Governor Kathy Hochul and the New York State legislature have reached an agreement on several crucial aspects of the Fiscal Year 2024 budget, putting a strong emphasis on innovative housing policies. In this blog post, we will dissect the key elements of the housing package, examining how they aim to tackle the housing challenges in New York.

Transition from 421A to 485-X Program

The 421A tax abatement program, vital for stimulating rental construction, expired in 2022. Since its cessation, there has been a marked reduction in rental housing developments, particularly in areas less favorable for condominium projects. The new 485-X program is designed to rekindle developer interest through the following incentives:

  • Tax Breaks: Developers receive tax incentives if they designate 20-25% of units in new constructions for middle-class families.
  • Affordability: Eligible families must earn around 80% of the city's median income, with rents set at $2,119 for a one-bedroom and $2,937 for a three-bedroom apartment.

Good Cause Eviction Legislation

The introduction of "Good Cause Eviction" law provides tenants with protections against unfair evictions and rent increases, including:

  • Exemptions: New constructions are exempt for 30 years, buildings with less than eight units, and landlords with fewer than ten units.
  • Rent Increase Limits: Landlords of non-rent stabilized units can raise rents by up to 10% or 5% plus CPI.
  • Tenant Protections: Increases beyond these limits allow tenants to challenge evictions in court as unreasonable.

Legalization of Basement Dwelling Units

This policy allows New York City to legalize basement apartments, thereby increasing affordable housing options and ensuring safety and compliance in these units. This move is expected to:

  • Expand Housing Options: Convert existing informal basement units into regulated, safe dwellings.
  • Increase Safety and Compliance: Ensure that newly legalized units meet city safety standards.

Facilitating Office to Residential Conversions

With a decrease in office space demand due to remote work, the budget now supports the conversion of office buildings into residential spaces, expected to add about 120 million square feet of residential space:

  • Tax Incentives: Developers who include at least 20% affordable units receive a property tax break for 19 years.
  • Affordability Requirements: At least 5% of the units must be affordable to households earning no more than 40% of the area median income.

Removal of the 12 FAR Cap

Eliminating the 12 Floor Area Ratio (FAR) cap will significantly boost the potential for high-density residential developments, especially in high-demand areas like Manhattan and Downtown Brooklyn. This change will:

  • Increase Development Potential: Enable more extensive residential conversions and new constructions without the current FAR limitations.

Updates to Individual Apartment Improvements

The budget updates the IAI rules to encourage landlords to maintain and improve their properties. Key changes include:

  • Investment Recovery**: Landlords can now recoup up to $30,000 for renovations, up from $15,000, allowing a monthly rent increase of $167.
  • Long-term Tenancies**: For apartments occupied by the same tenant for over 25 years, the cap increases to $50,000, permitting a rent hike of $347 per month for buildings under 35 units, and $320 for larger buildings.

Conclusion

The Fiscal Year 2024 housing package presents comprehensive measures aimed at revitalizing New York's housing market through a mix of incentives for developers and protections for tenants. These initiatives are poised to reshape the housing landscape, promoting a more equitable, diverse, and thriving urban environment.