‘Ain’t Nothin’ Goin’ on but the Rent’

As state Legislators face the rapidly approaching end of session on June 17, another key date is also coming up: the expiration of the rent control laws for New York City and the 421-a tax break for developers, both on June 15.

In 2011, the renewal of the rent control laws was tied to a 2 percent property tax cap the state Senate Republicans had championed. Now, Assembly Democrats have made renewing and strengthening the expiring rent control laws their No. 1 priority before the end of the session, while state Senate Republicans push to make the 2 percent property tax cap permanent. Assembly Speaker Carl Heastie has said the two priorities could eventually be linked, and a deal could include the extension of the 421-a tax break.

The 421-a break has become a controversial talking point for both sides of the debate this year. Proponents of the tax break, such as New York City Mayor Bill de Blasio, argue the tax break is necessary to promote affordable housing, while critics consider the tax break a “sweetheart” deal for developers that does little to promote affordability. Recently, de Blasio and Gov. Andrew Cuomo ramped up their political rivalry—which both insist doesn’t exist—by trading public barbs over 421-a.

Adding fuel to the debate are the recent arrests of then-Assembly Speaker Sheldon Silver and then-Senate Majority Leader Dean Skelos. Both federal indictments involve big real estate developers that benefit from 421-a. The corruption accusations flying around the state Capitol have made legislators leery of the issue.

Both sides agree something needs to be done with the expiring housing laws, but political observers are hesitant to guess what a deal would ultimately entail, and what changes, if any, will be made. It’s possible the state Legislature will approve a straight extension of the 421-a tax break and a renewal of the rent regulations so legislators can leave the chaotic session behind.

421-A

The current version of the 421-a tax break requires developers receiving the exemption to set aside 20 percent of apartments as affordable for 20 years, which has been criticized as a handout to developers that does not promote enough affordable housing in New York City.

De Blasio released a 421-a plan that would require developers receiving the break to set aside 25 to 30 percent of units as affordable and extend the abatement by 10 years, to 35 years. His plan does not require construction workers on 421-a projects to be paid a prevailing wage, a provision promoted by many major unions.

Cuomo has criticized de Blasio’s plan and has called it a “giveaway” for developers, although he signed off on the current version of the 421-a tax break in 2011 and has raked in millions in campaign contributions from real estate companies. The governor and major unions have criticized any form of 421-a that does not guarantee a prevailing wage for workers.

“421-a is very unclear right now because there is a great deal of disagreement between the governor and the mayor,” state Senate Housing Committee Chairwoman Cathy Young said. “However, 421-a has been proven to be effective in building affordable housing, so we’ll see how the negotiations go.”

Weighing in on the 421-a debate, Heastie told reporters he would let the state Senate Republicans and Cuomo fight it out, though on June 2, Assembly Housing Committee Chair Keith Wright introduced a new 421-a bill which includes prevailing wages for construction workers and provisions for 20 percent affordable units in 421-a developments.

Last week, state Sen. Jack Martins, a Republican, introduced a bill that would require a prevailing wage for construction workers only if the developer sets aside less than 50 percent of units as affordable, and it would only apply to developments with more than 50 units. Martins’ bill is an amendment to the existing 421-a bill and is set to expire on June 15, 2018.

Rent regulations

In May, Assembly Democrats passed a bill that extends and strengthens the rent control laws. The bill also included provisions that would repeal vacancy decontrol, strengthen tenant protections and require rental increases associated with major capital improvements and individual apartment improvements be separately designated and billed as surcharges. 

Additionally, the legislation would establish the crime of second-degree harassment of a rent-regulated tenant if a landlord intentionally makes housing uninhabitable, unsafe or unhealthy or causes a tenant to vacate.

“Ain’t nothing going on but the rent,” Assembly Housing Committee Chairman Keith Wright said. “Senate Republicans seem to have their heels dug in, but this is not about a political fight—this should be a fight about equity, justice and fairness, but we have some very powerful forces working against us.”

Senate Republicans instead have passed the Tenant Rent Increase Exemption bill, which is modeled after the senior citizen rent increase exemption program and would freeze rent for people who earn less than $50,000 annually and spend more than 50 percent of their income on rent.

“We would like to encourage the Assembly to pass the TRIE program,” Young said.

Like the expiring 421-a tax break, rent regulations are likely to be renewed in some form, even if it is a straight extender.

When City & State asked Wright in early May what would happen if the rent control laws were not renewed, Wright compared the prospect to a natural disaster.

“Do you remember the impact the tsunami had on those folks in Asia? It would be something like that,” the Manhattan Democrat said. “It would be devastating.”

Property Tax Cap

Senate Republicans passed a bill that would permanently extend the 2 percent property tax cap that was originally tied to the rent regulation laws in 2011. State Senate Majority Leader John Flanagan previously said passing the legislation would be a top priority for the conference.

“We strongly support making the tax cap permanent because it’s been proven to be effective in stopping harmful property tax increases that drive people and jobs out of the state,” Young said. “(The expiring rent regulations and the property tax cap were) already linked together—and that happened four years ago. So a straight rent regulation extender would be most appropriate.”

Cuomo has expressed support for making the property tax cap permanent, but Assembly Democrats have said it should be subject to periodic renewal.

“I think if we adhere to our responsibilities as legislators, I think in a perfect world we might be able to get some good pieces of legislation concerning both,” Wright said. “But sometimes politics does get in the way.”

What Got Done

• The 2015-16 state budget included $100 million for the New York City Housing Authority

What's on the Docket

• Extending the rent regulation laws and 421-a tax break for developers set to expire June 15
• Making the property tax cap permanent