The Real Deal: What Albany’s Cooking Up for Real Estate

Originally published in The Real Deal

In a September 23, 2020 article in The Real Deal, Georgia Kromrei covered various proposed bills pending in the Senate and Assembly that are intended to address the effects of COVID-19 on housing, small businesses, and property owners, including two pieces of legislation introduced by Senator Kavanagh--one that would halt residential evictions through January 20, 2021, and another that would authorize propety tax breaks to subsidize reduced rents negotiated between commercial property owners and financially burdened small businesses. The full text of the article is below; the original version is available via the link above.

What Albany’s Cooking Up for Real Estate: Bills Would Cancel Rent, Strengthen Eviction ban and Curb Developer Tax Breaks
By Georgia Kromrei
September 23, 2020

When tenant activists charged State Assembly Speaker Carl Heastie’s office this month — demanding he back their cancel-rent bills — the leader of New York’s people’s house gave the gathered crowd an impromptu talking-to.

“The bill you’re asking for is not something we can do alone,” Heastie said, of a measure sponsored by Assembly member Yuh-Line Niou and Sen. Julia Salazar to cancel rent. The bill, which has 11 Senate and 32 Assembly sponsors, has not advanced since July.

The state legislature could reconvene over Zoom at any time, but many observers do not expect it to do so until as late as Dec. 1. Numerous legislators said they have no idea when they will be called back to their virtual seats, and no committee meetings have been scheduled.

Still, efforts to cancel rent, tighten property tax breaks, create new tax abatements and stop evictions completely loom over the New York real estate industry.

In telling the activists about the obstacles to passing the cancel-rent bill, Heastie objected to the regulatory mechanism to cancel rent, rather than addressing the idea itself.

Heastie pointed out that just 10 percent of banks in New York are state-chartered banks, and the state might lack the power to suspend mortgage payments owed by landlords to those banks. Were the government to do so, the burden of subsidizing the canceled rents should be borne by the federal government, Heastie said.

Raising taxes on the wealthy — a key progressive demand — remains a last resort for the state’s leaders, as they hold out hope for a federal bailout. Should that aid not materialize, “every option is on the table,” Heastie said. Gov. Andrew Cuomo has opposed an income-tax hike on high earners, but recently allowed that raising revenue might be necessary.

On evictions, the Trump administration stunned tenants and landlords alike when the Centers for Disease Control issued a sweeping moratorium earlier this month, but it is not nearly as restrictive as New York’s own eviction ban, which has been repeatedly extended by the courts. Landlords looking forward to Oct. 1, when its most recent iteration is set to expire, may be disappointed, as most insiders expect another extension.

Heastie tried to assure the activists that his chamber would not allow mass evictions in New York, telling them to “stop worrying.”

“There is no way the New York State Assembly is going to see people evicted — but sometimes you gotta let things play out,” he said in a video posted of the exchange.

One state senator said he hoped the moratorium’s renewal would not be “down to the wire again,” but exactly when the eviction moratorium will be renewed, and for how long, is still up in the air.

As the deadline draws near to renew the state’s eviction moratorium, two bills aim to take the pressure off the courts. One, sponsored by Sen. Brian Kavanagh, would halt all evictions through Jan. 20, while the other — sponsored by Sen. Zellnor Myrie — would do the same, but continue for a year after New York’s state of emergency ends. Both Myrie and Kavanagh sponsor the two measures.

Both bills have significant support in the 63-seat Senate — with 23 senators backing Kavanagh’s bill and 16 sponsoring Myrie’s. In the Assembly, legislators overwhelmingly prefer Myrie’s version, which was introduced two weeks earlier.

The city is hemorrhaging small businesses, and surveys suggest two-thirds of its restaurants will close by the end of the year. To avert that, Kavanagh teamed up with Niou, who represents Lower Manhattan, as well as two City Council members, Brad Lander and Keith Powers, who will craft city-level legislation, on measures to let the city offer a tax break to landlords who renegotiate leases to help commercial tenants make ends meet.

That may be a long shot, given the city government’s perilous fiscal situation and reluctance to forsake tax revenue. Landlords would be eligible for the benefit if they renegotiate lease terms and either the landlord or tenant suffered financial hardship because of Covid. The new lease would be subject to annual rent increase limits, set by the city, and the legislation would expire in 12 years.

One bill axed from the Senate’s rent-reforms at the last minute in 2019 met little resistance from lawmakers this year, but has not yet been signed by Cuomo. The legislation, sponsored by state Sen. Neil Breslin, who represents Albany, and Assembly member William Magnarelli, who represents Syracuse, would revise the 485-a property tax abatement, which gives a 12-year tax break to developers who add apartments to commercial properties.

A spokesperson for Sen. Breslin said his office has heard no objections from Cuomo but had no idea when the governor would ask to sign the bill.

Critics of the existing tax break have accused developers of exploiting it. A 2019 report found that at 96 properties in Buffalo, the total value of 485-a was $66.9 million through 2030.

Under the new legislation, to receive that benefit, more than half the building would have to be residential and at least 15 percent commercial. The measure also eliminates an exception for previously vacant land.