Governor Kathy Hochul released her fiscal year 2023-2024 executive budget which proposes $125.2 billion in state operating funds and $21.4 billion in capital funding. Housing is a major focus of the budget, which filled in details of the Housing Compact announced in her State of the State last month, and included related new spending like planning and infrastructure funding.
New York desperately needs a smart growth strategy to catalyze housing production– and the New York Housing Compact is a historic chance to do just that.
The plan provides local leaders with options to create housing in a way that works for their communities. That could mean the creation of new townhomes along Metro North and Long Island Railroad transit corridors, tweaked zoning codes to allow for duplexes in places currently limited to single family homes, or the addition of apartment complexes offering rental and homeownership opportunities for families who are priced out.
The only choice not on the table is the stagnation that caused this crisis in the first place.
Last year, Gov. Hochul implemented a $25 billion five-year affordable housing plan to create or preserve 100,000 affordable units, including 10,000 supportive housing units. This year’s budget includes funding for new programs and ongoing HCR programs.
Executive Budget’s Housing Compact
Governor Hochul’s Executive budget provides legislative language for the New York Housing Compact, a statewide strategy to increase housing supply and combat exclusionary zoning, with the goal of producing 800,000 new homes over the next decade. The land use proposals include statewide production goals, transit-oriented development and establishes an appeals process. The following proposals can be found in the Education, Labor and Family Assistance (ELFA) budget bill.
Establishes Local Growth Targets and Fast Track Approvals (pg. 79)
To ensure every community in the state is doing its fair share, the New York Housing Compact will set statewide growth targets for all localities and creates a builder’s remedy for affordable housing in localities that are not in compliance. Downstate will have a three percent housing growth targets and upstate will have a one percent housing growth target in each three-year cycle. In New York City, growth targets would be set at the Community District level. New affordable or supportive housing units will count as two units toward the growth target and units on abandoned properties will count as one and a half units. Beginning on January 1, 2024, they will be required to reach production targets on a three-year cycle, with the existing housing stock as of the 2020 census being used as the baseline.
Localities that meet the growth targets or have taken action on their own in past years will achieve Safe Harbor status and avoid the builder’s remedy for the subsequent cycle. Those who do not meet targets can achieve Safe Harbor if they enact at least two preferred actions from the following options:
- Legalize accessory dwelling units (ADUs)
- Facilitate lot splits
- Remove all the following exclusionary measures: minimum lot size requirements, unreasonable height limits and lot coverage restrictions and parking minimums
- Smart growth – rezone one-third of developed land of a municipality for 25 units/acre
- Adaptive reuse rezoning to allow residential density of at least 25 units per acre in an area of at least 100 acres that only allowed commercial use
After January 1, 2027, localities that are not in Safe Harbor will be subject to a builder’s remedy
Applicants for qualifying projects – where at least 20 percent of units are affordable to very low-income households (at or below 50 percent AMI) or 25 percent affordable to low-income households (at or below 80 percent AMI) and are at least ten units or more upstate or 20 units or more downstate – may apply for local approval despite existing zoning and cannot be denied because of it.
Further, these projects are exempt from State Environmental Quality Review Act (SEQR) and review is limited to local infrastructure capacity and published, objective aesthetic standards. A decision must be made on these applications within 120 days if under 100 units or within 180 days if over 100 units. If a locality fails to make a decision or imposes conditions that make the project economically infeasible, it will be considered a denial.
Qualified projects denied a permit can pursue a new appeals process that places the burden of proof on the locality
If the locality denies the projects, developers can appeal to a newly created housing review board or file a land use appeal with the supreme court.
The housing review board will be established within Homes & Community Renewal (HCR) and have five members – three appointed by the Governor, and one each appointed by the Assembly Speaker and Senate Leader.
A new land use advisory council will be established with five members – three appointed by the Governor, and one each appointed by the Assembly Speaker and Senate Leader – to determine which supreme court judges are qualified to hear land use appeals.
Transit Oriented Development (pg.117)
The proposed budget will give downstate localities three years to rezone for a minimum average density within a half mile of rail stations including NYC subways. It will establish 4 transit zones based on proximity to NYC:
Tier 1: NYC and within 15 miles – 50 units/acre
Tier 2: 15-30 miles – 30 units/acre
Tier 3: 30-50 miles – 20 units/acre
Tier 4: 50+ miles – 15 units/acre
Projects in these transit zones will have a streamlined review process where a decision must be made in 120 days, it bypasses SEQR, and review is limited to local infrastructure capacity and published, objective aesthetic standards.
In localities that fail to adopt appropriate zoning, a developer could bring legal action to build a project up to the prescribed average density. The attorney general will also be able to compel a city, town, or village that has failed to take necessary land use actions to do so.
Collects Local Zoning and Housing Production Data (pg. 157)
HCR will collect from localities and publish data on new construction, conversions, alterations, demolition, consolidation of housing sites within their jurisdiction and zoning changes.
Facilitates Localities in Reclaiming Vacant and Abandoned Homes (pg. 159)
Clarifies and improves the process for localities to legally certify certain vacant residential properties are abandoned and facilitates municipalities’ ability to take ownership of hazardous properties
Creates Greater Opportunities to Convert Office Spaces to Residential Housing (pg. 160)
Allows for the residential conversion of NYC buildings that were occupied for loft, commercial, institutional, public, community facility, or manufacturing purposes prior to December 31, 1990. They would be exempted from the 12 floor area ratio (FAR) cap for residential buildings.
Creates Tax Incentive for Commercial Conversions (pg. 197)
Establishes the Affordable Housing from Commercial Conversions Tax Incentive Benefits (AHCC) for NYC commercial conversions that produce at least six rental units. Eligible projects will receive a full property tax exemption during the construction period, other than assessments for local improvements. After construction is complete, properties in the Manhattan prime development area, located entirely south of 96th Street in Manhattan (PDA), receive a 50 percent exemption for 15 years. Properties outside of the PDA receive a 35 percent exemption for this period. Each year thereafter for the next four years, properties within the PDA receive a tax exemption that is 10 percent less than the prior year, and properties outside the PDA receive an exemption 7 percent less than the prior year.
At least 20 percent of units must be affordable – at least 5 percent of those units must be affordable to households whose income does not exceed 40 percent AMI, as adjusted for household size, and the weighted average of all the affordable units cannot exceed 70 percent AMI, as adjusted for household size. The bill also requires the affordable housing units be rent stabilized during the 19-year tax benefit period. Further, building service workers in AHCC-recipient buildings must receive prevailing wage during the AHCC benefit period, unless they have fewer than 30 units or are converted with substantial assistance of governmental grants, loans, or subsidies.
Allows New York City to Legalize Basement Dwelling Units (pg. 166)
Authorizes NYC to legalize current basement apartments, including amnesty to landlords who convert basement apartments to legal units from civil prosecution.
It also removes the $60,000 per unit cap on loans from municipalities to owners of 1-4 unit dwellings for these conversions and provides right of first refusal to tenants who have to be removed for the conversion.
Authorizes New York City and the New York State Urban Development Corporation (UDC) to Override the Floor Area Ratio Requirement (pg. 171)
Authorizes the City and UDC to override the 12.0 FAR maximum for residential developments.
Updates Tax Abatement Incentives for Affordable Multiple Dwellings in NYC (J-51 Replacement Program) (pg. 171)
Provides a tax abatement for capital improvements to affordable rental and owner occupied buildings in NYC made between June 29, 2022 and June 30, 2026. The maximum annual abatement amount is 8⅓ percent of the cost of improvements, for up to 20 years. The overall abatement is capped at 70 percent of the total improvement costs over the duration of the abatement. Units would be subject to a 15-year restriction period during which they would need to continue to be affordable, and all non-Mitchell Lama rental units would be entered into rent regulation until the first vacancy after the 15-year restriction period. Must be enacted by local option by June 30, 2025.
Eligible rental buildings must meet one of the following conditions:
- at least 50 percent of the units are affordable
- the building is a Mitchell-Lama rental property
- or the building receives substantial governmental assistance
Creates a New Tax Incentive for Affordable Multifamily Housing Outside of NYC (pg. 190)
Allows municipalities outside of NYC to provide a property tax exemption for newly-constructed rental properties that have 20 or more units, where at least 20 percent of units are affordable and restricted to households meeting the bill’s criteria for low income.
Properties would be entirely exempt from taxes during the construction period, for up to three years. After construction, the size of the exemption would decrease by four percent per year for 25 years, at which time the property would be wholly liable for property taxes.
Provides a Property Tax Exemption for Accessory Dwelling Units (pg. 193)
The bill will create a new opt-in property tax exemption on the increase in assessed value of one and two family homes as a result of creating an ADU. The exemption is 10-years – the first 5 providing an exemption of 100 percent of the increase in assessed value, the next three decreasing that exemption by 25 percent, and the last two years decreasing by a further 10 percent in each year.
The exemption is capped at $200,000 in increased market value and only for ADUs that are valued at over $3,000. Localities have the flexibility to offer a lower percentage exemption or to limit eligibility.
Extend the Project Completion Deadline for Vested 421-a Projects by Four Years (pg. 214)
This would extend the deadline to complete 421-a projects already in the pipeline by four years.
Currently, projects must be completed by June 15, 2026, however many projects in the pipeline are unlikely to meet this deadline. This extension is necessary to finance affordable housing in some of NYC’s most recent rezonings including Gowanus.
Makes Buildings More Sustainable (TED pg. 251)
In the Transportation, Economic Development and Environmental Conservation (TED) bill, the budget proposes to phase out fossil fuel equipment and building systems in new residential construction and retrofits. Fossil fuel infrastructure would be prohibited starting:
- December 31, 2025 – new one-family and multi-family residential buildings no more than three stories in height
- December 31, 2028 – new multi-family residential buildings more than three stories in height and new commercial buildings
- January 1, 2030 – retrofits for residential buildings three stories high and lower
- January 1, 2035 – retrofits for all multi-family and commercial buildings
FY 2023-2024 Budget
The proposed budget includes new funding of $250 million for infrastructure to support the Housing Compact, a $50 million homeowner stabilization fund, $39.8 million for lead abatement, $15 million for statewide data collection, and $20 million for planning assistance. The budget also eliminates* funding for the Homeowner Protection Program (HOPP); last year the program was funded at $35 million.
In addition to funding supportive housing in the five year plan and ongoing homelessness prevention, Gov. Hochul’s budget adds $900 million for mental health care including adding 750 supportive housing beds and 750 scatter site supportive housing beds.
These bold polices will set New York on a path to expand housing supply and reduce housing costs for homeowners and renters. Other housing issues left out of the budget:
- With nearly 80k people experiencing homelessness in NY, rental assistance is needed to support the lowest income New Yorkers that are experiencing or at-risk of homelessness and we call on the governor and legislature to implement the Housing Access Voucher Program.
- In addition, there a looming crisis of renters in affordable housing with significant arrears. The state will need to find a solution in order to ensure the financial stability of buildings and to avoid a potential eviction tsunami.
- The New York City Housing Authority is experiencing operating budget shortfalls that, without assistance, are forcing them to spend from their cash reserves, leaving them with less than one month of reserves. They have projected a $35 million budget shortfall for the current fiscal year even while using $65 million in reserves. The shortfall is largely driven by record arrears, as NYCHA has a 65 percent collection rate (down from 88 percent before the pandemic) and arrears totaling $454 million since 2019. The governor and legislature should work together to provide financial assistance for NYCHA.
- Finally, the governor’s budget does not include a replacement for 421a, which expired last year. Instead, in her state of the state address, the Governor called on the Legislature to propose a replacement program. Real estate tax incentives have been effective in creating affordable rental housing in high-cost neighborhoods through Mandatory Inclusionary Housing (MIH). The majority of affordable housing created outside of these programs is found in lower income neighborhoods with lower land costs.
*Update: In our original analysis, we had said that HOPP was reduced to $3 million in this budget proposal. Upon further conversations and another look at the numbers, we agreed with others that there was no new funding in the executive budget for HOPP.