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NY Housing Deal Comes With Big Changes

A deal has been reached between NY Governor Hochul and state legislators to boost NYC housing with revived tax breaks and stronger eviction protections

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Good morning. A deal has been reached between NY Governor Hochul and state legislators to boost NYC housing with revived tax breaks and stronger eviction protections. Meanwhile, $929 billion deadline brings tax snags for borrowers, lenders.

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NY Gov. Announces Sweeping Housing Initiative

NYC Lawmakers Seal Sweeping Housing Deal

Senate Majority Leader Andrea Stewart-Cousins, Gov. Kathy Hochul and Assembly Speaker Carl Heastie (Getty)

NY Governor Kathy Hochul and state legislators have finally agreed on a deal to boost housing in New York.

The deal: Fifteen months after Gov. Kathy Hochul proposed an aggressive plan to increase housing, she and New York lawmakers have agreed to the most sweeping changes in New York housing policy in years. The historic housing policy reform, within a $237 billion budget, focuses on both tenant protections and developer incentives and aims to address critical issues like housing affordability and availability in the face of a drastic vacancy shortage.

Tax Incentives: The updated 421a tax incentive, rebranded as 485x, mandates that developers include permanently affordable apartments in their projects. It provides up to a 40-year property tax exemption but tightens eligibility by lowering the threshold for higher construction wages to projects over 150 units, down from 300. This change could lead to increased construction costs.

Good Cause Eviction: The housing deal sets stricter eviction controls: landlords must invest a minimum of $30,000 in renovations to significantly raise rents, which are capped at the lesser of 10% or the consumer price index plus 5%. New constructions are also exempt for 30 years, and small buildings with under 10 units are not subject to these rules.

Development boost: Alongside the "good cause" bill to strengthen tenant eviction protections, the agreement includes extensive measures to boost housing construction, particularly in New York City and its suburbs. This includes allocating $500 million to develop up to 15,000 housing units on state-owned sites. Additionally, the deal removes density restrictions in Manhattan, opening the door for more residential projects, which could enable more office-to-residential conversions.


Big picture: Despite reaching a deal, there are concerns that the new measures may not sufficiently address the housing supply issues in New York. Critics argue that the changes could deter landlords from offering rental units and potentially slow down new housing production, contrary to the state's goals of increasing housing availability. Moving forward, the effectiveness of this budget in promoting affordable housing and maintaining rental stock quality will be determined by the real estate community.


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✍️ Editor’s Picks

  • Calm seas: The IMF forecasts that the global economy will grow by 3.2% in 2024, up from its earlier 2.9% prediction, as the poorest countries lag behind.

  • Fresh face: Colleen Keating, former CEO of FirstKey Homes, was appointed as the new Planet Fitness (PLNT) CEO, succeeding interim CEO Craig Benson.

  • Builder blues: Nationwide housing starts plummeted 14.7% in March to a 1.47M unit annual rate, rattling builder stocks amid rising mortgage rates.

  • GM drives downtown: General Motors (GM) is relocating from the iconic Renaissance Center in Detroit to a new downtown skyscraper, leasing 558KSF.

  • Treasury yields soar: Powell’s latest hawkish comments saw the 10-year Treasury rate surge from 4.55% last Wednesday to 4.63% by Monday.

  • Building for tomorrow: In 2023, the U.S. commercial sector used 17B kWh, up 2x from 2000, emphasizing the need for more energy efficiency.


  • From offices to homes: Investor David Werner will potentially convert 100 Wall Street to a residential building, buying the 75% leased property for over $100M.

  • Prime property progress: CBRE reported slight improvements in key metrics for Class-A multifamily properties in Q1, hinting at upcoming rate cuts.

  • Rent cuts for the rich: Luxury apartment rent growth dropped by 12.1% YoY, from 11.8% to -0.3%, due to the current oversupply of 4- and 5-star apartments.

  • Higher ed hurdles: 3L Real Estate seeks buyers for a 533-unit Chicago portfolio of student housing and affordable housing near the University of Chicago thanks to the enrollment cliff.

🏭 Industrial

  • Investment growth: Investcorp (ICMB) acquires a 1.3MSF industrial portfolio in Denver and Miami for $200M, expanding to $5.1B in total assets.

  • Cold, hard cash: Richmond's Cardinal Commerce Center cold storage facility, leased to Performance Food Group, sold for $85.4M.

  • What a steal: A private developer buys the former Rackspace HQ in San Antonio for just $21.5M, or a measly $17 PSF. That’s what you call a snipe.


  • Clicks vs. consumers: Shoppers favor convenient and unique experiences, driving up continued demand for unanchored strip malls.

  • Retail resilience: March retail sales were well above expectations, up 0.7% on a 0.3% forecast, driven by stronger consumer spending.

  • Digital dining: Technology is reshaping the beleaguered restaurant industry by focusing on online bookings, more operational efficiencies via automation, and better insurance.


  • Tech titan takedown: Big tech companies continue downsizing their office space, leaving more empty office buildings and steep losses for exposed landlords.

  • Miami on my mind: Ares Management Corp. seeks 15KSF in Miami Beach to diversify the city's economy as Miami’s office space demand keeps rising.

  • Premium tower: A new 47-story office tower at 425 Park Avenue, completed in 2022, is already 90% leased after being refinanced with a $911M debt package.

  • Sky's the limit: A 62-story office tower at 350 Park Avenue anchored by Citadel will begin public review in 2025, delivering 1.8MSF.


  • Motel 6 on the move: Blackstone (BX) considers selling G6 Hospitality, owner of Motel 6, after a $1.9B deal in 2012. Currently, G6 is valued at over $1B.

  • Global hospitality: Partners Group invests $500M for a minority stake in Trinity Investments, expanding its global hospitality portfolio and accessing new growth opportunities.

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Real Estate Borrowers Should Avoid Cancellation of Debt Income

As the CRE sector grapples with the fallout from sustained high interest rates and the shift to remote work, owners face an urgent challenge: $929 billion in debt is slated for maturity this year, setting the stage for tax complexities.

The Borrower's Dilemma: For borrowers, the primary goal is to sidestep any transactions that could lead to Cancellation of Indebtedness Income (CODI). CODI occurs when a portion of a borrower's debt is forgiven, leading to taxable income without the corresponding cash to cover the tax liability. Tax advisors are crucial in guiding clients to negotiate terms that prevent CODI, focusing on adjusting interest rates and maturity dates rather than reducing principal amounts. For debts considered publicly traded, specific structuring is necessary to avoid significant modifications that could trigger CODI.

Maximizing Deductions: On the flip side, lenders aim to maximize their tax deductions through bad debt losses. These losses occur when the amount repaid falls short of the loan's outstanding balance. For those in the lending business, claiming a business bad debt deduction is viable when the debt becomes partially or wholly worthless. For non-lending entities, proving the debt's worthlessness is key to claiming a short-term capital loss. Lenders may also explore significant modifications of existing debts as a strategy to realize losses on their tax returns.


The clock keeps ticking: With a massive wave of debt maturity on the horizon, both lenders and borrowers in the commercial real estate market must prepare for significant negotiations and potential restructuring.


South Florida’s industrial constructions are slowing down as more space becomes available. As leasing activity declines across all major categories, dropping below 2020 levels across the board, available SF has reached or even exceeded 2020’s highs, depending on the size of the building.

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