2024-04-20 18:34:00
State lawmakers brought back a property tax break, added tenant protections, encouraged office-to-residential conversions and changed renovation rules for rent-stabilized apartments — all in one monster budget bill.
The legislation brings together housing policies that have been debated many years. It includes compromises criticized by both property and tenant groups.
Owners said measures for rent-stabilized apartments and multifamily projects insufficient. Their peers argued that tenant protections were too watered down, resulting in a lopsided legislative package that favored developers and landlords.
Gov. Kathy Hochul, who negotiated the deal, and Mayor Eric Adams, who advocated for it, praised the outcome for its policy of increasing housing production while improving renters’ rights.
“I was not here to please people. I’m here to help New Yorkers find a home.”
“Obviously there are voices that are not excited,” Hochul told WNYC’s Brian Lehrer this week. “But you know what, I wasn’t here to please people. I’m here to help New Yorkers find a home.”
The bill was expected to be passed by the legislature on Saturday and signed by the governor. Here is a breakdown of the different housing policies included:
485x (formerly 421a)
Nearly two years following lawmakers defiantly let the multifamily project tax break 421a expire, the state is replacing it with 485x, or Affordable Neighborhoods for New Yorkers. This increases affordability requirements for tenants and wages for workers on projects that receive the tax break.
The program gets rid of the expired program’s highest-income option, which allowed developers to meet affordability requirements by setting aside 30 percent of apartments for households earning 130 percent of the area’s median income .
More details on 485x:
- Wages: After the Real Estate Board of New York and the Building and Construction Trades Council failed to agree on wages, lawmakers chose a middle ground option that will keep accountants busy for years to come.
Wage requirements kick in for any project with more than 100 units. For those, the wage and benefit floor starting at $40 an hour and increasing 2.5 percent each year.
At projects of more than 150 units in Manhattan south of 96th Street and on the Brooklyn and Queens waterfronts, including Williamsburg, Greenpoint and Long Island City, construction workers’ total compensation must be the lesser of $72.45 an hour or 65 percent of the be prevailing wage. .
Contractors on such projects in other parts of Brooklyn (including Dumbo and Brooklyn Heights) and Queens (Astoria and Queensbridge) must pay at least $63 an hour or 60 percent of the prevailing rate.
Those rates also increase by 2.5 percent each year – an effort by the legislature and governor to keep up with inflation.
- Affordability: Projects with between 100 and 149 apartments must set aside 25 percent of units for tenants who earn a weighted average of no more than 80 percent of the area median income. For larger projects, the AMI number is 60 percent. Developments with six to 99 units must do 20 percent at 80 percent of AMI. Projects outside Manhattan that are 12,500 square feet or smaller and have six to 11 units are eligible for a 10-year benefit, and must have at least 50 percent of units rent stabilized. Condo and co-op projects are also eligible if they are located outside of Manhattan and have an average value of $89 per square foot or less. Condos were part of 421a before they were virtually excluded by the version that expired in 2022.
- Construction deadline: The budget extends the construction deadline for the expired 421a program by six years. That means developers who managed to get foundations in the ground before June 15, 2022, have until June 2031 to finish.
- The takeaway: Lawmakers have tried to strike a balance between wages and affordability. REBNY predicted that the program would not create as much housing as 421a. But the industry needed something to succeed because high property taxes on rents made new projects almost impossible to finance.
Office conversions
Last year, Mayor Eric Adams estimated that around 20,000 homes might be created within 10 years by converting office buildings into residences.
That projection relied on changes by the city and state, including lifting the citywide cap on residential floor area ratio, or FAR, as well as a new tax incentive to get more of these expensive and complicated projects off the ground.
Provisions of the conversion measure:
- Twenty-five percent of the new apartments must be affordable at a weighted average of 80 percent of the AMI, including 5 percent at 40 percent of the AMI.
- The length of the benefit varies from 25 to 35 years, depending on when the application is submitted. The exemption generally starts at 90 percent of the tax bill in areas of Manhattan south of 96th Street, and at 65 percent outside of Manhattan. For any project, the tax break is phased out in its final years.
FAR, a long, long way to go
For years, the idea of letting the city control its own residential density did not gain traction in Albany. The new agreement lifts the FAR cap, which limited living space to 12 times the lot size.
Lifting the cap doesn’t automatically allow larger apartment buildings, but allows the city to rezone for them. The Adams administration’s proposed City of Yes for Housing Opportunity aims to create two residential districts with a RENV of 15 and 18.
Rezoning triggers the city’s Mandatory Inclusionary Housing Act. The budget specifies that any residential projects exceeding a VER of 12 must have at least as much affordable housing as required under that law.
The budget also bars larger residential projects in historic districts or those that share a lot with a building that contains co-working quarters for artists — an apparent concession to preservationists in neighborhoods like Greenwich Village.
If a developer wants to demolish a residential building to take advantage of the higher RENV, tenants must be offered a buyout worth up to six months’ rent, or a new lease in a comparable unit.
Another good cause
A “good cause eviction” bill introduced in 2019 would have allowed tenants to challenge evictions that resulted from rent increases of more than 3 percent or 1.5 times the local inflation rate, whichever is higher. But it never came to a vote.
Instead, this year’s housing package implements a version of good intent similar to California’s:
- Tenants can challenge evictions due to rent increases of more than 10 percent, or 5 percent plus inflation, whichever is less.
- The policy automatically applies in New York City. Out-of-town locations can subscribe.
- Buildings constructed in 2009 or later are exempt from good cause for 30 years from the time of completion. Apartments affordable to households earning 245 percent of the area median income are also exempt, as are those whose owners have small portfolios, defined as no more than 10 units in the state. Owner-occupied buildings with 10 or fewer apartments are also exempt.
- Landlords can still evict tenants for failing to pay rent or for being a nuisance.
- The takeaway: Proponents of the good cause have warned that the cut would exclude hundreds of thousands of renters. They were also concerned regarding landlords playing the portfolio size exemption. Housing Justice for All urged lawmakers to reject the deal.
Time will tell if the compromise takes the issue off the table for landlords or creates a benefit for tenants that future lawmakers will improve.
Social housing
In their unicameral budget resolutions, both the Senate and the Assembly proposed programs that would help finance the development of limited equity cooperatives on state-owned land.
The budget includes one that looks closer to the Assembly proposal — a program overseen by the state’s housing agency to finance limited-equity cooperatives on land owned by the state, localities, nonprofits or community land trusts. It’s called “New York Housing for Future Homeownership and Rental Housing.”
Basement apartments pilot
State and city lawmakers have long debated ways to legalize the tens of thousands of illegal basement and basement apartments in the city. The issue became urgent when 11 people were killed by Hurricane Ida’s floodwaters that poured into their homes.
State lawmakers have been reluctant to legalize such apartments or even to give the city the authority to do so. This year, they agreed to let the city create a pilot program led by “local engagement.”
The pilot program will allow basement and basement apartments to be converted into legal units in 15 of the city’s 59 community districts: four each in the Bronx and Brooklyn, six in Manhattan and one in Queens. Community councils will have a chance to weigh in on joining the pilot program, but it seems likely that the local city councilor will ultimately decide.
Individual apartment improvements
In 2019, the state legislature made significant changes to rent stabilization. One was a cap on the individual apartment improvement program, which allowed landlords to raise rents on stabilized apartments following renovations.
The new bill shifts the numbers a bit in the direction of the old law.
- Apartment repairs eligible for rent bumps are capped at $30,000 over 15 years, with rent increasing by 1/180 of the cost for buildings with more than 35 units and 1/168 for smaller buildings. Increases will be permanent and amount to $166 or $179 per month.
- The cost of repairs might increase to $50,000 if a unit has been continuously occupied for 25 years or is registered as vacant in 2022, 2023 and 2024. In those cases, owners of buildings with fewer than 35 units can reduce the improved unit’s rent by 1 / increase 144 of $50,000, or $347 per month. In buildings with more than 35 units, the increase can be 1/156 of the renovation cost.
- The takeaway: The Rent Stabilization Association and Community Housing Improvement Program said the changes are not enough help for owners of stabilized properties in need. Tenancy groups described it as a dangerous rollback of the 2019 Tenancy Act.
CHIP pushed for a separate measure to allow landlords to reset rent one time on vacant stabilized apartments that have been continuously occupied for 10 or more years. The apartments will remain regulated. The bill didn’t come close.
Stickers
Lawmakers have responded to an increase in news reports regarding squatters in recent months by proposing a number changes to state law.
The budget includes a measure closest to Queens Sen. John Liu’s bill, which changes a section of state law to exclude squatters — those who trespass or otherwise enter a property and continue to occupy it without permission — from the definition of a tenant. Another part of state law already specifies that a squatter does not have a landlord-tenant relationship.
The budget does not include a proposal to create a state-based voucher program, despite support from landlord and tenant groups. Also missing is the Faith-Based Affordable Housing Act, which would have made it easier for religious organizations to build affordable housing on their property.
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