A New York Housing Grand Bargain?
Happy Tuesday and welcome to another edition of Rent Free. This week’s stories include:
- The Saudi Arabian government is downsizing its ridiculous plans to build “The Line.”
- Hawaii is considering giving counties the power to ban short-term rentals.
- A study examines when affordable housing mandates get you less affordable housing.
But first, our lead story about the potential housing deal coming together in the New York Legislature this week.
A New York Housing Grand Bargain?
Most state legislatures put together housing-specific bills to set housing policy. Not so much in New York, where the Legislature takes a cue from the federal government and tries to cram as many must-pass policies as they can into the state’s annual budget agreement.
Already lawmakers have missed an April 1 deadline for passing a budget. One thing holding up a budget bill is the big question of what lawmakers might do about housing policy in one of the highest-cost, highest-regulation states in the country.
It’s a complicated matter because most people want something to be done about housing, and lawmakers want to be seen to be doing something. But the interest groups that play the biggest role in shaping housing policy all have specific policy demands that are either in tension or mutually exclusive of each other’s demands.
So, the shape of a deal is still very much in flux. In an interview with The New York Times, Gov. Kathy Hochul equated the process of assembling a housing deal to playing a game of Jenga. (She made this metaphor before New York got hit with an earthquake.)
Like previous years, New York’s elected socialist lawmakers and affordable housing advocates are primarily dedicated to passing a “good cause eviction” policy (effectively rent control) that would cap “reasonable” annual rent increases and require landlords to renew current tenants’ leases unless they had a “good cause” for not doing so.
This same group of left-wing lawmakers and activists are also dead set against any changes to New York’s 2019 amendments to its long-standing rent stabilization law that has made it effectively impossible for owners of rent-stabilized buildings to increase rents to cover the costs of repairs or reset rents to something closer to market rates after a vacancy.
Securing changes to the rent stabilization law is the top priority for owners of rent-stabilized buildings. They argue that the 2019 amendments have made it impossible for them to renovate dilapidated units and are making it increasingly impossible for rent-stabilized buildings to receive financing.
Turmoil at New York Bancorp and other banks heavily invested in rent-stabilized properties is blamed on the 2019 law’s rent limitations, which crashed the value of rent-stabilized properties.
A recent city report found that close to 10 percent of rent-stabilized buildings are operating at a loss, and that number has increased sharply since 2019.
Smaller landlords are primarily committed to stopping a good cause eviction policy, and in particular, any good cause provisions that would require them to renew leases for current tenants.
Developers are mostly focused on renewing the expired 421-a program that gave builders tax credits in exchange for building below-market-rate housing units.
Renewal of that program is controversial amongst left-wing housing advocates and lawmakers, who consider it a giveaway to developers. Housing experts argue it’s the only thing that made the production of new housing feasible in New York City, which requires most new housing developments to include below-market-rate units.
The state’s trade unions are eager to see any new tax credit program include union wage guarantees.
On zoning reform, the state’s Yes In My Backyard (YIMBY) activists, as well as Mayor Eric Adams, are pushing for a loosening of state-set density limits on residential construction in Manhattan.
The zoning reforms on offer this year are a lot less dramatic than what was being considered during the 2023 budget negotiations.
Last year, Hochul had pushed for a “housing compact” that would have mandated local governments change their zoning laws to allow for more housing.
For a while there, it looked like some version of that housing compact might pass along with a very strict “good cause” eviction policy that treated any rent increases above 3 percent as “unreasonable.”
Ultimately, the Legislature did nothing of consequence on housing last year.
This year, neither the most aggressive form of good cause eviction nor sweeping upzoning is on the table. The New York Post reported last night that Hochul is warming to the idea of a good cause eviction bill that caps rents at the lower of 5 percent plus inflation or 10 percent.
That makes for less dramatic negotiations but increases the likelihood that some sort of housing package will be included in this year’s budget.
Peo
Article from Reason.com
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