Hochul extends controversial housing tax break to Gowanus developers

Gov. Kathy Hochul took a series of executive actions on Tuesday intended to put a dent in New York’s apartment shortage by rewarding “pro-housing” towns across the state and extending a controversial tax break to developers in Brooklyn’s Gowanus neighborhood.

The announcement marks the culmination of more than seven months of Democratic infighting in Albany — with the governor and Legislature failing to reach a consensus on how to address New York’s affordable housing shortage as it reaches crisis levels, with median rents and the homeless shelter population both setting record highs.

“It is not just a shortage, it is a crisis. That is one of the number one reasons people leave this state,” Hochul said at a news conference in Gowanus. “Doing nothing is not an option anymore.”

The governor’s actions tinker around the edges of the affordability crisis, but Hochul said she hoped the measures would spur “momentum” in the months ahead of the next legislative session in Albany, which starts in January.

The current housing shortage is taking a dramatic toll on New Yorkers, forcing hundreds of thousands of tenants to pay at least half their income on rent, as tens of thousands of people turn to homeless shelters, according to city data..

The National Low Income Housing Coalition estimates New York state needs roughly 615,000 new apartments priced for “extremely low-income renters” earning less than 30% of the area median income, or about $36,000 for a family of three.

A January analysis by the Real Estate Board of New York, a lobbying group that represents landlords and developers, found that New York City alone needs 560,000 units for all income levels over the next seven years to keep up with population growth.

Under Hochul’s directive, the state’s economic agency, Empire State Development, could purchase properties in Gowanus where construction is already underway and lease them back to the developers under terms they were promised under the state’s controversial and now expired 421-a tax abatement.

The city changed the land use rules in the neighborhood to make way for taller apartment buildings with roughly 8,000 new units — about 3,000 income-restricted — in 2021.

The unique arrangement received praise from REBNY and project developers who broke ground before 421-a expired. The influential group and developers warned that they wouldn’t be able to complete the projects by the 2026 deadline and would miss out on the hefty tax break. The groups argued in recent months that they would likely abandon the job sites and urged state lawmakers to extend the deadline, but the measure failed to gain the necessary support in Albany.

Hochul said her action ensures those Gowanus buildings get built.

“Where some see a hellhole, I see homes,” the Buffalo native said of the Brooklyn neighborhood.

“People worried that the housing projects would be scrapped for good,” Hochul said. “We’re not going to let that happen any longer.”

Rafael Cestero, head of the affordable housing financier Community Preservation Corporation, praised Hochul “for taking decisive action to pull the levers we need to jump-start development after a sorely disappointing legislative session failed to deliver meaningful results.”

But Cea Weaver, lead organizer with the tenants rights group Housing Justice For All, said she worried the measure would set a precedent empowering the Empire State Development agency.

“It’s a way to give developers the benefits of the 421-a program without having to actually do the program,” Weaver said. “Really generous programs go through these economic development agencies where there’s very little public oversight.”

Another Hochul action would prioritize “pro-housing communities” — local governments that adopt policies to promote housing creation and share zoning information with the state — by giving them priority for $650 million in state grants. The incentive-based approach to spurring development differs from Hochul’s earlier plans to penalize municipalities that fail to reach certain housing targets, which alienated suburban lawmakers.

She said “pro-housing” communities must create a clear plan to increase residential development to get priority for the state money.

“You’re going to have to demonstrate to us you’re fulfilling our desire, our need, our urgency around developing more housing,” she said.

Hochul also directed state agencies to identify publicly owned land that could qualify for new housing. And another will create a state-run housing data dashboard to track development in every town.

Hochul’s actions drew support from the administration of New York City Mayor Eric Adams. Deputy Mayor Maria Torres-Springer, whose portfolio includes housing policy, represented City Hall at Hochul’s Gowanus event.

But some state lawmakers groused that the governor went over their heads to enact the measures, which, in the case of the benefits for towns that create new housing, mirrored some of their own proposals.

“We didn’t get a heads up,” said state Sen. Jessica Ramos, who criticized what she said were a lack of labor protections in the new actions.

State Assembly Speaker Carl Heastie (D-Bronx) said the state still has “a great deal of work ahead of us to address New York’s housing crisis.”

“That means providing tenant protections, increasing affordable housing, and creating more pathways to home ownership,” he said. “We stand ready to work with our partners in government to get this done.”

Negotiations over housing policy in Albany started in January, when Hochul unveiled a wide-ranging housing plan that she claimed would have created 800,000 new units over the next decade, in large part by requiring each city, town and village to increase their housing stock by a certain percentage over the next three years.

But Hochul’s plan was quickly met by a suburban blockade. The governor wanted to allow the state to step in and approve multifamily housing projects if a locality failed to meet its growth target, which enraged local officials on Long Island and in the lower Hudson Valley.

The Democrats who control the state Legislature pushed back, refusing to go along with that portion of Hochul’s plan. They also had other concerns, including over the governor's insistence on resurrecting the 421-a tax credit in some form.

Hochul refused to cede the major points of her plan, and it died by the time lawmakers approved the state budget in May.

In June, just before wrapping up their legislative session, Democratic lawmakers tried to do an end-around, negotiating a potential housing package among themselves — without Hochul’s participation. Such a plan would created a modified version of the 421-a tax break, while also creating new protections for rental tenants by capping annual rent increases and preventing landlords from evicting someone without “good cause.”

But those talks fell apart, too. Lawmakers accused Hochul of refusing to support their plan, while Hochul’s office cast doubt on whether the Senate and Assembly actually had the votes to pass it.

In the end, the Legislature left Albany without taking any meaningful action on housing.

Hochul had been promising to take executive action on housing policy for the last two months, ever since her original housing plan died in state budget talks.

“When there’s a roadblock, you zig-zag around,” she said on Tuesday.