Hochul Proposes Four-Year Extension to 421a, $650M ‘Pro-Housing’ Fund in State Budget

Mayor Eric Adams released a $109.4 billion budget proposal for New York City on the same day

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New York Gov. Kathy Hochul wants the state to budget in a few carrots, and not many sticks, to encourage housing construction this year, according to the $233 billion budget proposal the governor released Tuesday.

Hochul will once again ask state lawmakers to extend the deadline for developers with ongoing projects to take advantage of the expired 421a tax abatement program, this time by four years to 2031. 

SEE ALSO: IBO Predicts NYC to Bring in $900M More in Tax Revenue Than Adams’ Projections

She also wants to create a $650 million “pro-housing” fund to award communities that increase their housing supply, and proposed putting an initial $250 million toward repurposing former correctional facilities and other state properties into affordable housing.

New York’s housing shortage is “inexcusable,” Hochul said in a speech unveiling her $233 billion budget proposal, and chastised the New York State Legislature for not working to fix the problem.

“When I presented a transformative housing plan last year, a lot of the members of the legislature said they wouldn’t support it,” Hochul said. 

Hochul teased her housing agenda — with fewer details — in her State of the State address last week. Her housing proposals also include creating a new incentive to convert underutilized office buildings to housing, paving the way for the city to circumvent a cap on floor area ratio to allow for denser buildings in some neighborhoods, and legalizing basement apartments.

But Hochul has dropped the idea of using mandates to accomplish her housing goals. A more ambitious proposal that included mandatory housing growth targets failed last year after a protracted battle with lawmakers from Westchester County and Long Island who staunchly opposed it. Now, Hochul’s new $650 million pool will be given to pro-development communities already willing to play ball.

“Others said they wanted local control for housing decisions,” Hochul said. “OK, let’s put that to the test.”

Critics characterized Hochul’s 2024 housing agenda as a watered-down version of her housing goals from previous years.

“New York has been suffering from an acute housing shortage for decades,” Jay Martin, the executive director of the Community Housing Improvement Program, a group representing owners of rent-stabilized properties, said in a statement. “The governor has stated she is committed to addressing the shortage, but her plan lacks the bold vision of last year after a stalemate with the legislature prevented anything from being done on housing.”

Hochul did not come up with a replacement for 421a — a tax abatement that proponents say helps spur affordable housing construction — but instead tasked the city to come up with a substitute.

What she did do was propose giving developers who already had construction on projects underway in 2022 a four-year extension to complete those projects and still qualify for the tax abatement. That could still be an uphill battle since Hochul failed to get the state legislature to agree to move up the deadline from 2026 last year.

The budget would also continue to allocate money to continue Hochul’s $25 billion five-year plan to build or preserve 100,000 units of housing across the state, which started when she took office in 2022.

In her State of the State, Hochul said she would allocate $500 million to develop 15,000 new units of housing on state-owned lands such as former prisons and State University of New York campuses. The budget would kick that off in the first year with a $250 million allotment.

Hochul wasn’t the only New Yorker to release a budget proposal on Tuesday. In a rare double whammy, Mayor Eric Adams kicked off his budget process and proposed a $109.4 billion city budget later in the afternoon he said would be focused on “prioritizing the needs of working-class New Yorkers.”

While Adams expects the city to bring in $2.9 billion more than previously expected over the next two years, New York still faces a $7.1 billion budget gap that Adams pinned on the end of pandemic stimulus funding, expenses from labor contracts and outpaced spending on the city’s asylum-seeker crisis. (Hochul’s budget proposal increases state support of New York City’s spending on services for migrants from $1.9 billion last year to $2.4 billion.)

Still, the extra money in the state budget allowed Adams to propose pulling back on some of his previously proposed cuts to city services, but agencies including the Department of Education and the Department of Social Services would still have their budgets lowered.

Adams did not mention new housing proposals in his budget address. He released a separate statement agreeing with Hochul’s latest tactics to spur more construction. 

“We agree with Gov. Hochul that the only way out of our housing crisis is to build more housing,” Adams said in a statement Tuesday afternoon. “With the governor’s support, we are confident that our partners in the state legislature and City Council will also say ‘yes’ to the legislation that our city needs to address our housing crisis with the urgency New Yorkers demand.”

Abigail Nehring can be reached at anehring@commercialobserver.com.