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 passing a $237 billion budget that includes sweeping plans to build housing, shutter unlicensed cannabis storefronts and help manage the city's migrant crisis.

The raft of proposals is expected to pass through the Legislature late Friday and into the weekend, almost three weeks after the budget was due.

The governor and leaders of the state Senate and Assembly weighed countless political and business demands during their negotiations behind doors. They also contended with a cyberattack that temporarily shut down the statehouse's bill-drafting office just as legislation started to flow.

The housing agreement, the budgetary crown jewel for Democratic Gov. Kathy Hochul, was the most contentious issue of the spending plan.

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

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

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

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

State lawmakers let the 421-a tax break expire in 2022, with lawmakers in the state Legislature thwarting an effort from Hochul to adjust the program.

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

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

The state will also offer tax incentives to turn vacant office space into apartments and will set aside a pot of money to build apartments on state-owned land, as part of the larger strategy to jump-start the housing supply.

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

Hochul has presented the agreement as a big legislative victory on a pressing problem, especially after her prior plans to drive construction in the state have failed in the statehouse. It also marked an important moment of compromise with progressive Democrats at a critical time for her party.

In a few months, New York is set to be a congressional battleground where races in New York City's suburban districts could decide which party controls the House. Hochul, who has taken a more prominent role in her party’s messaging strategy, has appeared eager to carry Democratic political wins into the campaign season, and has already begun to tout her budget wins in public.

The governor also pushed to legislate other headline-grabbing issues, including how to handle the large number of international migrants who have overwhelmed New York City’s homeless shelters. Others include retail theft concerns that have resulted in cumbersome security measures at many stores, and unlicensed cannabis storefronts that have become ubiquitous in the city.

Over the objections of progressives, Hochul pushed through a measure to enhance criminal penalties for assaulting retail workers, though at the bargaining table she agreed to make the crime a Class E felony rather than the more stringent felony classification she had first proposed.

The budget also includes $40 million to establish law enforcement teams dedicated to organized retail theft and a $5 million tax credit for small businesses to install security measures.

On the bootleg marijuana shops, the budget is set to have a measure allowing local law enforcement to more easily shut down unlicensed stores. The move is intended to solve bureaucratic problems that have embarrassingly stymied government efforts to close thousands of bootleg 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 migrants shelter services, legal aid and health care, among other things, another proposal from the governor's office.

The budget, composed of several dense pieces of legislation, has been slowly introduced in incremental steps this week and is expected to be finalized in a set of votes late Friday night and into the weekend.