“Now, I wouldn’t totally rule out a program being in place on June 16. I wouldn’t bet on it. But you know, conversations continue,” Jim Whelan, president of the industry group the Real Estate Board of New York, said in a recent interview. “Does anyone dispute the fact that if you don’t have a program in place on June 16, and that that continues for an extended period of time, the city’s housing crisis is only going to get worse?”
Lawmakers and Gov. Kathy Hochul did not reach a deal to continue the incentive — reformed and rebranded by the governor as 485-w — when they were hammering out a state budget in March and early April. That pushed the matter to the current legislative session, giving the governor less leverage over lawmakers.
With just five days left in Albany’s legislative session, most people involved in negotiations say a deal is highly improbable.
Mayor Eric Adams advocated to continue it, but put more muscle behind pushing to change the state’s bail laws and maintain his control over the public school system — issues of city importance that are nonetheless decided in the state capitol. When he presented his agenda to the state Legislature in February, for instance, he barely mentioned the tax break.
And real estate industry leaders, in good standing with the mayor and governor, find themselves with fewer friends in the Democratically-controlled state Legislature than when the Republicans they bankrolled with campaign cash ran the Senate.
Those dynamics brought the effort to reinstate 421-a to the brink.
Then modern-day electoral politics kicked it over the ledge.
The politics of 421-a
The entire state Legislature is up for reelection this year, and despite losses progressive Democrats have faced at the ballot box in recent years, they continue to mount successful challengers to incumbents they deem too centrist.
Among their ongoing policy goals is limiting the power and wealth of developers in a city that is hardly recognizable from the days of suburban flight, when 421-a was established to lure builders back to the five boroughs. The city is now a destination for glass-encased luxury residential buildings while many live in or near poverty, giving critics of the real estate industry an easy argument against a tax break worth $1.8 billion, according to a recent city estimate.
Now, as proponents of 421-a scramble to salvage it before it expires, the finger pointing has begun.
Some blame Hochul for failing to deliver during budget negotiations, when she was at the height of her power, and instead delaying the issue until lawmakers were in the throes of contentious summer primaries.
“Our strategy going back a year ago was to seek to get it done in the budget,” said someone involved in the negotiations, who would only speak on background about private discussion. “It was clear the governor didn’t have a strategy for getting it over the finish line.”
Others say the Adams team did not make it a priority, despite the housing shortage they are facing across the five boroughs, particularly for low-cost rentals. And some argue the Real Estate Board of New York (REBNY) should have cut a deal that would have attached the extension of their favored tax incentive to the “good cause” eviction bill promoted by left-leaning legislators.
Still, others blame the Senate.
“The Senate’s leadership presumably knows that you need to build housing, but you have some members who are very vocal about their opposition to the program without having an alternative,” said another person with knowledge of the back and forth. “They can’t get their members in line to support something — or even know what that something is.”
The consequences
Defenders of 421-a warn that without it, market-rate rental construction will grind to a halt.
“There’s this massive housing crisis. The rent stabilized stock is in decline. Apartments are being kept off the market because they can’t be repaired. Market-rate rents are through the roof because there’s no supply,” Jordan Barowitz of The Durst Organization, one of the city’s most prominent developers, said in a recent interview. “We desperately need a tool to create mixed-income housing now more than ever.”
Alicia Glen, deputy mayor for housing and economic development for former Mayor Bill de Blasio, said affordable housing will take a hit as well.
“Not only does it produce rental housing, it’s really the only tool we have to make sure there’s affordable housing in higher-income neighborhoods,” Glen said in an interview. “And with everybody talking about how we need to have a more equitable and evenly distributed set of opportunities for New Yorkers, this is one of the tried and true tools to accomplish that goal.”
Without the tax break, she said the city is facing the costly proposition of spending even more taxpayer money on affordable housing.
But 421-a remains a tough sell among lawmakers.
“It’s a bad program in a vacuum, and it has been abused by real estate,” state Sen. Mike Gianaris said in an interview. “It ends up subsidizing what is effectively luxury housing and creating quote-unquote affordable housing that’s not affordable for everyday New Yorkers and working people.”
Those pushing to extend 421-a got off to a rocky start this year.
Shortly after Hochul’s budget proposal in January, Assemblymember Steven Cymbrowitz, chair of the housing committee, briefed his colleagues on the contours of the governor’s reforms to the program, but the reception was cool.
“There is not much of an appetite to do 421-a, and I think the governor has resigned to the fact that it won’t be done this year,” he said in a recent interview.
The mayor’s role
In the succeeding months, Adams rolled out an uneven lobbying effort in Albany that was hampered by staff turnover in the city’s state legislative affairs division, even as he scored a victory on changes to bail laws.
Cymbrowitz said he speaks regularly with the city’s housing czar, Jessica Katz, about the need for 421-a to create rental housing in a tightening market. But other prominent Albany officials said they haven’t heard from City Hall on the issue.
“I think he has been quoted as saying he wants [421-a] somehow, but I don’t know what specifically he has said or done,” said state Sen. Liz Krueger, who chairs the Senate Finance Committee. “It has not come up in the meetings I have had around the city’s agenda.”
One housing advocate who spoke on background said that the mayor’s team was made aware that the tax break was set to sunset in June during his transition process last fall. But five months into the administration, he has yet to roll out a housing plan, which a city official said could have bolstered his case for renewing 421-a.
“It only affects New York City. So New York City has to take the lead, not some policy person in [Senate Majority Leader Andrea] Stewart-Cousins’ or Hochul’s office,” said the city official, who was granted anonymity to speak freely about private negotiations.
Adams argued his team has spent ample time in the state capitol fighting for 421-a.
“We simply cannot address the housing shortage at the root of our affordable housing crisis without critical incentives like 421-a, and we are hoping to have at least a one-year extension to study the issue further,” he said in a prepared statement. “My team and I have been to Albany many times, and we have thoroughly presented our case, but Albany must make this decision.”
The offices of Hochul, Stewart-Cousins and Assembly Speaker Carl Heastie did not respond to requests for comment.
The road to 421-a’s demise
Beginning in March, the governor’s office and other proponents of 421-a approached state senators to gauge interest in a deal, according to one Albany lawmaker. In response, several left-leaning legislators suggested coupling a renewal of 421-a with passage of another controversial proposal — the “good cause” bill that would cap rent increases and limit the power of landlords to evict their tenants.
But good cause appeared to be so toxic to private property owners that the real estate board rejected any deal that would involve the eviction bill in an internal vote several weeks ago, according to a former city official familiar with the matter.
“One of the great surprises to me this session was REBNY’s internal decision to kill ‘good cause’ at the expense of preserving 421-a,” said Cea Weaver, campaign coordinator at the tenant advocacy group Housing Justice for All. “I’m not ready to say that a major housing package is not happening yet. But it’s certainly true that the Legislature will not do one without the other.”
Whelan confirmed that concern.
“The current legislation put forward by Senator [Julia] Salazar would be the death knell of rental housing in New York City and rental housing production in particular,” he said in an interview with POLITICO.
The practice of coupling a tax break for landlords with tenant-friendly policies has succeeded in past legislative sessions.
Until 2015, the expiration of 421-a coincided with the sunsetting of rent regulations — a setup that offered bargaining chips to state lawmakers on both sides of the aisle and provided political cover to justify their votes.
“To get them done in one kind of ‘big ugly’ together had advantages because there was just more to negotiate with,” said David Lombino of Two Trees Management. “It’s another lever that is now gone.”
But in 2015, that timeline was tossed out.
De Blasio and Glen partnered with REBNY to propose a deal to extend it, but then-Gov. Andrew Cuomo scuttled the offer — arguing it excluded input from the unionized building trades.
Cuomo orchestrated a new deal in the fall of 2016, putting 421-a and rent regulations on different schedules. And when the state Legislature passed it the following year, they extended it for five years — instead of four, which had been customary — leaving a controversial matter in the hands of future legislators in an election year.
In 2018, REBNY lost its grip on the state Senate when Democrats won a sizable enough majority to render any power-sharing agreements with the GOP pointless. And the following year, Albany removed the periodic expiration dates attached to rent regulations altogether so they would not be subject to future legislative negotiations.
This year, REBNY appeared to have learned from past mistakes, and forged a partnership with Gary LaBarbera, head of the construction union trade organizations in the state and city. Krueger noted LaBarbera and 32BJ, which represents unionized building service workers, met with her office to try and salvage a deal.
“Could REBNY have played a better ground game? Maybe, but it probably wouldn’t have mattered,” said Stephen Smith, co-founder of Quantierra, a real estate tech startup. “Could Adams have? Definitely, but it still probably wouldn’t have mattered. The optics of the program are terrible. Should the progressives have been a little smarter and not demagogued a program that is not that bad? Yeah, but if my grandma had wheels she’d be a bus.”
Janaki Chadha contributed reporting.
