Lawmakers Hail Governor’s Housing Push — Except on Developer Tax Breaks
State legislature housing committee chairs Linda Rosenthal and Brian Kavanagh announce they’re ready to embrace the governor’s pro-growth agenda.
The two veteran legislators who head the housing committees of the state Assembly and Senate say they agree with the governor and the mayor that only building more units will solve the housing crisis gripping New York.
Both Assemblymember Linda Rosenthal (D-Manhattan) and Sen. Brian Kavanagh (D-Manhattan) support Gov. Kathy Hochul’s proposals to set state housing development targets and penalize localities that don’t increase housing production by 3%, especially near transit hubs. The penalty would limit localities’ power to reject projects.
Kavanagh and Rosenthal also back Mayor Eric Adams’ proposal to find a way to legalize thousands of basement and other “accessory dwelling units” as they are called. Kavanagh supports the Adams proposal to increase the allowed density in residential buildings; Rosenthal says she is looking at it.
But when it comes to the tax breaks both the governor and the mayor want, the response is, in effect, either “convince me” or “there is no support for such steps in the legislature.”
And, they both said in interviews with THE CITY, if there is to be a major housing reform package, it will have to include a new, state-funded voucher program and additional tenant protections for lease renewals in market-rate apartments.
“The governor and the mayor will have to consider what’s important to the legislators,” said Kavanagh, who has been in the legislature since 2017.
Their positions drew a sharp retort from the head of the Real Estate Board of New York (REBNY), who insists the tax breaks are crucial and that the “Good Cause” tenant-protection proposal — which caps rent hikes at 3% or 1.5 times the consumer price index — is a non-starter.
“Common sense and math will need to replace ideology as the driving force behind the legislature’s housing efforts or the city’s housing crisis will continue to worsen,” said REBNY President James Whelan.
Many REBNY members are major campaign donors to Hochul, and the trade group traditionally wields substantial influence with New York’s governors.
‘We Need More Housing’
The differing opinions suggest how difficult it will be to pass major housing legislation this session even as the urgency of the issue grows.
The intense lobbying over housing options began last week, when Hochul fleshed out proposals in her preliminary budget.
By any measure, New York City is up against a dire housing crisis. Rents soared for apartments on the market in the last year, as the city recovered from the pandemic. One-third of New Yorkers spend half their income on rent, well above the recommended outlay of putting one-third of income toward housing. And the city is simply not building enough housing to keep up with population growth.
The governor has set a target of facilitating 800,000 new housing units statewide over the next decade, and endorsed the Adams administration’s goal of building 500,000 in the city in that time period.
Legislative leaders, the governor, the mayor and virtually all housing groups agree the issue is one of supply.
“Across the board we need more housing,” said Rosenthal, who became the Assembly Housing Committee chair this year. “I am glad she is centering her efforts on the need for new housing,” she said of Hochul.
Unsurprisingly, Democrats in Manhattan support her efforts to force low-rise communities near mass transit to build more.
“The suburbs are not producing housing and this is an interesting way to do it,” Rosenthal said. Kavanagh points out how far behind New York is in housing productions, compared to other states.
“We are the only state in America with a dense metropolitan area like New York that has not had a state intervention to make sure localities are producing more housing,” he said. In fact, last year California took many of the same steps that Hochul is proposing.
They either support or are considering allowing residential construction in business districts to have greater density than currently allowed, a key to converting obsolete office buildings to housing.
Both agree with the mayor’s effort to legalize an estimated 50,000 basement units, an undertaking that would require property owners in many cases to undertake renovations.
Kavanagh emphasizes the need to make it affordable to comply with the standards, so owners don’t continue to ignore the law. Rosenthal stresses the need for the units to be safe, with protections for tenants currently living there, so they don’t face unaffordable rent increases.
Division on Tax Breaks
Agreement among the elected officials ends when it comes to real estate tax breaks. The mayor and governor support four: a new tax abatement for offices being converted to residential space when including some affordable units; a replacement for the expired J-51 incentive to renovate older apartment buildings; an extension of a construction deadline qualifying projects for the 421-a property tax break that expired last June; and a yet-to-be-determined replacement for 421-a.
Kavanagh ticks off his reasons for skepticism about those proposals.
“It is an open question whether we need tax incentives to facilitate the conversion of offices to housing,” he begins, adding, “I don’t see a good reason to extend the deadline” for the 421-a-qualified projects.
In fiscal year 2022, 421-a cost the city $1.8 billion in uncollected property taxes.
Rosenthal is suspicious of reviving J-51 “because there were a lot of shenanigans” in the expired program. And she takes aim at the Hochul-Adams tactic of not putting forward a specific proposal to replace 421-a.
“I do think the 421-a calculation is if you propose a specific program you have a built-in target, and it does put the onus on the legislature” to come up with specifics, she notes.
“But that doesn’t get you anywhere.”
Both legislators say they sense there is little support for the tax breaks in their chambers. Kavanagh adds he is happy to defer the issue until near year, when it may become clearer if residential construction in the city has plummeted since the break expired.
The 421-a abatement emerged to offset the high cost of building in New York, as well as high property taxes on rental properties, which developers say eat up 30% of their operating income compared with a national average of 10%. Buildings receiving 421-a benefits must set aside 25% to 30% of their units for affordable housing.
The governor has also proposed less controversial tax breaks for new housing in the suburbs, as well as money to help communities that are adding new housing improve their infrastructure.
Pushing tax breaks through the legislature will be more difficult because many housing groups are sidestepping the issue.
For example, a new lobbying group called New York Neighbors, primarily spearheaded by the Regional Plan Association, has recruited a diverse group of more than 40 organizations to push the governor’s and mayor’s housing agenda. But the group is not taking a position on the tax breaks.
Support for the voucher proposal, which would begin with $250 million this year before reaching $1 billion in five years, is widespread and likely not a major hurdle. It would provide rent assistance for those who do not qualify for federal vouchers, such as undocumented immigrants.
But tenant protections like those outlined in the Good Cause anti-eviction bill could torpedo the entire effort.
“Tying a voucher program to Good Cause eviction so it can be used as a bargaining chip is shameful,” said Greg Drilling, a spokesperson for Homeowners for Affordable New York, a group supported by real estate interests.
“It does nothing to address the housing supply shortage and would, in fact, make finding an apartment more difficult and impossibly expensive for renters.”