In Albany, Taxes and Red Tape Seize Spotlight in Addressing Housing Crisis

Affordability has been the buzzword of the year in Albany, but lawmakers have very different ideas over how to reduce the cost of living and ensure New York state can continue growing.

This year, Gov. Kathy Hochul proposed in her $263 billion budget to overhaul the state’s environmental review process (known as SEQRA) in a bid to expedite construction on new housing projects. She also sought to enhance the J-51 tax incentive, which enables owners of co-ops and rent-regulated buildings to make costly capital repairs to their properties. 

At the same time, state lawmakers joined New York Mayor Zohran Mamdani to demand raising tax rates on corporations and millionaires to shrink the city’s $5.4 billion budget deficit and fund an array of services. They have also floated their own versions of the governor’s plans.

These disagreements have threatened to hold up state budget negotiations well past an already blown April 1 fiscal deadline. The governor has balked at adjusting income taxes or corporate taxes during an election year, despite legislative leaders’ calls for a corporate hike at minimum. 

Real estate industry leaders have sided with Hochul and strongly supported her efforts. 

“New York is already one of the highest taxed jurisdictions in the country, and raising taxes would only make it harder to attract investment and build the housing the city needs,” Basha Gerhards, executive vice president of public policy at the Real Estate Board of New York, told Commercial Observer. “More housing and economic growth depend on lowering barriers, not raising costs.”

The outcome of this year’s budget plan will have a lasting effect on how fast new housing will be added to the market, how many existing units can get fixed, and what everyone will pay for them. 

For now, the governor may hold more leverage. As negotiations paused for legislators to return home for the Passover and Easter holidays, Hochul had not changed her mind on taxes or tightening building reforms. If talks drag on for another month, lawmakers may back off their positions and let Mamdani deal with the city budget on his own.

“From a big picture point of view, it’s hard to persuade legislators to raise taxes in the best of times and in an election year unless there’s a genuine crisis,” said Ken Fisher, a member of Cozen O’Connor’s business law department. “It doesn’t matter where they fall on the ideological spectrum, they need to be able to tell their constituents they have exhausted all other possibilities.”

That’s rich

The debate over taxes is an early test of the new mayor’s influence in Albany.

During last year’s mayoral race, the Queens Democrat proposed raising income tax rates for city residents earning above $1 million a year from 3.88 percent to 5.88 percent. In addition, Mamdani floated hiking the state’s corporate tax rate from 7.25 percent to 11.5 percent.

But the mayor does not have the authority to adjust tax rates — only the governor and state legislature can do that. Instead, Mamdani must use his skills of persuasion and political acumen, qualities that helped him become the city’s youngest mayor in more than a century.

Once Mamdani was sworn in, his allies organized “Tax the Rich” rallies in Albany to pressure Hochul and state lawmakers to include tax rate changes in the state budget. Mamdani skipped the upstate rallies but testified at a state budget hearing in February that tax hikes were necessary to close the city’s ballooning deficits. 

The results have not been encouraging. New York’s state Senate and Assembly have both discussed corporate tax proposals that would nudge the rate closer to 9 percent for businesses, generating between $5 million and $10 million in tax income. But Hochul has remained firmly opposed to either tax increase, and business leaders argued that higher rates would compel wealthy residents and corporations to relocate to other states.

“I get the politics of trying to give the mayor a political win, but the reality is that this is a very fragile economy and jobs are portable,” said Steven Fulop, president and CEO of the Partnership for NYC, which represents private-sector employers. “People are unfortunately going to leave if you have an environment where you keep raising taxes for the sake of raising taxes.”

Louis Tuchman, partner and chair of law firm Herrick Feinstein’s tax department, has heard from an increasing number of clients over the past two years asking how to move their businesses out of New York to avoid the state’s taxes and regulations. He worries that a corporate exodus would put additional pressure on the city’s commercial real estate market, which has been slow to recover from the pandemic.

“People feel they can work remotely much more effectively than they could 10 years ago,” Tuchman said. “More and more businesses are looking to structure their operations in ways of minimizing their work in New York. I’m not saying it’s right or wrong, but it’s incorrect to say these decisions have no impact on the tax base.” 

So far, state voters have shrugged off those concerns. When asked whether the governor and legislature should allow the city to raise income taxes for high-earning residents, 53 percent answered yes while 30 percent said no, according to a March 2026 Siena poll. Among New York City voters, 64 percent favored income tax increases while only 20 percent opposed them, the poll found.

Business leaders warned the public to be careful what they wish for.

“The tax issue is very similar to ‘Defund the police,’ ” said Suri Kasirer, CEO and founder of Kasirer, which lobbies on behalf of many New York-based corporations and real estate owners. “When something becomes a movement, people kind of stop being rational. ‘Tax the rich’ has become a mantra, whether we need the money or not.” 

Cutting green tape 

New York’s environmental review laws are more likely to see significant changes this year.

The governor and the legislature agree the cumbersome process must be sped up to generate more housing, but details in their proposals vary widely.

Hochul wants certain mixed-use multifamily projects to avoid having to go through environmental review. She is proposing exemptions for projects with no more than than 500 units in high-density New York City neighborhoods, no more than 250 units in other parts of the city, and no more than 100 units in the rest of the state. 

Her revisions, aimed at spurring more infill housing in developed areas, could cut the average length of review from 2.5 years to months and save developers in New York City nearly $82,000 per unit. The changes would not apply to industrial properties or those in flood zones where an assessment would still be necessary, but it would exempt non-
residential projects like child care facilities, bike lanes or clean water infrastructure that communities need.

The state Senate version closely mirrors the governor’s plan but would adjust the caps higher, to 1,000 units within the city and 500 in the rest of the state while cutting out exemptions for non-residential uses. The Assembly’s draft, which leaked in late March, made more dramatic changes by slipping in a prevailing wage labor standard and a 50 percent below-market-rate mandate on new housing. It would also expire after three years.

Real estate owners, housing advocates and municipal leaders including Mamdani have rallied behind the governor’s plan, which many said contained the fewest restrictions to new housing construction. 

“New Yorkers want their government to do everything they can to address housing affordability and build as much housing as we can,” Annemarie Gray, executive director of advocacy group Open New York, said. “SEQRA doesn’t cost money. It adds new taxpayers to the local tax base, making it easier to build more housing, which will help the affordability crisis.”

New Yorkers are largely supportive, too. In a February 2026 Siena poll, when asked whether “it is time that we cut the red tape that too often slows down projects and let communities build,” 76 percent of voters agreed while a mere 7 percent did not.

For developers, any change that would make it easier to build residential projects while saving them money is welcome. 

Rosie Tilley, head of development at Charney Companies, wanted to add 10 stories to a 43-story tower in Fort Greene, Brooklyn, so she opted into a zoning bonus with the Metropolitan Transportation Authority and made accessibility improvements to its Nevins Street station. But, to receive the benefit, the project had to undergo an environmental review with the city, which found it exceeded noise limits, and Charney needed to put up an enhanced facade to correct that.

Tilley thought the review was unnecessary because the noise affected only condo owners inside the building, not any of the neighboring properties or the public on the street. She said she hopes the governor’s proposal would eliminate such additional costs in the future.

“I really appreciate her taking up the cause,” Tilley said. “I am glad she is being very sensible in recognizing what needs to be worked through to allow for housing development. It’s prudent environmental reform, not pointless costs and schedule to a project.”

A fix for fixing up

Lawmakers may also sign off on tax relief for existing buildings.

Hochul proposed expanding the eligibility for co-ops and condo buildings and some rental buildings to use the J-51 tax incentive to make repairs or modifications to their properties.

The revised program would allow an abatement of 100 percent of a project’s certified reasonable costs, up from the existing 70 percent; raise the assessed value limit from $45,000 per unit to $60,000; and extend the eligibility of preservation work through June 2036. Other versions in the legislature raise the cap on qualification to as high as $75,000 per unit.

Those changes would allow more co-ops and condo properties to qualify for the incentive. Mary Ann Rothman, executive director of the Council of New York Cooperatives and Condominiums, said her members would use the incentive to make capital improvements to comply with city carbon reduction mandates such as Local Law 97. 

“The J-51 incentive has traditionally required that improvements be made building-wide,” Rothman said. “In most cooperatives and condominiums, it is the shareholders or unit owners who are responsible for repairs to their individual apartments, though Local Law 97’s ultimate goal of electrification to replace fossil fuels is likely to involve major modifications within apartments in order to electrify them.”