have been adamantly opposed,” said Campbell. “They think lifting the cap will result in more supertall luxury housing.”

Lifting the FAR cap might be more tenable for office-to-residential conversions than new construction. Many office buildings constructed after 1970 are much larger than the FAR cap allows, which makes them nearly impossible to convert.

Pro-housing and real estate groups hope the legislature not only lifts the FAR cap for conversions, but also amends state housing laws to allow for office buildings across the city to be converted to residential. Current rules only allow for conversions in Lower Manhattan, and they only allow for buildings above the FAR cap to be converted if they were built before 1969.

The last major wave of office-to-residential conversions occurred in the mid-1990s through the mid-2000s. They were triggered by a now-defunct state tax incentive, 421g, and legislative changes to the housing laws that made it easier to convert Downtown office buildings to apartments.

“For conversions, [lifting the FAR cap] could be a potential compromise,” said Campbell. She added that a tax abatement, exemption or subsidy would be needed if the state hopes to see affordable housing in New York City office-to-residential conversions.

“I think it’s inevitable that both in lifting the FAR cap and allowing for broader conversions that there is going to be a requirement for an affordable housing component,” she said. “And the amount of those subsidies may depend on what the requirement is. If you’ve got a significant requirement for affordable housing in new construction or conversions, at a certain point if you don’t have subsidies, it won’t happen.”

John Sanchez, head of a new pro-housing group called 5 Borough Housing Movement, felt that legislators were on board with changing the laws to facilitate conversions and crafting a tax incentive for those projects to include affordable housing.

“Generally, people are supportive of converting vacant office floors,” he said. “Legislators want to see how many affordable units, how affordable. We just want to keep the topic in their minds when they go through budget negotiations. That’s what they’re going to negotiate over. People are supportive of something to create affordability south of 96th Street, and without a tax incentive only market-rate will be built.”

He said he felt broadly optimistic about support for Hochul’s housing policies among state and city legislators.

“I’m very encouraged by the adaptive reuse study [on conversions] from the city,” said Sanchez. “There have been supportive statements from Councilmember [Justin] Brannan, Councilmember Erik Bottcher. I think there’s an appetite to make things work. I think the baseline approach legislators need to have is that we can’t have thousands of people living in shelters in the wealthiest city in the country, and whatever way we address that needs to be considered and enacted.”