Last week, New York's State Legislature, acting more like an embattled frat house cramming for finals, passed a series of largely unremarkable bills in the final hours of its 2016 session. Although we can all rejoice about now getting Bloody Mary's at 10:01 AM on Sundays, it's impossible not to deem the session a massive failure given what wasn't resolved. Despite a desperate need for action on housing and a number of key bills and initiatives on the docket, no housing laws were passed. There is plenty of blame to go around, notably the bitter feud between the Governor and the Mayor, but the bottom line is that the housing market right now is crippled by uncertainty and a lack of vision at a time when the future of affordability, particularly in NYC, hangs in the balance. I will highlight three areas where the Legislature has undermined, skipped, or out right blocked the chance for sweeping housing reform and give my take as to why.
Cuomo's Failed 'Memorandum of Understanding'
When Governor Cuomo announced his massive $20b 5-year housing plan back in April, he included $2b for 2017 to be spent on affordable housing and fighting homelessness. In place of details, he outlined a Memorandum of Understanding (MOU) that was to be worked out among the "Big Three" (the Governor, the Senate Leader, and the Assembly Leader) at a later time. This type of action, which excludes rank and file legislators from debate and negotiations, is notorious in Albany and decried by many taxpayer advocates and policy watchers because it is the source of so many shady deals in other areas of government. It has never been used in a housing bill, let alone one of such scale. The Governor's decision to use this tool is even more stunning when you consider that two former members of the Big Three have been sentenced to prison on corruption charges (more on this later.)
Back when I wrote about the growing feud between Governor Cuomo and Mayor de Blasio, I pointed to this plan as a signal to see if the Governor was serious about housing policy or simply trying to embarrass and impede the Mayor's own housing plan. If the Governor could reach a sweeping agreement to fund affordable housing, it could be seen as a generational shift in housing policy and in how business gets done in Albany. Well, here we are in June and there is no MOU and no policy.
Clearly the biggest unfinished item is 421a, the controversial tax incentive given to developers for including a certain number of affordable housing units per building. The bill sunsets every 4 years and Governor Cuomo allowed it to expire in January when negotiations over union construction wages broke down. This has left plans for thousands of housing units up in the air and threatens to kill Mayor de Blasio's housing plan in the cradle. Though a compromise is still possible, the fact that one hasn't been found yet shows a shocking lack of leadership and/or a childish level of personal animosity.
I've written a lot about how flawed 421a is as an affordable housing tool. At best, it is a wildly expensive way to create a tiny fraction of the needed affordable housing units and, at worst, it is a market-warping give-away for developers that prevents more affordable housing units from entering the market. Certainly some advocates welcome the delay on 421a and would like to see it scrapped altogether. Others think that affordable housing can not happen in any form without it. I certainly believe it should be reformed significantly to create better targets and measurements for affordable housing, but scrapping it abruptly leaves existing projects in chaos.
The frustrating thing about this session however, is that there was never any serious talk about reforming the policy, nor was there any ability to given the ambiguity of the MOU. The initial breakdown came when the carpenter's union rejected the wage floor suggested by the Real Estate Board of NY, which was more or less the same language in the current Republican-controlled State Senate proposal. That is where the negotiation stood six months ago, and where it stands now. We are left with a maddening binary decision between extending it as is or letting it die. Neither one makes any sense given the political landscape.
A compromise on this particular element is probably a few horse-trades away and you can argue one way or the other over the union's current position, but the fact that there was no larger review of the policy should anger every voter and taxpayer. 421a is not a short-term or long-term solution for creating affordable housing. Perhaps, if properly designed and part of a larger effort, it could be an effective tool, but there was no ability for the legislature to debate this. Additionally, the Democrat-held Assembly attempted to expand the nature of the MOU by tying any reform of 421a to additional state funding commitments to NYCHA, but the Governor has not shown any interest in this effort and no deal has been struck. This appears to be dead on arrival.
Despite the ambitious scale of the Governor's suggested housing plan, we have seen no details or policy discussions, no deal within the existing MOU framework, no sense of what it would take to accomplish one, no sense of how and where billions of dollars would be allocated in housing across the state, and no ability for our elected officials to properly debate these issues. Is it any wonder that a deal wasn't struck?
This question brings us to the other major inter-related failure of this legislative session: ethics reform. As I mentioned earlier, this past year we have seen two of the Big Three in state government sentenced to a combined 17 years in prison on multiple corruption charges. This is on top of more than 30 state elected officials meeting the same fate over the past decade. Assembly Speaker Sheldon Silver and Senate Leader Dean Skelos, along with Governor Cuomo (who has been accused of blocking a commission on ethics), effectively ran the state between the three of them for years, during which New York has been seen as the most corrupt state in the Union. The calls for reform have been deafening, but action has been slow and punchless.
The legislative session did pass one important ethics reform when it agreed to ban public officers convicted of office-related crimes from receiving pensions (it still has to be voted on next year to become part of the State Constitution.) This is a positive step for sure, but fails to address the types of crime that has gotten leaders into trouble in the past. Specifically, there was no action taken to limit outside income for state legislators, to limit 'housekeeping' donations to political parties, or to close the so-called "LLC loop-hole" that allows unlimited donations from these corporate structures despite the ease with which individuals or corporations can hide behind them.
All in all, here again we see a shocking failure of leadership across all parts of Albany. The fact is that the current system, as corrupt and ineffective as it is to the larger population, works well for both parties. The unique nature of power in New York State allows for both parties to control just enough to keep the peace (and their seats) while blocking bolder policy initiatives and reforms. Until ethics reforms pass on a larger scale, the status quo will remain in Albany to the determent of all New Yorkers - and truly sweeping housing policy won't see the light of day.
A potential major blow to Airbnb is the final piece of legislation that I'll touch on because it could have an impact on housing in certain neighborhoods in NYC. The bill, which has passed the Senate, bans any advertising of apartment rentals under 30 days, which is already illegal in NY state, and creates a series of fines for an owner caught listing them. Whether this represents a true crackdown on the service remains to be seen (it also must pass through the Governor's Office before becoming law.)
It might seem like a surprise for me to include cracking down on Airbnb as a blow against housing, given how controversial the company and the practice are. In addition to being illegal in NYC, there is no doubt that it has an adverse affect on housing costs in certain, trendy neighborhoods and has negative impacts both on potential renters blocked from finding units and on existing tenants or neighbors surrounded by strangers. (I also have a philosophical problem with a company that is fundamentally based on exploiting peoples' income insecurity around housing, but I'll have more on that at another time.)
The problem is how to separate the good actors from the bad actors, which this bill (and NY's general dwelling laws) does not do. A couple going out of town for a long weekend once a year that wants to rent out their apartment, with the consent of their landlord or neighbors, is simply not a problem. However, despite Airbnb's claims, there are a lot of renters that amass a large portfolio of apartment leases or building owners that opt to focus exclusively on short-term tenants (they also have a huge problem with racial discrimination by renters on the site, which they are are trying to combat). Airbnb doesn't release much data, but when it does, it appears that these types of actors are the majority of its listings. Airbnb won't be completely honest about this for the simple reason that they make the majority of their money on 'professional' Airbnb renters. They can't justify their model to investors if they do rely on that couple going out of town once a year.
I think there could be a responsible way of allowing landlords/tenants/neighbors to make short-term rental agreements, but no doubt pressure from the hotel industry simply won't allow that discussion right now - and that's really where this bill came from. This is less a win for tenant advocates as it is for hotel developers. What could have been a chance to force Airbnb to evolve and become a stakeholder in NYC has instead likely inspired the company to double down on aggressive lobbying to fight the existing laws rather than improve its practices. Housing in NYC will continue to suffer in any event.
I have advocated for a broad reinvention of our housing and dwelling laws before and I absolutely think we should include short-term rentals in the discussion. The toothpaste is out of the bottle with Airbnb and bad actors will still find ways around even this law. Rather than try to force it back in, we should...find more toothbrushes to put it on? (I'm tired and need to publish this before the Mets game, sorry.) At any rate, this bill doesn't come close to considering how best to handle Airbnb and similar technology-driven companies. (A bill to allow Uber and Lyft to expand upstate was blocked in the Assembly.)
The Airbnb law is the perfect example of rhetoric masking reality in state politics. New York isn't alone in this, but it is certainly more naked about it (not lease because of how many people seem to fail at balancing the act and get busted.) Special interests have a right to lobby their elected officials, but unfortunately that comes increasingly at the expense of the common good, which is never as well organized or funded. Albany is evidently trapped in a particularly vile cycle of sacrificing the public good whether out of greed or flawed ideology or both. This could have been a significant legislative session given the public demand for action, the amount of ideas on the table, and the amount of actors across all spectrums who were engaged in the debate, but it wasn't. The more the state government fails to take advantage of these circumstances, the harder it will be for them to materialize again.