421a

Budget Process Continues to Expose Governor Cuomo

Different story this time around (cnn)

Different story this time around (cnn)

New York State is still without a budget and will likely remain so for the immediate future.  The Senate has left for its Easter Break, though the Assembly remains (unpaid) in Albany for now. They have collectively passed an emergency extender for two months, but there is a lot of bad blood circulating in Albany over why a budget agreement hasn't been struck.  As I laid out in last week's blog, the problem can largely be placed at Governor Cuomo's door.  Despite attempts to blame the uncertainty of the federal budget or the major differences between priorities in the legislature, the Governor can't distract anyone from his lack of leadership in a changing political landscape.  Housing shows why.

Given the affordable housing crisis gripping New York (primarily in NYC but not exclusively) major state action has been needed for a long time. Over the last few years, Governor Cuomo has happily stepped up to the microphone with grand proposals for addressing the crisis head on.  He has talked about turning JP Morgan settlement money over to homeless programs.  He has talked about reforming the controversial 421a tax program. And most famously, he has outlined an ambitious 20-year, $20 billion affordable housing plan. These grand promises were met with a lot of support, particularly from wary housing advocates.

However, almost none of these promises have been kept or even outlined in detail. Instead, we've seen the Governor feud with Mayor de Blasio by withholding state funds for housing. We've seen him spike a deal at the last minute on a revamped 421a plan the Governor himself proposed called Affordable New York. And we've seen almost none of the billions of dollars of funding called for in his plan allocated to affordable housing projects.

All of this posturing could be viewed as the Governor wielding considerable power over the political mechanics of the state, in a presumed ramp up to a 2020 presidential run. In reality, it has revealed a politician weakened in a new landscape, mired in his own contradictory impulses, and exposed for lacking a strong political base. Who is the Governor's core constituency?

The Governor has tried to please the strong downstate progressive element of his party in the Assembly while also trying to please the powerful, more conservative, developer interests aligned with upstate Republicans in the Senate. This balancing act works when the stakes are lower or when the issues are unrelated. 

The Governor can come out in favor of issues like gay marriage or anti-fracking because they don't impact developers' bottom line.  He can come out in favor of 421a reform, over the objections of many housing advocates, because it can be framed as an affordable housing mechanism even though it is largely a tax giveaway for large developers.

It doesn't work when those two worlds collide, which is what is happening over housing in budget negotiations. This budget requires some hard compromises on housing that simply can't match the Governor's promises to progressives and conservatives.  It doesn’t appear that the Governor anticipated the political environment he was entering, or at the very least, how this new environment would force him to make choices that he could previously avoid.

As of Wednesday, these negotiations have collapsed and state legislatures have walked away from the process without a deal. I don't want to suggest that housing is the only issue holding up the budget, but the issue shows how the Governor's leadership style has led us to this moment. 

Building housing in New York is difficult. Building affordable housing in New York is really difficult. These realities are partly structural - there are so many local variables, policies, and market forces that clash with each other that its nearly impossible to streamline a single affordable housing initiative. But these realities are also political. It's not impossible to pass a cohesive plan that addresses these structural issues, but it means pissing off somebody. Or lots of somebodies. 

Some politicians thrive under those partisan circumstances and some political systems even incentivize that type of style. Governor Cuomo is not that politician and New York State is not that system.  

That is the worst thing in the world necessarily.  There is something to be said for being a steely-eyed dealmaker and there is something to be said for a system that operates through old-fashioned power brokering rather than ideological extremism. Indeed, the previous six budgets during the Governor's reign have been passed on time and without going over major fiscal cliffs. 

However, over the years this has meant the “Three Men in A Room” style of governance involving the Governor and now disgraced Senate majority leader Dean Skelos and Assembly Speaker Sheldon Silver.  Both men were removed from office and convicted of federal corruption charges, radically altering the political landscape. Albany has always had the stink of corruption, but these developments, some of which have creeped into the Governor’s orbit, have undermined much of the Governor’s standing and power.

This ethical gray zone is largely why Governor Cuomo has maintained considerable control over Albany over two terms, with a hoped for third term on the way in 2018.  He has been able to strike deals in the legislature that have avoided big flair ups between parties by relying on his ability to maneuver in back rooms. But that is not the case anymore. (Although ethics reform has taken a back seat in this budget process.)

Without his fellow leaders to keep reigns on the political process, the Governor doesn’t have the type of cover he once relied on and it shows.  It is now up to him to make tough policy trade-offs in a much broader political arena than he is used to.  He has lost the initiative in crafting the budget process and can no longer control each chamber as he once could.

This isn’t lost on the Governor. His comments on the 421a negotiations show an almost child-like surprise that there are other motivations in politics than triangulation: “What we’re down to is truly ideological issues. 421a is an ideological, philosophical issue.”  Evidently, this is the first budget season where the Governor has had to consider actual political theory.

This openness has led to some truly bad ideas coming out of the negotiations, including linking 421a to rent regulation laws (which come up for renewal again in 2019.)  The Governor has come out against this line of thinking and it seems unlikely that a deal like this would be struck, but it shows that whatever deal does get done, Governor Cuomo will likely face the unpleasant realty of owning a divisive budget that he ultimately had less control over than his previous budgets.

How this will impact the Governor’s fortunes in 2018 let alone 2020 are unknown at this stage. But what is clear, and dispiriting, is that the housing crisis will continue, and many struggling New Yorkers will not get the help promised by the Governor so many times before. 

Governor Cuomo Wants You to Pay Developers' Labor Costs

You guys got it, right? (truthaboutguns)

You guys got it, right? (truthaboutguns)

Housing construction is complicated in New York City, but leave it to Governor Cuomo to make a bad thing worse.  The Governor had already single-handedly killed negotiations on 421a, the infamous tax subsidy to developers who agree to construct some affordable housing units, in the midst of Mayor de Blasio’s push to pass his ambitious housing plan.  As a result, hundreds of affordable units, and perhaps the Mayor’s entire housing plan, have remained in limbo. The Governor’s recently proposed solution makes matters worse.

Readers of this blog will be familiar with the problems that arose through the implementation of 421a since it was passed in 1971.  It was conceived while the NYC market was at its nadir, but quietly became a massive cash-transfer for developers when the market rebounded.  It has cost the city hundred of millions of dollars in lost tax revenue over the last decade’s hot market run, prompting many housing advocates to call for it to be abolished outright when it was set to expire last year. 

Mayor de Blasio took a different approach when putting his two major housing policy initiatives together last year.  The Mayor’s plan relied heavily on remodeling 421a with input from developers and construction union leaders.  He appears to have understood the political need for developers and construction unions to buy into his plan and the economic need for some type of tax benefit to spur development with his new requirements.  At the time that the law was up for renewal, the mayor was working with unions and developers on a compromised 421a version that would allow some non-union labor on certain housing projects that fell under the proposed guidelines.

It would be one thing if the Governor was against 421a from a policy standpoint but, in many circles, the governor’s last minute insistence on prevailing wage levels was seen as a direct attempt to kill the mayor’s plan for personal reasons.  The long-simmering tensions between the Governor and the Mayor, despite both being Democrats and broadly agreeing on policy, has been a major impediment to state and city policy-making on a number of issues.  Given the Governor’s track record, it’s hard not to look at his action as a petty lashing out.  The situation may be petty but the stakes are real - over the last eight months, a number of developments have been put on hold or out right cancelled over the 421a uncertainty.

To some degree, Governor Cuomo had political coverage at the time because he promised to announce his own detailed $2b housing plan.  The Governor created the impression that, if he was blocking Mayor de Blasio, it was because his plan was bigger and better. We’ll never know because he has never revealed his plan.  It, along with the $2b, quietly got pushed from the agenda until next year.

Instead, Governor Cuomo sent out a one-page outline to developers that suggested restoring 421a with prevailing wave requirements with the state directly subsidizing the differences for developers.  This type of direct wage intervention is virtually unprecedented. Taxpayers will literally be writing checks to construction workers to the tune of millions of dollars.

At least we think.  We don’t really know the true cost of this proposal because there aren’t many details about where the money would come from, what projects would get covered, who would administer and monitor the payments, and what if any restrictions or caps would be installed.  Although some numbers have been mentioned under some circumstances, the publicly available information is sparse.

To the extent that other parties are able to comment on the proposal as it stands, developers appear to be open to further consideration (as you would expect) and even Mayor de Blasio has offered support if the state holds to its obligation of paying those wages instead of the city.  We can expect a lot of closed-door talks to take place into the fall.

Governor Cuomo’s political antics against the Mayor and NYC in general have always appeared petty and vindictive to me.  It’s not the first time a governor has been nakedly jealous or resentful towards a mayor of NYC, but given the stakes of this particular issue – lest we forget this is about addressing the affordable housing crisis – the governor’s actions are a stunning failure of leadership.

Simply put, no taxpayer should support a vague plan to directly subsidize a developer’s construction costs.  Taxpayers should support the right to fair wages and safe working conditions for construction workers, but these are not, nor should the governor try to make them into, related issues.  This type of policy proposal is ill-conceived and potentially reckless.

If 421a is necessary for all parties to move forward right now, fine.  There will need to be complicated discussions and complicated agreements.  I certainly concede that there are no simple solutions to creating more housing under the existing framework. Though I argue that there are more options to consider and more ideas to explore to improve the creation of affordable housing in NYC, we must get the best possible agreement from all invested stakeholders.  If the Governor is secretly setting on a much better plan, I am all ears.

The Governor should be held accountable for holding up progress on affordable housing in the state.  He should be held accountable for promising then punting on a major $2b housing proposal.  And he should be held accountable for continuing to operate behind closed-doors and in vague terms.  Every stakeholder in the housing market, whether public or private, corporation or citizen, deserves better leadership.