Gov. Hochul's Housing Plans for 2025
2025 State of the State Review
Mayor Adams’s State of the City address delivered more backward-looking remarks on 2024 than it offered ideas for the future, leaving the reader hoping for a bit more. One idea could have been to develop a City of Yes for Housing Opportunity (COYHO) office staffed with architects, zoning attorneys, and city planners to educate private agents on leveraging the new COYHO changes. Another idea would have been to include remarks about The Adams administration's position on property tax reform and establishing working groups to work alongside TENNY to support a solution. Likely, Adams had sweeping and ambitious plans, as his last two years in office have portrayed, but they were not shared in the State of the City. So, I turned my attention to Governor Hochul's State of the State.
Hochul identified three key areas of housing reform in her plan for the new year:
· Making home purchases more affordable
· Encouraging new development
· Supporting affordable housing
Let's take these ideas individually, beginning with working to make home-buying more affordable. Hochul will do this in two ways. First, she proposes making the purchase of homes cheaper by offering down payment assistance to first-time home buyers. She also wants to create property tax reductions for low- and moderate-income home buyers. This follows the ideas parroted by President Trump and former VP Harris. Governor Hochul wants to make home-buying more accessible to the average Joe by restraining the 800-pound gorilla of institutional capital that is increasingly competing against home buyers to make home purchases.
It's become public knowledge that institutional landlords own 3% of all (rental) homes in the United States, and that is rubbing some people the wrong way. Some say, "only 3%", but 3% can also be a big number. For example, 60% of Americans live on only 3% of the total land area in the United States, which we know as urban centers. In a different vein, in 2019 only ~5% of Americans living in the U.S. were of East Asian descent, and less than 2% are Chinese. These are small percentages, but they represent ~17.5m Asian Americans and ~5m+ Chinese Americans. 3% is small but can also represent large quantities.
Hochul's plan follows the national legislation aimed at curbing Wall Street landlords from "taking over," and she wants to set a required 75-day period after 1 and 2 families hit the market before institutional landlords can begin bidding on them. It's unclear how far Hochul is willing to go to enact this measure and how much pushback or support she will encounter. After all, how big is the appetite to purchase SFRs in Albany, Rochester, and Syracuse? Hochul also says she will propose "tax law changes to disincentivize these entities from amassing large portfolios of single-family and two-family homes." That's much more problematic. Limiting purchases of single- and two-family homes is risky only in the sense of scope creep, whereby the bill expands to include small to medium properties (3-10 units) as well as one- and two-family homes. However, changing the tax code to make the taxes of these smaller properties more expensive for corporate landlords than individuals could even the playing field for the entrepreneurs and give them a fighting chance to buy deals/homes.
Unfortunately, constraining institutional buyers will also lower the prices that sellers of these homes can achieve. If the top buyer has much higher costs (in the form of taxes, say), he cannot pay the top dollar that he used to. Worse yet, if the top buyer isn't purchasing anymore, pricing expectations from when he was active in the market must come down. If individual homeowners understand the consequences of saying no to Wall Street, it seems clear which way they would vote on any proposed legislation. The corporate lobbyist just needs to spell this out nicely for NY homeowners, and it's a pretty easy way to take the measure off the table.
Hochul also says she will take steps against home appraisal discrimination. Experiments have been repeated enough times to know with certainty that appraisals of white homes come out with higher values than appraisals of identical black homes. I use identical here in the literal sense because experiments have staged home appraisals where, in one instance, the house contains images of black families, and in the other the same home contains images of white families. The “black” homes are often appraised at lower values, which leads to worse outcomes across categories. Hochul wants to end this.
New Development
Governor Hochul and NYS notched some landmark wins for developers in 2024 with the renewal of 485-x and 467-m. These breakthroughs will direct more capital toward new construction projects and lead to thousands of new homes. Perhaps because of the momentous achievement in 2024 and the big flop in her housing ambitions in 2023 (RIP to the Housing Compact), Hochul is trying to tread a thin line.
Her new development idea for 2025 is to reduce state environmental requirements in the development of smaller housing, smaller than 10,000 square feet. That means R6 zoned, 30 x 100 lots could get built more quickly in NYC. This small and subtle change could yield many benefits depending on what specific changes are made.
Supporting Affordable Housing
Hochul has planned several initiatives to support housing for low to moderate income New Yorkers. Some of them are below.
· State fund to finance mixed-income projects – Hochul wants to encourage and support developers outside of NYC by offering them similar partnerships and pools of funding that they have access to inside of NYC.
· Double New York State Low Income Housing Credits – this increase would make it America's largest state low-income housing tax credit program.
· Tax Exemptions for Redeveloping Vacant Properties into affordable homes
· Reform NYS' approach to Historic Tax Credits – Hochul proposes to work to eliminate specific census tract eligibility requirements and cease to require the same investor to have both state and federal historic tax credits to qualify.
What I found most interesting was her discussion of lowering insurance costs. Below is what she had to say about that.
In other words, Hochul seeks to work with non-profit developers, with whom many private developers partner, to better qualify for certain insurance structures that would enable them to lower their costs.
Many initiatives are on the table here, and it will be interesting to see which can be introduced into the legislative houses or included in the 2026 Budget. It's worth mentioning that Hochul's vision for the upcoming year includes nothing about reforming the way rent stabilization and the DHCR work. Perhaps something to look out for next year.
I am bullish on NYC multifamily
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Best Regards,
Romain
Source: NY Governor Kathy Hochul’s 2025 State of the State (Housing)