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'Going To Get Even Worse': Hope Sinks For Housing Fix After Hochul's Proposal Collapses

The reality that New York lawmakers have failed to agree on any new housing policies during state budget negotiations is sinking in for real estate players and housing advocates alike, forcing them to question just what — if anything — will force leaders to act amid a deepening crisis.

New York Gov. Kathy Hochul at a business event in Staten Island April 25.

Gov. Kathy Hochul in January announced a goal of building 800,000 homes in the next decade, proposing a slew of tax breaks and regulatory changes that drew raves from the real estate industry, but none of those policies are moving forward as talks drag on, according to multiple reports.

"We thought this was going to be the year for housing in New York and that we would take really important steps through state action on zoning. And this has been an extremely disappointing outcome," Rachel Fee, the executive director of the New York Housing Conference, told Bisnow in an interview this week.

"This is the first time we've seen a governor prioritize housing and to do it in such a brave and bold way to take on zoning reforms," she said. "We knew it would be difficult, but we thought the legislature also understands we have a housing crisis, and that we need them to act."

Rents statewide rose more than 20% on average between 2021 and 2022, according to data from the U.S. Census Bureau's American Community Survey. Manhattan apartment rents hit an average of $4,124 in March, the highest on record and a 13% jump on last year.

Hochul’s plan, dubbed the New York Housing Compact, had a requirement for 3% growth in housing units over three years for downstate municipalities, and 1% for those upstate. Locales that failed to meet the target would have seen the state override zoning restrictions to allow development. She also wanted to extend the deadline for projects trying to meet the 421-a deadline, to allow more developers to make sure of the treasured tax break real estate players say they need to produce housing. 

“I'm not certain what else needs to happen to get people's attention,” said Bruce Teitelbaum, the developer behind One45, a proposed housing development in Harlem that has faced a protracted land use battle. “The housing shortage is even worse now than it was three months ago, it's going to get even worse … There really needs to be bold and creative solutions to exigent problems, and I thought this was the time. I was wrong.”

Tenant advocates were left stunned as well.

"I am at a loss at how our elected officials could acknowledge a crisis and do nothing," Legal Aid Society attorney Ellen Davidson told The City.

Reports emerged late last week that no deal on housing could be reached in the state budget after Hochul issued a statement last Tuesday conceding that key pieces of her housing agenda were not being taken up by the legislature. She also said she will continue to push for changes in the legislative session.

The stalemate reportedly came down to the fact that some legislators wouldn't agree to give up local control on zoning, and those in support of what is known as Good Cause eviction would not accept a deal for other measures without an agreement on that legislation.

“I would say from fairly early on in [negotiations] the Legislature showed they were not interested in the cornerstone” Hochul said this week, per the Times Union, adding she decided not to “waste” any more time on it.

“You miss 100 percent of the shots you don’t take,” she said. “I took the shot.”

The budget, officially extended until Friday, is now nearly a month late. This is already the latest budget deal in more than a decade, though Hochul said this week negotiations are close to over. The legislative session ends on June 8. 

REBNY President Jim Whelan (left) and Chair Douglas Durst (right) presenting the Harry B. Helmsley Distinguished New Yorker Award to Mary Ann Tighe, CBRE's CEO of the New York Tri-State Region.

“I don’t understand the point of power if you don’t know how to use it,” CBRE Tri-State CEO Mary Ann Tighe told Bisnow at the Real Estate Board of New York gala last week.

“Andrew Cuomo knew how to wield power, and knew, when he focused on an agenda, how to get, if not all of it, a big part of it through. So while I’m sure there are things [Hochul] would like to change from that administration, we need more from her than she’s demonstrated thus far.”

Some lawmakers said housing was too complex of an issue to be included in the budget discussions.

“It is unfortunate that we couldn’t reach an agreement, and I think part of that was because it was put in the budget," State Assembly Member Harry Bronson, a Democrat from Rochester, told Politico last week.

But REBNY President James Whelan said on a Bisnow podcast that he doesn't expect the legislative session after the budget to bring any progress on the proposals.

“Given the way they’ve handled housing issues recently, as well as in the past, I have a high degree of confidence that nothing productive will happen,” he said last Thursday. “These last few days have been a perfect illustration of poor decision-making from the state legislature that is a combination of far-left ideology, a nice healthy dose of NIMBYism and a lack of appreciation for economics and math.”

Fee, the head of the Housing Conference, which had backed Hochul's agenda, maintains hope that changes will actually happen — though she admitted it will take time to recover from the disappointment of the Housing Compact's collapse.

“At this moment, people are just sort of trying to understand what happened ... I think it's too early to tell exactly what's next,” she said. “It's not over, I think especially on land use. The governor got the conversation started, and I do think we will see a time where we pass meaningful reforms.”

Seth Pinsky, a former RXR Realty executive who also was president of the New York City Economic Development Corp. during the Bloomberg administration, said the gravity of the city’s economic woes — particularly the shift to remote work — is not truly being accepted by lawmakers.

"I think that the city and the state are facing crises of a magnitude that most of our leaders have not yet fully internalized,” he said.

“It feels like we're operating under the assumption that eventually everything will be returning to the way that it was or that, if things don’t, it won’t matter much. If more of our leadership had a greater sense of urgency about these problems, then more of the problems would have been addressed as opposed to being shelved for a later date."