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Dec 09, 2019

The New York real estate industry’s Albany goals in 2020

Although few Albany observers expect the political winds to shift in real estate’s favor next year, and its lobbyists will likely spend more time trying to defeat bills than pass them, there is still some optimism in the industry. Here are the goals it hopes to achieve in the legislative session that begins next month.

Kill the eviction bill

No legislative measure poses a greater threat to landlords’ business model than state Sen. Julia Salazar’s “good cause” eviction bill, which would restrict owners’ ability to evict tenants who do not pay rent increases deemed “unconscionable” by the legislation. Last year, that increase was defined as 1.5 times the consumer price index — a much lower cap than was recently passed by the California legislature.

The New York bill did not make it to the Assembly floor for a vote last session, but Salazar is not deterred. It is a threat the industry should take seriously, according to Jay Martin, the executive director of the Community Housing Improvement Program, a landlord group.

“Advocates could once again just dare the governor to veto and put the political albatross around his neck,” Martin said. “We don’t have the privilege of assuming it won’t pass.”

Stifle upstate rent control

The new rent law lets municipalities all over New York opt in to rent regulation. But to do so, they must have a 5 percent vacancy rate in eligible housing.

Howard Husock, a senior fellow at the Manhattan Institute, told an audience of real estate investors, trade associations and affordable housing developers that landlords in Buffalo were “completely blindsided” by the new provision, and are rushing to mobilize against Buffalo tenants’ efforts to opt in.

“The last thing Utica, Buffalo and Rochester need is rent regulation. Property owners are up in arms and talking to their Assembly members,” Husock said. “It could make for a surprise in Albany.”

Amend NYC’s green buildings law

Without some changes to the Climate Mobilization Act passed by the New York City Council in April, even LEED-certified buildings such as One Bryant Park face millions of dollars in fines or complicated retrofitting. But because Albany regulates energy production and transmission, and has the power to trump city laws, the real estate industry may look there for a solution.

One alternative to massive fines could be to let owners offset their buildings’ emissions by supporting renewable-energy projects all over the state.

That could be a win-win for both real estate and Gov. Andrew Cuomo, whose recently enacted Climate Leadership and Community Protection Act aims to zero out greenhouse-gas emissions, and who may be looking to mend his relationship with the industry.

Real estate industry leaders say the city law will penalize buildings that are actually efficient but have high emissions because they are heavily used or have energy-intensive tenants such as finance and media firms.

But a senior executive for a major real estate company acknowledged that there is little political will for a correction that favors the industry, which may have to wait until a recession pushes the measure’s costs into the spotlight.

The city’s new emissions law, according to the executive, is just another indication of elected officials’ race to appease the left.

“It’s an unworkable, ill-thought out law,” the person said. “The City Council and state legislature are more concerned about press release headlines and staying to the left of AOC” — Rep. Alexandria Ocasio-Cortez — “than doing policies that work out.”

Stop the mechanical void bill

In the aftermath of Superstorm Sandy, which ruined mechanical equipment in many basements, developers began to place vital gear higher in their buildings. But some took that a step further, creating mechanical floors with huge voids — raising the heights of apartments above so they could offer better views and command higher prices.

Lawmakers are crafting a bill to crack down on the practice, saying developers such as Extell used mechanical floors to raise the height of their buildings far above what was intended by zoning. Mechanical floors are not included in the floor-area ratio, which is determined by dividing the total floor area of the building by the area of the lot.

The bill has already made it through committee and its two Manhattanite sponsors, Assembly member Linda Rosenthal and state Sen. Robert Jackson, expect it to pass.

“Developers got wise to this and turned it into an opportunity to build taller, but we’re wise to their trick,” Rosenthal said. “It’s a loophole they’re taking advantage of and the city [government] didn’t seem to care much.”

But people in the industry say the restrictions being contemplated on mechanical voids would forbid designs necessary to meet modern building codes. The bill would impose a penalty on any residential space in excess of 12 feet high, cap mechanical floors at 20 feet, and cap mechanical deductions at 5 percent.

Upsize J-51

Louise Carroll, commissioner of the city’s Department of Housing Preservation and Development, indicated in October that her agency was crafting a proposal to overhaul the J-51 program, which provides a tax exemption and abatement to multifamily properties that are renovated.

Under J-51, tax assessments remain at the property’s pre-renovation level for 14 to 34 years. HPD is expected by next year to provide the state legislature with a proposal to “right-size” the J-51 program to make the benefits “more targeted and cost-effective” for owners. Landlords and developers say the program, which requires re-regulation of units, isn’t worth the trouble in its current form. Applications for J-51 declined 69 percent over the last decade, according to data collected by HPD.

Kathryn Wylde, president of the trade association Partnership for New York City, said she hoped a program would be revised and resurrected, but added that it should have been done in the last session as part of the rent-law overhaul.

“The logic [of adjusting J-51] is the real estate tax assessments have gone up on these buildings so much,” Wylde said. “That conversation should have been addressed last year as part of the formula to keep the buildings viable.”

Source:  The Real Deal

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