A housing deal taking shape between the legislature and the governor is likely to provide a larger increase in rents for landlords who renovate apartments, lift the limits on density in residential buildings in many areas of the city and provide renter protections more like those in other states than the original proposal by tenant groups.
A new tax break for rental buildings may be passed as well, since the administration of Mayor Eric Adams and real estate groups are reluctant to agree to any sweeping housing package without it — even though real estate groups and labor unions are publicly at odds over required wage standards for construction workers on those buildings.
Those in touch with the legislative leaders and the governor’s office, who declined to be identified given the sensitivity of the negotiations, say an agreement could be struck late this week or sometime next week as part of the state’s new budget for the fiscal year that began April 1. Legislative leaders have been signaling elements of the package as they prepare their constituencies for what will be included in a compromise.
For example, Assembly Speaker Carl Heastie (D-The Bronx) this week told reporters that an increase in the allowable rent hikes after an apartment was renovated was being discussed. The sweeping pro-tenant reforms that the legislature passed in 2019 sharply limited the increase in rents to $89 per month for buildings with 35 or fewer units and $83 for larger ones.
It isn’t clear how big the increases would be, but until this week any change in the 2019 laws seemed a longshot given strident opposition from most tenant advocates and their legislative allies. But increasing media coverage of the financial difficulties of landlords had an impact, especially in the Assembly, say those close to the talks.
Landlords have argued that the total spending allowed for a renovation — equivalent to about $15,000 — is simply inadequate to make updating an apartment economically possible, especially for apartments that become vacant after long-term tenants move out. Tenant advocates say owners are “warehousing” empty apartments as a ploy to build support for increasing the caps on how much of the cost of renovations they can pass along to new tenants.
The tenant advocates Housing Justice for All immediately denounced any changes to the 2019 rent reforms. But other groups have had a more nuanced response. For example, Ellen Davidson, a Legal Aid Society lawyer specializing in housing, said it was a mistake not to index the 2019 restrictions on renovation recoveries to inflation and that she would support an increase that did that.
How many units are being left vacant as a result of the renovation restrictions remains a matter of great controversy, with the Adams administration emphasizing a number of low-rent vacant apartments that it estimates is in the low thousands, while a recent Census Bureau survey tallies 26,000 unoccupied rent-stabilized units.
Meanwhile, a proposal from Gov. Kathy Hochul to increase the allowed density of residential buildings to 15 times the land’s square footage, up from 12, appears to be gaining momentum.
Influential Manhattan Democratic State Sen. Liz Krueger, who previously opposed the increase, said last week she would support it if it excluded historic districts and required some affordable apartments.
‘Good Cause’ Compromise
Crucial to a housing compromise is passage of a “good cause” anti-eviction bill, which would protect even tenants in market rate apartments by limiting the reasons a landlord cannot renew a lease and setting a maximum increase in the allowable rent.
But a tenant-backed proposal introduced by State Sen. Julia Salazar (D-Brooklyn) is much more restrictive than similar bills passed in other states.
In a sign of where the legislative leaders stand on the issue, State Senate Majority Leader Andrea Stewart-Cousins (D-Westchester) has said any housing package must include the “principles” of good cause, without being more specific. Other sources say that a compromise along the lines of California’s law — which could allow annual increases up to about 10% and exempt new construction — is close to completion.
Another key will be a deal to replace the city’s controversial 421-a tax break, which expired in June 2022.
It forgives property taxes worth about $1.8 billion a year, provided a tax exemption for up to three decades and had required one-third of the apartments be set aside at lower rents. It is designed to counter a property tax system that taxes rental units at several times the rate of homeowners, coops and condos. But since its expiration in June 2022 construction of rental housing has plunged.
Any agreement depends on whether two major industry groups, the Real Estate Board of New York and the Building and Construction Trades Council of Greater New York, can reach a deal on how much construction workers will be paid for jobs on buildings qualifying for the new tax break. The unions are trying to stop the continued expansion of non-union construction work in the city.
The public back-and-forth suggests that the two sides are far apart, making it unclear if the gap can be closed. It is possible that the issue could be set aside for consideration after the budget is delivered, according to those with knowledge of the talks, but that could reduce the leverage of the Adams administration, whose members begin every discussion of their housing agenda with the need for a tax break to spur construction.
Other elements of the city’s housing agenda are likely to be tackled after the big issues are decided, which include easing conversions of office buildings into residential use, possibly with a tax break and affordable housing requirements, and legalization of basement apartments and other adjacent dwelling units.