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NY Leg Counters Gov's Budget; No Mezz Tax or Rent Control

March 20, 2023

On March 15, the New York State Assembly and State Senate released their counterproposals to Gov. Kathy Hochul’s budget.

• The bills do not include a mortgage recording tax on mezzanine debt or preferred equity investments. CREFC opposed a similar tax in 2021.
• State rent control via a good cause eviction law was not included.

Why it matters: The Governor’s Budget Process is the main legislative vehicle for enacting laws in NY. While the Governor did not propose the mezz tax or good cause eviction, the legislature could have added them to its own proposals.

Hochul still could have vetoed the provisions, but inclusion in the counterproposal would have put the policies much closer to enactment if they were used as a bargaining chip or funding source.

By the numbers: While the legislature did not add in the mezz tax or rent control that could negatively impact CRE and multifamily finance, the Assembly did eliminate several affordability focused proposals that Hochul had proposed.

• Update Tax Abatement Incentives for Affordable Multiple Dwellings in New York City: The Assembly did not include the Executive proposal to establish a partial real property tax abatement for capital improvements made to certain rental and owner-occupied buildings located in the City of New York or any city in which the multiple dwelling law applies at local option
• Establish a Local Option Tax Incentive for Affordable Multi-Family Housing: The Assembly did not include the Executive proposal to establish a real property tax exemption for the construction of certain multi-family housing projects on previously vacant or underutilized land. The exemption would be at local option, and would apply to municipalities located outside the City of New York.
• Authorize Tax Incentive Benefits for Converting Commercial Property to Affordable Housing: The Assembly did not include the Executive proposal to establish the Affordable Housing from Commercial Conversions Tax Incentive Benefits (AHCC) program, which would provide a partial real property tax exemption for the conversion of commercial, manufacturing and other non-residential buildings to residential rental buildings located in the City of New York.
• Extend the Project Completion Deadline for Vested Projects in Real Property Tax Law 421-a: The Assembly did not include the Executive proposal to extend the completion deadline for projects vested in the expired 421-a program for four years, from June 15, 2026 to June 15, 2030.

What’s next: The Governor and the legislature will continue to negotiate on the provisions to pass a final budget by April 1 (though that timing may slip). CREFC will continue to monitor developments.

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

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Weekly Talking Points 

March 20, 2023

• The impact to CRE finance from bank failures is likely reduced liquidity from the banking community, particularly from small to mid-sized institutions. Elevated CRE mortgage rates and wider CMBS spreads have reduced loan originations for balance-sheet and CMBS lenders. Read full article here. 
• The political fallout from recent bank failures is hitting Capitol Hill, and lawmakers are scheduling hearings, proposing legislation, and assigning blame. The White House also proposed tougher penalties on executives when their bank fails. Read full article here. 
• Regulators activated emergency powers to cover uninsured deposits and provide a liquidity backstop for Treasuries and Agency MBS that have seen drops in value. The latest crisis will likely play a role as the Fed reviews and proposes bank capital rules. Read full article here. 
• New York’s legislature released its counterproposal to Gov. Hochul’s budget. The bill did not include a tax on mezzanine debt/pref equity and does not implement statewide rent control. However, several of Hochul’s housing affordability initiatives were excluded. Read full article here. 
• CMBS delinquency rates rose 18 bps to 3.12%, the highest post-pandemic rate since December 2021. The recent banking crisis played havoc on CMBS markets as spreads widened and transactions were pulled. Read full article here. 

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2024 Election Outlook: Republican Field Takes Shape

March 20, 2023

The 2016 presidential primary field was crowded and competitive, with 17 candidates seeking the Republican nomination. While the 2024 field may not be as large (yet), it is shaping to be just as competitive.

Three candidates have officially declared for the Republican nomination for President in 2024:

1. Former President Donald Trump – Declared his candidacy just weeks after the midterm election on November 22, 2022. According to RealClear Politics, Trump is leading the field with 43.9%. Despite being impeached twice and under investigation, Trump maintains his popularity with the GOP base.
2. Former U.N. Ambassador Nikki Haley – Officially joined the race on February 14, 2023. Haley was the first high-profile Trump administration official to jump in as a challenger. Haley maintains an edge in the race with her compelling personal background and record as Governor of South Carolina. However, she is considered a long-shot candidate.
3. Vivek Ramaswamy (R) – A political newcomer to the field, announced his campaign on February 21. His background as a former tech and finance executive could appeal to Republican primary voters as a Trump alternative. His profile has recently been elevated in conservative circles because of his anti-ESG rhetoric. However, his lack of name recognition and base support may hurt his chance of succeeding as a major candidate.

Three doesn’t seem like a crowd….yet. However, five other well-known Republicans are mulling a potential run:

1. Gov. Ron DeSantis - Is considered Trump’s greatest rival this cycle. The Governor of Florida, who recently won reelection by 20 points, has kicked off a nationwide book tour to promote his book, The Courage to Be Free. The book tour is considered a soft launch for his 2024 campaign. Last week, he met with Republican legislators in Iowa, prompting Iowa’s Gov. Kim Reynolds (R) to release a statement announcing her neutrality in the GOP presidential primary.
2. Former VP Mike Pence - Trump’s number two in 2016. Pence’s popularity with evangelicals in the GOP base is his greatest strength and weakness because his support in the GOP base ends there. Pence is swinging through the sunbelt states, speaking at universities before officially announcing.
3. Sen. Tim Scott - South Carolina’s junior Senator, has been giving speeches in early primary states. Scott is considered the “nice-guy” candidate, and his diverse background and views could bring a different perspective to the GOP. Additionally, he has been reaching out to donors beyond South Carolina to increase his war chest in recent months.
4. Gov. Glenn Youngkin - Virginia Governor who defied expectations by being elected in a blue state in 2021; made his prime-time debut on CNN last week, headlining a town hall on education. This event signaled his profile is on the rise. Youngkin, in recent weeks, has been seen fundraising in New York for a potential White House bid.
5. Fmr. Secretary of State Mike Pompeo - Is the latest Trump cabinet official publicly mulling a bid. With appearances at CPAC and Fox News Sunday, he has been outspoken about his view that the Republican party needs to move forward and would decide whether to run in the coming months.

The bottom line: In political time, it’s a lifetime until the 2024 Republican National Convention. Over the next 17 months, CREFC will continue to highlight the GOP Presidential primary candidates as the field takes shape.

Contact Chelsea Neil at cneil@crefc.org with any questions about the 2024 cycle. 

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