WHAT MUNICIPALITIES NEED TO KNOW ABOUT THE AFFORDABLE HOUSING INITIATIVES INCLUDED IN THE NYS BUDGET
In its Fiscal Year 2024 Budget, New York State passed significant measures expanding access to affordable housing across the State, moving the ball forward on Governor Kathy Hochul’s ambitious plan to “make the Empire State a more affordable, more livable, safer place for all New Yorkers.” These measures include tax exemptions for creating affordable housing, protections against insurance discrimination for affordable housing property owners, and support for developing rental and limited equity cooperative housing.
“The Governor and Legislature have created new and significant tools to address the housing crisis facing New Yorkers. As former New York State Housing Commissioner, I see great possibilities and look forward to working with our clients to put these tools to their best use in order to create and preserve housing opportunities for all New Yorkers.” Brian E. Lawlor, of counsel.
The Governor’s press release is available here and enacted budget overview is available here. The following is a summary of the affordable housing initiatives included that are available to Upstate New York municipalities:
Tax Exemptions for Affordable Housing and Accessory Dwelling Units
Real Property Tax Law § 421-p The budget provides a real property tax exemption under new Section 421-p of the Real Property Tax Law. Municipalities (other than New York City) and school districts may adopt a local law or resolution opting into the exemption, which will provide real property tax exemptions for affordable housing multi-family rental properties constructed or converted in designated “benefit areas” located within the municipality for which the exemption will apply. The exemption applies to properties located within designated benefit areas, with at least 10 dwelling units, where (i) 25% of the units are affordable for individuals or families with household incomes between 60% to 80% of the area median income (“AMI”), and (ii) all units are affordable to individuals or families with household income at or below 100% of AMI. For mixed-use projects, the exemption applies to the residential portion of the property if it constitutes at least 50% of the total square footage and meets affordability criteria. To obtain the tax exemption benefits, developers must build on underutilized or vacant land or land with nonconforming uses or substandard structures in the designated benefit areas. The law also requires that building service employees at a qualifying property, such as a doorman, cleaner, handyman, janitor, groundskeeper, etc., be paid prevailing wage, unless the qualifying property (i) contains less than 30-units, or (ii) was constructed with financing from federal, state or local programs for the development of affordable housing (e.g., low income housing tax credits, tax exempt bonds, grants, etc.). Qualifying properties receive a full exemption during construction (up to 3-years) and an additional 25-year period of decreasing exemptions (beginning with a 96% exemption in the first year after construction, and then decreasing by 4% year thereafter).
Real Property Tax Law § 421-pp The budget also introduces a real property tax exemption under new Section 421-pp of the RPTL, which offers similar exemptions for newly constructed or converted multi-family rental properties with 10 or more units where all the units are affordable rentals for households with incomes between 60% to 80% of AMI. These properties must be located on underutilized or vacant land and may include mixed-use projects if the residential portion accounts for at least 50% of the property. Eligible properties receive a full exemption during construction and an additional 30-year period of exemptions at a rate determined by local municipalities, which cannot exceed 10% of the shelter rent for the qualifying project. The law does not include any prevailing wage requirement for building service employees.
Accessory Dwelling Units
The budget introduces a new real property tax exemption under the RPTL, which allows municipalities and school districts (except for city school districts of cities with more than 125,000 inhabitants) to adopt a local law or resolution that offers exemptions for the creation of accessory dwelling units. The exemption applies to residential properties improved with one or more additional residential dwelling units (attached or detached) that provide complete independent living facilities for one or more persons located on a lot with a proposed or existing primary residence. Qualifying properties receive a 10-year exemption on any increase in the assessed value of the property attributable to the accessory dwelling unit, with the initial 5 years being a full exemption on the assessed value of the accessory dwelling unit, followed by annual 25% decreases in the exemption amount for years 6-8, and then finally annual 10% decreases in the exemption amount for years 9-10. Upon the 11th year, the accessory dwelling unit is fully taxable. The exemption amount is any increase in the assessed value as determined in the initial year of the exemption term, which may be recomputed during the exemption period if there’s a change in the assessed value of the property by 15% or more compared to the immediately preceding year.
The exemption only applies to properties improved with accessory dwelling units after the municipality or school district adopts the exemption. Additionally, the exemption only applies to properties whose market value increases by no more than $200,000 due to the construction of the accessory dwelling unit and the value of the improvements attributable to the accessory dwelling unit exceeds $3,000.
Prohibition Against Insurance Discrimination
The budget also amends New York’s insurance laws to provide a strong shield of protection for affordable housing property owners from insurance discrimination. Insurers are now prohibited from canceling coverage, refusing to issue policies, or adjusting premiums based on whether the property provides affordable rentals, receives Section 8 vouchers, or the tenants' source of income. This robust protection also prevents discrimination due to buildings owned by limited equity cooperatives, public housing authorities, or cooperative housing corporations, ensuring the security and stability of our affordable housing sector.
New Programs for Future Homeownership and Rental Housing
Limited Equity Cooperative Housing and Income-Limited Rental Housing The budget tasks the New York State Division of Housing and Community Renewal (“HCR”), the Housing Trust Fund Corporation or the Housing Finance Agency with creating a program that provides assistance in the form of payments, grants, and loans to support the development of limited equity cooperative housing and income-limited rental housing on appropriate sites, including state-owned, municipal, or not-for-profit-owned properties. The programs aim to create homeownership and rental opportunities for households earning up to 130% of AMI. In the case of limited equity cooperative housing, the program will allow households to earn equity while maintaining the housing as affordable in perpetuity. Municipalities are expressly authorized to acquire real property for the purpose of this program, and projects are entitled to real property tax exemptions in accordance with Article XI of the Private Housing Finance Law without the formation of a housing development fund company. Lastly, construction of these projects will generally be subject to payment of prevailing wages.
Landlord Tenant Issues
Good Cause Eviction
The budget amends the Real Property Law to add a new Article 6-A (“Good Cause Eviction”). With the adoption, Good Cause Eviction automatically applies in New York City and allows villages, towns, and cities to opt into its provisions. If a municipality opts in to Good Cause Eviction, the local law may provide that a housing accommodation may be exempt from its provisions if the unit has a monthly rent above a certain percent of fair market rent, as determined by the U.S. Department of Housing and Urban Development (“HUD”) and HCR. If the local law does not establish the percentage of fair market rent that exempts a housing accommodation from Good Cause Eviction, any housing unit with a monthly rent greater than 245% of the fair market rent at the time of adoption shall be deemed exempt.
Additionally, a local law may designate the number of units that deems a landlord as a “small landlord,” which designation creates an exemption from the provisions of Good Cause Eviction. If a local law does not define a “small landlord,” the term shall mean a landlord of no more than 10 units in a multi-family building. Additionally, if a town and a village within such town adopt Good Cause Eviction, the local law adopted by the town shall not apply within the territorial limits of the village co-located within such town.
If a municipality enacts a local law to adopt Good Cause Eviction, the Department of State shall notify HCR, which shall maintain and publish a list, once a year, of the municipalities that adopted Good Cause Eviction. The list shall also include the applicable fair market rent threshold within such municipality and the relevant definition of small landlord within such municipality.
Where Good Cause Eviction applies, the provisions shall apply to all housing accommodations within the territorial jurisdiction of the municipality that adopted its provisions, except certain housing accommodations excepted from Good Cause Eviction under the statute, including, premises owned by a small landlord, owner-occupied housing accommodations with no more than 10 units, a subleased unit in which the sublessor is seeking to recover possession for their own personal use and occupancy, units where a tenancy is conditioned upon employment, units that are otherwise subject to local, state or federal regulations, units that are affordable to tenants at specific income levels pursuant to a local, state or federal program, units that are part of a condominium or cooperative, and other exceptions set forth in Section 214 of Article 6-A of the Real Property Law. For the housing accommodations subject to the provisions of Good Cause Eviction, a landlord may only remove tenants from such housing accommodations for one of the following 10 reasons listed under the law:
1. Failure to pay rent as long as failure to pay rent due to a rent increase is not unreasonable.
2. Violating an obligation of the lease or rules governing the premises.
3. Committing a nuisance, substantially damaging the unit or property, or interfering with the landlord's and other tenants' comfort and safety.
4. Tenant’s occupancy causes a violation of law, which subjects the landlord to civil or criminal penalties.
5. Tenant is using the housing for illegal purposes.
6. Tenant unreasonably refuses landlord access to the premises to make necessary repairs or improvements or to show the premises to a prospective purchaser or somebody who has a legitimate interest in the premises.
7. Landlord seeks in good faith to recover possession for own personal use and occupancy or personal use and occupancy of landlord’s relative.
8. Landlord, in good faith, seeks to demolish the housing accommodation.
9. Landlord seeks to remove the unit from the housing rental market in good faith.
10. Tenant fails to agree to reasonable changes in the lease at lease renewal so long as written notice of the changes was provided to the tenant at least 30 days, but no more than 90 days, prior to the expiration of the current lease.
Squatters The budget also amends portions of Section 711 of the Real Property Actions and Proceedings Law to specify that a tenant shall not include a squatter. The amendment defines a “squatter” as a person who enters or intrudes upon a property without permission of the person entitled to possession and continues to occupy the property without title right or the permission of the owner or a person entitled to possession.
Conclusion
The measures outlined in the New York State budget represent a significant step forward in supporting the affordable housing industry in Upstate New York and strengthening tenants’ rights to existing housing. New real property tax exemptions, protections against insurance discrimination, new housing programs, and additional protections for tenants provide valuable opportunities for municipalities, developers, tenants and other stakeholders. Industry professionals should consider how these provisions can benefit their projects and the communities they serve.
If you have questions or wish to learn more about these opportunities, please contact Brian Lawlor (blawlor@woh.com), Daniel Hubbell (dhubbell@woh.com), Terresa Bakner (tbakner@woh.com), Dylan Harris (dharris@woh.com), David Craft (dcraft@woh.com) or any of our other attorneys at (518) 487-7600.
