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  • Writer's pictureRealFacts Editorial Team

New York Is Passing a Big Housing Deal. Everyone Is Grumbling.

New York buildings and bridge

New York, a city that has recently received a lot of bad press revolving around real estate, is now back in the spotlight with a package aiming to spur more affordable housing development. The deal - expected to be approved this week - “includes a “good cause” eviction protection favored by progressive lawmakers, in exchange for new developer tax breaks to create housing in the state,” The Wall Street Journal reported. “It also includes incentives for converting offices into apartments, removal of a zoning restriction and adjustments to regulations on renovating some of the city’s one million rent-regulated units once they become vacant.” Lawmakers expect the package to bring over 200,000 new housing units over the next decade.

The deal comes as the city faces record-low vacancy rates of 1.41% last year, according to a city report. This has allowed landlords to unexpectedly jack up rents to profit off the lack of other available housing options. The good-cause provisions in the deal would limit increases in monthly rents to 5% plus inflation, and up to 10% when a lease is renewed. Tenants would also have an effective right to lease renewals. Nonpayment of rent, illegal activities, or tenants causing a significant nuisance would allow landlords to push for eviction.

Just over 40% of New York’s rentals are already under some form of regulation in regard to rent increases and evictions and the deal would expand these protections into the private market. There are loopholes, however. “Newly constructed units would be excluded for 30 years, and the exemption would apply retroactively to units built as early as 2009. Units in small owner-occupied buildings are exempted, as are dwellings where the landlord owns 10 or fewer units across an entire portfolio,” The Wall Street Journal said. Many tenant advocacy groups are unhappy with how unenforceable and weak the deal would be.

Landlords are unhappy as well. Ann Korchak, the owner of two 10-unit apartments in Manhattan, is one of them. She says that 40% of her units are already rent-regulated and added “The free-market apartments really cover the lion’s share of the expenses for the building. They’re really tying our hands.”

The package would revive a version of the 421-a tax break for developers which expired in 2022. This tax break allowed for payments to be made based on the land's predeveloped use in exchange for setting aside some units as affordable housing. The new tax break, called 485-x, would effectively allow incentives for around 80% of projects that began before 421-a expired. “Having this tool back in the toolbox is absolutely fundamental to, and mission critical to, the city,” said Alicia Glen, CEO of MSquared. The package would also incentivize more office-to-residential conversions. James Whelan, President of REBNY, thinks that these policies would help ultimately increase the supply of housing, but that it “falls short of addressing the city’s housing needs and must be reassessed in the coming years.”

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