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NY Renews Affordable Housing Tax Program; Other Housing Provisions

April 23, 2024

Last week, New York Governor Kathy Hochul (D) announced an agreement with the NY legislature on the FY 2025 budget, which will include a new tax incentive for affordable housing and extend the 421a tax credit for existing projects. The law also will introduce new tenant protections. The legislature passed Hochul’s agreement over the weekend.

• Click here for an analysis of the housing provisions from The Real Deal.

Why it matters: The 421a program, which provided tax exemptions for NYC multifamily construction projects with 30% of affordable units, expired in June 2022 amid criticism the program benefited developers and wealthy individuals.

• Rent Caps: The bill also included a watered-down version of “good cause eviction”, which can effectively limit rent increases. The legislation allows renters to challenge an eviction due to annual rent increases over 10% or 5% plus inflation (whichever is lower).
• Limited Scope: The good cause eviction automatically applies in NYC while other communities can opt in. The protections are limited to buildings constructed before 2009 and renters under a 245% area median income metric for affordability.
• Office Conversions: The law will allow NYC to rezone buildings and teak the residential floor area ratio (FAR) above 12 times the lot size, though the changes come with limitations and some affordability requirements.

The big picture: Click here for a New York Times story on the recent history of the tax incentive. The topline housing items touted by Hochul include:

• A landmark plan to build more housing in New York City, including establishing the new 485-x tax incentive to construct affordable housing, extending the 421-a tax incentive for six years for projects already in the pipeline, changing the outdated 12 FAR density cap, creating incentives to convert unused office space into affordable housing.
• New initiatives to spur housing creation statewide, including a new 421-p tax incentive to construct housing outside NYC, mandating that $650 million in discretionary funding goes to Pro-Housing Communities, allocating $500 million to build up to 15,000 new homes on state land, and incentives for Accessory Dwelling Units (ADUs).
• Historic protections for tenants and homeowners, including anti-price gouging measures for renters, stronger protections from evictions, new enforcement and preventative measures to protect homeowners from deed theft, and reinforcement of the law that squatters are not tenants.
• More than $600 million in capital funding to support housing statewide.
• Combating housing discrimination against Section 8 voucher recipients and affordable housing providers.

Go deeper: Hochul has been working to revive the incentive and deferred to the real estate industry, city officials, and unions on how to structure the new program, known as 485x. According to The Real Deal, the 485x program:

• Provides a 40-year exemption on taxes, up from 35 years, and requires income-restricted units remain permanently affordable;
• Includes wage requirements for 100+ unit projects; and
• Affordability requirements depending on the size of the building.

The program expires in June 2034.

Contact David McCarthy (dmccarthy@crefc.org) with questions. 

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Presidential Election: RFK Jr. - A Spoiler?

April 23, 2024

Robert F. Kennedy Jr. has been drawing outsize attention in his campaign, as he seeks to follow in the footsteps of his father Robert F. Kennedy and uncle, John F. Kennedy.

Why it matters: RFK Jr. is unlikely to win any individual state but could be a spoiler for Trump or Biden in November, as he is averaging 7.9% in polls.

• Kennedy has been running for president since April 19, 2023, though he initially challenged President Biden for the Democratic presidential nomination. This past October he changed course and announced he was running as an independent.
• On March 26, 2024, Kennedy announced his running mate, Nicole Shanahan. For her background click here, for RFK Jr’s biography click here.

By the numbers: Is RFK Jr. drawing more votes from Trump or Biden? The answer is unclear, but a few polls have tried to gauge Kennedy’s strength in key swing states.

In polling done by The Wall Street Journal, Kennedy received varying levels of support in swing states. In the crucial states of Michigan, Arizona, and Nevada, he received 12%, 13%, and 15% of the vote, respectively.

Later in the poll, voters were asked to choose from a list of candidates that did not include Kennedy and then to choose again from a list to which Kennedy had been added. For the full poll, please click here.

• Trump lost a higher percentage of voters to Kennedy than did Biden in five of the seven swing states polled. But in most cases, that difference was around 1%, within margins of error.
• Historically, third-party candidates tend to do worse than their polling suggests. As voters consider the likely outcome of the election, the allure of an outsider candidacy tends to wane.

Other data points demonstrate that RFK’s campaign draws from Biden voters.

• In the polling average maintained by The Hill and Decision Desk HQ, Trump leads Biden in a one-on-one match-up by a negligible margin: roughly half a percentage point. But the former president has a 2-point advantage over Biden when Kennedy is listed as an option.

Where Is RFK Jr. on the ballot? RFK Jr. claims he is on the ballot in all of the states noted below. Yet, not all of those states have confirmed.

Ballot eligibility varies from state-to-state:

• RFK Jr’s campaign claims that he is on the ballot in Utah, Hawaii, Nevada, New Hampshire, North Carolina, Iowa, Nebraska, Michigan, and Idaho.
• Only Michigan and Utah state officials have publicly confirmed he is on their ballots.
• The 2020 winning margins in Nevada, North Carolina, and Michigan were under 3% in 2020.

What’s next: Both campaigns have taken note of Kennedy’s candidacy, with the Biden campaign recently holding an event in which other members of the Kennedy family endorsed Biden instead of their relative.

• However, third-party candidates’ influence tends to peak before the party nominating conventions in the summer and then wanes as election day grows closer.
• These next few months could very well be Kennedy’s high-water mark. Click here for a deeper dive on the history of third-party voting.

Contact James Montfort (Jmontfort@crefc.org) with any questions.

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Senate Banking Hearing with FHFA Director

April 23, 2024

On April 18, the Senate Banking Committee held a hearing with leaders of the Federal Housing Finance Agency (FHFA) and Department of Housing and Urban Development (HUD).

Why it matters: Housing is a key priority for Chairman Sherrod Brown (D-OH), and the Biden Administration has been seeking to implement a number of housing policy priorities via FHFA and HUD. Witnesses included:

• FHFA Director Sandra Thompson
• Acting HUD Secretary Adrianne Todman

What they’re saying: Senators focused on a number of cost drivers and barriers to housing affordability both on the single family and multifamily side, and many senators questioned both witnesses on detailed policy issues. Key takeaways for CREFC members include:

Insurance Cost and Availability: Sen. Laphonza Butler (D-CA) specifically asked Thompson about FHFA not receiving notice when insurers withdraw from a market.

• Thompson responded that FHFA is working with the mortgage and insurance industry, and Butler urged both regulators to work on a framework to protect consumers when insurers withdraw.

Institutional Investors in Homes: Sen. Raphael Warnock (D-GA) focused his questions on “…large institutional investors and Wall Street private equity firms from outside Georgia [effectively] boxing first-time, first-generation home buyers out of the housing market….”

• Thompson responded that the GSEs do not engage with institutional investors for single-family rental and have limits on how many properties individuals can own.
• Thompson also emphasized that GSE real estate owned (REO) properties have a 30-day “first look” period that limits bidders to owner-occupied, Community Development Financial Institutions (CDFIs), or nonprofits. Institutional investors are not able to purchase during that period.
• Chairman Brown used his opening remarks to call single-family rental “predatory” and highlighted his Stop Predatory Investment Act (S.2224), which would eliminate tax breaks for institutional investors who buy single-family homes.

Federal Home Loan Banks (FHLB): Senator Elizabeth Warren (D-MA) highlighted her concerns with the FHLB program, including dividends to member institutions, FHLB liquidity to failed banks, and a lack of investment in affordable housing programs.

Conservatorship Exit: Sen. Bill Hagerty (R-TN) was the sole senator to bring up the GSE conservatorship. Hagerty urged Thompson to work with Treasury Secretary Janet Yellen and “continue the work that was begun by former FHFA Director Calabria to raise private capital and return Fannie Mae and Freddie Mac to the private markets.”

Contact David McCarthy (dmccarthy@crefc.org) with questions. 

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