New York Gov. Kathy Hochul Comes Up Empty On Housing In State Budget

When New York Gov. Kathy Hochul (D) announced an ambitious plan to increase New York’s housing supply in February, she framed it as a response to a “housing crisis that requires bold actions and an all-hands-on-deck approach.”

In her New York Housing Compact, Hochul proposed building 800,000 more housing units over the next decade by, among other things, forcing outer-borough New York City neighborhoods and suburban communities with restrictive zoning laws to increase their housing stock by 3% over three years. The plan, which would override some municipal rules in order to encourage denser development near public transit, won praise from many housing advocates who credited Hochul for taking on a politically thorny cause.

Nearly three months and five budget deadline extensions later, the New York Housing Compact is dead. The state budget will not include a housing bill of any kind, let alone one with the kinds of construction mandates that Hochul and her allies envisioned.

In a conversation with reporters on Tuesday, Hochul acknowledged temporary defeat while celebrating her willingness to try and promising to do so again at a later date.

“I feel a little bit like Wayne Gretzky – you know, ‘You miss 100% of the shots you don’t take,’” Hochul said, quoting the retired professional hockey star.

But politicians are judged on results, not their good intentions.

The exclusion of housing policy from the state budget for the next fiscal year is yet another setback for Hochul’s agenda. And according to housing advocates who supported her plan, it is a loss for struggling Empire State renters and prospective homeowners, many of whom are leaving for states with cheaper housing.

“The status quo will continue for at least another year,” said Andrew Fine, policy director for Open New York, a “yes-in-my-backyard,” or YIMBY, housing group that was an outspoken proponent of Hochul’s plan. “The status quo is a housing crisis.”

Experts typically consider rental housing “affordable” if a household’s rent takes up 30% or less of its income. In New York City, rent takes up more than 34% of income for over half of renting households; the cost exceeds 50% of income for more than one-third of renters.

To keep pace with a New York City-area population that has grown significantly in the past decade ― notwithstanding anemic statewide growth over the same period ― Hochul and her allies believe it is essential to increase the housing supply in places that are currently zoned to heavily restrict anything but single-family homes. Her plan aimed to double the number of houses that would be built in the coming decade absent any action.

As with any YIMBY plan, Hochul’s argument for the proposal is rooted in the economics of supply and demand. If there is more housing, she and her allies insisted, renters and homeowners will eventually have more leverage, and prices will stabilize or decline accordingly.

“If we want a New York that is more affordable, that is more integrated — racially and socioeconomically — that allows people of lower incomes to live near their jobs and that empowers people to stay in their apartments or to move to better apartments when their lives change, then we need to fix restrictive zoning,” Fine said.

The administration of New York City Mayor Eric Adams (D), a Hochul ally and supporter of the New York Housing Compact, has expressed frustration with the lack of progress in an area that deeply affects the city, but over which the city has less control than the state.

“Mayor Adams has been clear that there is a severe housing shortage driving the city’s affordable housing crisis and that every neighborhood must do their part to address it,” Charles Lutvak, an Adams spokesperson, said in a statement. “We need our partners in Albany to take action on affordable housing this year. And we’ll continue to work closely with them to support their efforts to create the housing New Yorkers desperately need.”

In addition to supporting Hochul’s more ambitious measures, Adams wanted rules making it easier to turn commercial buildings into apartments, the legalization of basement apartments and a temporary extension of 421a, a recently expired real estate tax exemption originally designed to encourage the development of vacant or under-developed plots of land. Progressive critics have attacked the provision as a corporate giveaway that has fueled luxury development and worsened housing affordability, but Adams and the real estate industry bemoaned the impact of the abrupt cutoff on development and pushed for an extension, pending a compromise measure.

Rachel Fee, executive director of the New York Housing Conference, a real estate-backed affordable housing nonprofit, noted the irony of suburban lawmakers’ refusal to countenance housing mandates that would jeopardize municipalities’ “local control,” when those same lawmakers “won’t give the mayor of New York local control on housing issues.”

Indeed, the fate of Hochul’s housing plan highlights the tensions within a Democratic coalition that increasingly relies on voters in affluent suburban communities. While the Democratic base is composed of liberal professionals and working-class communities of color in city centers, the party’s supermajorities in the state legislature depend on the inroads it has made in Long Island, Westchester County and other areas where building more housing is unpopular with many homeowners.

In Long Island, in particular, Democratic members of the state Assembly feared that Hochul’s bill would cost them their seats following a November election when the backlash to crime had already resulted in the defeat of several of their colleagues.

Republicans have already shown an interest in making the mandates to liberalize zoning a political wedge issue. Influential Long Island Republican Sean Hannity dubbed Hochul “KATHY THE COLONIZER” on Twitter over the plan. And Long Island state Sen. Jack Martins (R), who unseated a Democratic incumbent in November, derided the proposal as “an attack on our suburban communities.”

Long Island Democrats “felt like we’re in the hole on Long Island, and we’ll just continue to bleed if we did that,” said a progressive state Assembly member who requested anonymity to speak freely about internal conference discussions.

The question is whether Hochul could have achieved something to increase housing affordability if she had played her cards differently.

As a counterproposal, the Democratic leaders of the state Senate and state Assembly had offered to create a $500 million fund to provide grants to municipalities that build housing.

“We put forward a plan in our budget proposal and staff engaged on this issue for weeks. We fought hard to ensure tenant protections were part of any housing package,” Kerri Biché, a spokesperson for Assembly Speaker Carl Heastie (D), said in a statement. “Unfortunately we could not come to an agreement on housing issues as part of the budget, however we will continue to work on this issue and fight to ensure tenants are protected from unfair evictions.”

While experts have said that the legislative leaders’ plan would not make much of a dent in the housing crisis, some Democrats believe that better negotiation by Hochul might have yielded some kind of compromise.

In addition to angering moderate lawmakers in the suburbs, Hochul elicited the ire of many progressives for her opposition to a “good cause” eviction bill that would make it harder for landlords to dramatically increase rents.

“There was room for a deal,” said a second New York Assembly member, who requested anonymity to protect professional relationships. “Exactly what that deal looks like, I don’t quite know. But I do know that for many, something like ‘good cause’ would have helped get it over the line, and it seemed clear that was never on the table.”

“The governor, in this negotiation, took an all-or-nothing stance on a lot of her propositions instead of working to find a way to get to ‘yes,’” the Assembly member added.

But Hochul, still reeling from an unexpectedly narrow election win in November and state Senate Democrats’ defeat of her first choice to lead the state’s high court, appears to be in no mood to assuage progressives. In the present budget talks, Hochul prioritized another round of reforms narrowing the state’s 2019 bail law, which limits the use of cash bail for people awaiting trial after an arrest. The law was the source of relentless Republican attacks against her in November, despite two previous sets of changes reducing the bill’s scope.

“She tried to strike a really conciliatory tone in a post-Cuomo world, but it just hasn’t shown itself in terms of how she approaches the work,” the first progressive Assembly member said. “Are we all just fighting all the time? It feels like the answer is ‘yes.’”

Hochul’s allies maintain that the legislature failed her, rather than the other way around.

“This was the first governor in New York State to really put out a bold proposal that got to the core of our affordability issue in New York,” Fee said. “The legislature didn’t come to the table in a meaningful way.”

One way or another, New York Democrats come away from the battle appearing hopelessly divided. New York Republican Party spokesperson David Lanza called the defeat of the housing plan a “win for New York’s localities,” while noting that Hochul had “once again been thwarted by a legislature controlled by members of her own party.”

Hochul has vowed to try to pass a housing law outside of the budget process in the coming months. Yet without massive budget legislation that Democrats feel obligated to vote for, she will lack the kind of leverage she had during the current round of negotiations.

Hochul has also noted that passing comparable laws took years of effort in California and Massachusetts, two liberal states that have taken steps to override restrictive local zoning.

In practice, that could mean waiting for housing to become even less affordable in New York so more political momentum builds for action.

“We’re just sort of following that path of letting things get worse and worse,” Fine said. “Sometime it will reach a breaking point.”