To Solve New York’s Housing Crisis, Hochul Hands Off to Private Groups

New York Gov. Kathy Hochul’s second attempt in the past two years to craft landmark housing legislation is sputtering despite taking a completely different tack to pass it.

Vast disagreements between lawmakers, property owners and other stakeholders over tax incentives, fair wages and tenant protections have once again been a drag on the rest of the state budget, which now risks being weeks late after already blowing the April 1 deadline.

On Thursday, April 4, Hochul visited the state Capitol press corps after she signed off on a second extension of the budget deadline, and gave a pep talk acknowledging it’s taken a crisis to get the New York State Legislature, as well as the private sector and organized labor, to address the state’s historic lack of housing.

“I’ve been working hard to bring all the parties together, and it’s beyond just this legislature and the leaders,” Hochul told reporters. “We have to address their concerns because otherwise I can’t force the private sector to build. I can’t make them go do it.”

State legislative leaders, with whom Hochul had been meeting for several weeks to hammer out a budget deal, were optimistic that they were making progress but offered no guarantees over a housing agreement. Senate Majority Leader Andrea Stewart Cousins predicted last week that the budget would be finalized in April. Assembly Speaker Carl Heastie said April 4, “I think we might be in the same neighborhood, I don’t know if we’re on the same block yet.”

Hochul has struggled to pass meaningful housing laws despite making it the centerpiece of her agenda after she won a full term  in 2022. 

Last year, she introduced a plan that would have required towns to build more multifamily homes and override local zoning rules; allowed a denser concentration of units to be constructed in city lots; and revived an expired tax incentive for developers to build mixed-income housing known as 421a.

But suburban lawmakers recoiled at her move to mandate housing construction in their communities, while progressives refused to consider a tax break for real estate owners without new laws reducing evictions and capping rent hikes. Hochul unceremoniously abandoned her housing compact, and the state’s $229 billion budget passed a month late without it. 

This year Hochul changed her game plan. Instead of introducing a 421a replacement, she enlisted the New York City real estate industry’s two most prominent stakeholders, the Real Estate Board of New York (REBNY) and the Building and Construction Trades Council, to hash out wage standards for any projects receiving the incentive. 

The governor once again pitched removing a cap on the floor area ratio of lots to enable more housing density. But she allowed state lawmakers to make their own proposals to protect tenants who face eviction instead of offering her own plan, and her measures requiring suburbs and villages to build housing and a plan to legalize basement apartments have both been mothballed.

It’s unclear if Hochul’s newest strategy will pay off. Kevin Elkins, who has been negotiating minimum wage standards as the political director of labor group the New York City District Council of Carpenters, argued that having stakeholders work out key differences will get something done this year.

“We think it’s important to try and craft legislation with expert input,” Elkins said. “So their idea is absolutely the right one and should be commended.” 

But other real estate leaders warned that Hochul’s move could backfire and result in legislation that pleased no one.

“I think it’s an abdication of responsibility to let two private parties negotiate the terms of the No. 1 issue that New Yorkers are facing,” said Cea Weaver, campaign coordinator at tenant group Housing Justice for All. “I don’t think it’s a good way to affect public policy. I don’t know if it’s working or not, but I don’t like it very much.”

Reviving the tax break

This year the budget has been held up because talks between REBNY and organized labor over the replacement for 421a ran aground at the end of last month. (The incentive expired in mid-2022.) Most of the argument has focused on wage levels and whether projects in Manhattan should offer significantly higher wage rates than those in other areas. 

Real estate leaders proposed an average hourly wage of $72.45 for Manhattan below 96th Street for projects receiving the tax incentive, while workers in projects in certain parts of Brooklyn and Queens received $56 an hour, and those in the rest of the city would receive $35. 

But two trade unions chastised REBNY for setting a wage floor that was below the state’s prevailing wage on projects that employed unions represented by the building trades, the website City & State reported. That prompted union leaders to call on the legislature and governor to step in and determine wage levels. The Mason Tenders District Council also floated codifying a $40 minimum wage for both union and nonunion construction workers on projects taking the tax break.

“The only issue will be if REBNY continues to hold up negotiations over petty politics,” carpenters representative Elkins said. “Thankfully, our elected officials have shown they have the courage to step in if that happens. I only hope REBNY’s leadership understands that.”

Tensions have simmered down a bit. On April 5, a day after Hochul’s remarks to the press, reps for REBNY said negotiations were “very fluid” and the governor has taken a more active role behind the scenes to get both sides to reach an agreement, sources said. 

“New Yorkers are facing a housing crisis, and we’re focused on advancing policies that create much more rental housing and help maintain the city’s housing stock,” REBNY President James Whelan said in an April 5 statement to Commercial Observer.

Once the wage levels are resolved, there are other challenges, though. 

As of the end of last week, lawmakers still needed to craft other details of the tax incentive, such as the percentage of below-market-rate units set aside in new buildings as well as the level of area median income (AMI) that would be used to determine who would qualify for these units. But some insiders do not believe that will be too big a hurdle to achieve, once the wage levels are reached.

“Any new 421a, affordability and depth will look similar to previous versions,” one real estate insider privy to negotiations said. “You’ll get somewhere between 20 to 30 percent affordable with AMIs within 40 and 70 percent. It’s some variation of that, and it’s going to get reauthorized eventually. I just don’t know when.”

Halting evictions

The governor did not mention curbing evictions in her annual address to legislators in January. But, on April 4 she told reporters she would “make sure people are not abusing our tenants” and prevent landlords from gouging them.

That’s a change that reflects some unity within both houses of the legislature, whose leaders stated there would be no housing legislation without eviction protections included in the budget.

Both the state Assembly and Senate included so-called good cause eviction principles in their respective budget proposals but did not provide specific details about how high property owners could raise rent annually or about any exemptions from good cause for newly constructed buildings for a 10- or 20-year period. 

One bill that Brooklyn Sen. Julia Salazar introduced would cap rent hikes at 3 percent each year or 1.5 percent of the Consumer Price Index, and require landlords to send evidence of higher utility costs if they needed to raise rents above that rate.

Tenant organizer Weaver favors the Assembly’s version, which would make good cause eviction a statewide policy as opposed to applying only to New York City.

“We want this bill for two reasons: to protect tenants in small buildings and tenants who don’t live in New York City, which has had rent stabilization for some time,” Weaver said. “If you’re exempting Rochester, we think that would be a big shame.”