Dear Clients, given that the Albany legislative session has now ended without either Good Cause Eviction or the 421-a extension passing, we wanted to send you the following update:
Good Cause Eviction (GCE):
Thankfully for New York owners, the Legislature adjourned on June 2, 2022 without passing the Good Cause Eviction (“GCE”) bill. GCE, first introduced in 2019, would impose a brand-new rent control system on virtually the entirety of New York State’s free-market rental stock, which would in most instances restrain rent increases to the higher of 3% or 1.5 times the local Consumer Price Index. Perhaps even more alarmingly, in a revolutionary change that would upend centuries of landlord-tenant law, GCE would also abolish the concept of the fixed-term residential lease and would require perpetual tenant occupancy, unless one of several narrow species of “good cause” to evict are met — all of which would require owners to expend significant legal resources to have even a hope of success. GCE, in short, would confer most benefits of real estate ownership upon tenants with almost none of the attendant responsibilities.
While owners can breathe a sigh of relief, they should remain on guard. GCE was perhaps the tenant activists’ top priority this session, and GCE could have become law had national political issues not preoccupied the Legislature in the session’s final days. The tenant activists have signaled an intent to renew their push for GCE when the Legislature reconvenes next January — but with November elections coming up and new legislative districts that are less friendly to the majority party than previously expected, owners have reason to hope that GCE’s best chances for passage may have passed. Nevertheless, we will continue to monitor legislative developments and keep you apprised.
If you have any questions about GCE and how, if enacted, it could affect your portfolio, please reach out to Alexander Lycoyannis. You can also click here to learn more about GCE and Alex’s ongoing efforts to stop its passage in the legislature.
421-a / Affordable New York Housing Program:
The NYS Legislative Session ended on June 2, 2022 without a renewal or replacement of Real Property Tax Law Section 421-a aka the Affordable New York Housing Program (“421-a”). The current 421-a program requires a “Commencement Date” on or before June 15, 2022 to vest for 421-a benefits. Projects which have vested for the 421-a program must be completed on or before June 15, 2026 (among other requirements) to qualify. Properties already receiving 421-a benefits will be unaffected by the expiration, which only impacts projects that have not achieved a Commencement Date on or before June 15, 2022.
While Governor Hochul has proposed a replacement to 421-a, so far the NYS Legislature has not moved forward on this proposal. Without a renewal of 421-a or an economically viable replacement program, NYC developers are expected to stop developing most new rental housing and to shift to other types of real estate development (condominiums, commercial or other non-residential uses). Certain property tax and zoning incentive programs are still available for residential projects which contain affordable housing, other approved uses and/or which may receive governmental subsidies. Developers, lenders and purchasers will want to consider whether these programs may make sense for their projects.
If you have questions about the expiration of the current 421-a program and development of residential or other projects in its absence, please contact Daniel M. Bernstein, head of our Tax Incentives & Affordable Housing Department.