New Issue Brief Evaluates Governor Hochul’s Housing Plans

Despite Hochul’s pro-housing commitments, New York’s political climate will stymie new growth and perpetuate the housing crisis

New York, New York—As the 2024 New York legislative season kicks off, the housing supply crisis in New York City remains as dire as ever. On January 16, Gov. Kathy Hochul proposed housing legislation attached to the FY 2025 Executive Budget that, most importantly, would create a new tax incentive called “Section 485-x," replacing the “Section 421a” tax exemption for new multifamily housing that expired in June 2022. In a new Manhattan Institute issue brief, senior fellow Eric Kober writes that Hochul’s proposals are greatly scaled back, compared to her ambitions in 2023. That probably reflects political realism, but even if enacted, her proposals are inadequate to create abundant and affordable housing. Moreover, the legislature, if it acts at all, is likely to demand changes that make the crisis worse.

The state legislature is bent on strapping a “good cause eviction” law to any 421a replacement, which would effectively impose a new version of rent control and further impede the market mechanism matching the supply of housing with demand. A recently released study indicating that New York City’s rental vacancy rate is at the lowest level in more than fifty years indicates the price the state pays for pairing strict rent controls with deference to local governments hostile to new housing construction.

Kober writes that good 421a replacement legislation would allow the New York City mayor and council to decide how much property tax they want to exempt for new apartment buildings, and the numbers and affordability levels of the below-market-rent units they require in exchange. Instead, Hochul proposes an unwieldy framework in which different decisions are made by public and private entities.  That is unlikely to work well.

Kober concludes that New York’s housing crisis will persist unless New Yorkers elect a legislature less dominated by anti-growth politics, or at least threaten to do so. Barring a miraculous rediscovery by the legislature of its civic duty to enact constructive housing legislation, it will likely again do nothing—as it did in 2023—or negotiate an ill-considered “compromise,” in which all parties declare victory while the crisis remains unabated. The only feasible solution is for the state’s political leadership, business community, and body of concerned citizens to back legislative candidates who will campaign on better, pro-growth policies.

Click here to read the full issue brief.