Hochul Abandons Housing Plan in NY State Budget Deal

In last-minute maneuvering to seal a deal on the state budget on Friday, NY Gov. Kathy Hochul was forced to abandon her plans to build more than 800K new homes in the Empire State.

Faced with fierce opposition from NYC suburbs and Long Island, Hochul dropped all of her major housing initiatives, including a plan to give the state the power to override local zoning officials and force higher-density housing development along transit lines.

The biggest loser when Hochul took her entire housing package off the table was New York City, which had tied its Moonshot program—which aims to build 500K in new housing units—to a series of measures that Hochul had promised to enact, including incentivizing office-to-resi conversions, raising the city’s cap on residential floor area ratios and legalizing basement apartments in NYC.

Hochul also failed to include in the budget deal a four-year extension on the 2026 deadline for completing 421a tax abatement projects, without which developers have warned projects involving more than 30K housing units may end up being canceled.

“We’ll continue to see anemic rental housing production,” James Whelan, the president of the Real Estate Board of New York (REBNY), told the New York Times. “There’s no reason to think that’s going to turn around.”

Scores of developers raced last June to pour foundations before the June 15 deadline to qualify for the tax breaks, which expired at the end of June 2022. If they fail to meet the 2026 construction deadline, their 421a projects are no longer eligible for the tax breaks.

NYC developers said most of these projects will be canceled or postponed because in the current environment they’re not feasible—and, if they miss the deadline, whatever financing they were anticipating will evaporate when lenders pencil out the tax breaks.

According to a survey conducted by REBNY, more than 32,000 housing units may not get built if the June 2026 deadline stays in place.

Two initiatives that Hochul heavily promoted made it into the final budget: the state will initiate a ban on gas hookups in new construction, for buildings less than seven stories in 2025 and all others in 2028; and the MTA received a bailout package.

The Metropolitan Transportation Authority (MTA), which is running at about 75% of capacity, will get an infusion of cash through an adjustment of the Payroll Mobility Tax for the largest businesses within New York City to 0.6%, generating approx. $1.1B.

The MTA also will get $300 million in one-time State aid; NYC will be required to contribute $165M for paratransit services funding; $65M will be allocated to reduce the proposed fare increase on the MTA and expand service frequencies on the subway.