New York closing in on $237B state budget with plans on housing, migrants, bootleg pot shops

ALBANY, N.Y. — New York state lawmakers are on the verge of approving a $237 billion budget that includes sweeping plans to build housing, close illegal cannabis stores and help manage the city’s migrant crisis.

The set of proposals is expected to move through the Legislature late Friday and possibly over the weekend, nearly three weeks after the budget was due.

The governor and the leaders of the Senate and National Assembly weighed numerous political and business demands during their behind-the-door negotiations. They also suffered a cyberattack that temporarily shut down the state House bill office just as legislation began to flow.

The housing deal, Democratic Gov. Kathy Hochul’s crown jewel, was the spending plan’s most controversial issue.

The goal is to address one of the state’s most pressing problems: a housing crisis in New York City, where supply is tightening and prices are astronomical. To do this, Hochul turned to a familiar idea: a tax break for developers who agree to include below-market apartments in new buildings.

New York first offered developers a tax break to build in the 1970s, when the city was in dire financial shape, and recently required buildings to offer some discounted apartments to qualify for the program, known as 421-a.

The incentive has always been controversial. Critics see it as a giveaway to developers, who in turn respond that the cost of building in the city makes it unprofitable. Opponents also point out that it cost the city a lot of money: about $1.8 billion in one of its last fiscal years.

As for its effectiveness, a report from the Furman Center, a housing and urban policy research group at New York University, found that 68% of the more than 117,000 homes built between 2010 and 2020 benefited from the program took advantage.

State lawmakers allowed the 421-a tax credit to expire in 2022, with lawmakers in the state Legislature thwarting an attempt by Hochul to tweak the program.

This year, the plan was to revive the tax incentive, but also to serve the interests of unions fighting for wage standards and progressives who have long wanted stronger protections for tenants against sharp rent increases and evictions.

The final product is something called 485-x. And while the formal budget text has not yet been released, officials have said it includes a tax break for developers if they rent a percentage of their apartments below market, a wage deal for construction workers and a package of protections for tenants.

The state will also offer tax incentives to convert vacant office space into apartments and set aside a pot of money to build apartments on state-owned land, as part of its broader strategy to boost housing supply.

“This is a great deal for New Yorkers,” Hochul said in an interview on Spectrum News NY1 this week.

Hochul has presented the deal as a major legislative victory on a pressing issue, especially after her previous plans to boost construction in the state failed in the statehouse. It also marked an important moment of compromise with progressive Democrats, at a crucial moment for her party.

In a few months, New York will be a congressional battleground where races in the New York City suburbs could decide which party controls the House of Representatives. Hochul, who has taken a more prominent role in her party’s messaging strategy, appears eager to carry Democratic political victories into the campaign season, and has already begun publicly touting her budget victories.

The governor also pushed to enact legislation on other headline-making issues, including how to deal with the large number of international migrants who have overwhelmed New York City’s homeless shelters. Others include concerns about shoplifting that have resulted in cumbersome security measures in many stores, and unlicensed cannabis stores that have become ubiquitous in the city.

Over the objections of progressives, Hochul pushed through a measure to toughen criminal penalties for assaulting store workers, though she agreed at the bargaining table to make the crime a Class E misdemeanor instead of a stricter misdemeanor classification she first suggested.

The budget also includes $40 million to create law enforcement teams to deal with organized shoplifting and a $5 million tax credit for small businesses to implement security measures.

As for illegal marijuana shops, the budget includes a measure that will make it easier for local law enforcement authorities to close unlicensed shops. The move is intended to resolve bureaucratic problems that have embarrassingly hampered government efforts to shut down thousands of illegal retailers, which operate in glitzy storefronts on seemingly every street corner in New York City.

The state will also spend $2.4 billion to provide shelter for migrants, legal aid and health care, among other things, another proposal from the governor’s office.

The budget, which consists of a number of dense pieces of legislation, has been slowly introduced in stages this week and is expected to be finalized in a series of votes late Friday evening and possibly over the weekend.