Gov. Kathy Hochul announced with much fanfare last week that state lawmakers had reached a “general agreement” on a $268 billion budget. But almost immediately, legislative leaders made clear that key policy and funding details were still being worked out, with the plan now more than six weeks past its April 1 deadline.
While lawmakers are closing in on final budget language and formal approval, a final deal still isn’t expected for at least another week or two.
In the meantime, here’s where some of the biggest real estate-focused proposals stand.
Pied-à-terre tax
A month after Kathy Hochul floated a new tax targeting luxury second homes owned by part-time New Yorkers, Albany is still wrestling with a thorny problem: New York City’s property tax system doesn’t accurately value many of the properties the levy targets. Behind closed doors, state and city officials have spent weeks negotiating how to structure the tax, particularly because condos and co-ops are routinely assessed far below their actual sales value.
On Thursday, Hochul proposed her preferred framework to legislative leaders: a phased-in surcharge that would initially apply to condos and co-ops with an assessed market value of $1 million or more, and one- to three-family homes assessed at $5 million or more.
Under the proposal, condos and co-ops valued between $1 million and $3 million would face a 4 percent tax during the first two years. Units assessed between $3 million and $5 million would be hit with a 5.25 percent surcharge, and those valued above $5 million would pay 6.5 percent.
These are temporary rates taking into account that properties assessed by the city’s Department of Finance as having a market value of $1 million have an actual sales value of roughly $5 million, according to the governor’s office.
After the initial two-year period, the city and state would pivot to a different valuation method altogether. The proposal calls for the city to assess condos and co-ops based on comparable sales prices instead of valuing them as rental buildings — a flashpoint in the decades-old fight to reform the city’s property tax system.
For one- to three-family homes, the surcharge would kick in at an assessed market value of $5 million. Homes valued between $5 million and $15 million would pay .8 percent. Properties between $15 million and $25 million would face a 1.05 percent rate, while homes above $25 million would be taxed at 1.3 percent. Those same rates would eventually apply to condos and co-ops once the city changes its assessment methodology.
Hochul’s office projects the tax would generate $500 million annually, revenue the Mamdani administration is counting on to help close a multi-billion-dollar budget gap this year.
But the projections are far from settled. A recent report from New York City Comptroller Mark Levine warned the tax haul could fall to as low as $340 million annually, depending on how the levy is implemented and whether wealthy property owners alter their behavior — including opting not to maintain second homes in the city at all.
Tax on $1 million-plus cash home deals
A last-minute budget maneuver by state lawmakers to tax all-cash city home purchases of $1 million or more caught New York’s real estate industry by surprise.
Assembly Speaker Carl Heastie told reporters Thursday that the proposed surcharge is part of Albany’s broader effort to help the Mamdani administration “close the city’s deficit.” The Mamdani administration quietly pitched the tax to state lawmakers in March.
As currently structured, the proposed tax would impose a one-time 1 percent surcharge on all-cash purchases of residential properties above $1 million, paid by the buyer, according to Michael Whyland, a spokesperson for Heastie. The proposal is modeled after the city’s existing tax on real-estate purchases with a mortgage, known as the mortgage-recording tax.
The proposal immediately drew backlash. Real Estate Board of New York President James Whelan slammed the tax, warning that “putting even more costs on home buyers and sellers will further discourage transactions and threaten existing revenue.”
While the measure would initially apply only to transactions in the five boroughs, lawmakers are also weighing whether to expand the tax statewide.
The surcharge is expected to generate roughly $160 million annually, said Whyland, though it’s unclear if the tax would sunset at some point or become a permanent fixture.
The governor’s office did not respond to requests for comment on the proposal.
Environmental review reforms
One major housing policy item that appears largely settled is a package of reforms to New York’s State Environmental Quality Review Act, or SEQRA.
The changes would allow certain housing and infrastructure projects to bypass environmental review, a process developers and housing advocates have long argued adds years of delays and drives up construction costs.
Under the agreement taking shape in Albany, housing developments in New York City with 500 or fewer units in medium- and high-density districts would be exempt from review. In low-density areas, the threshold would fall to 250 units.
Outside the city, housing projects with 100 or fewer units would qualify for exemptions, though the cap would increase to 300 units in urban areas elsewhere in the state. In municipalities without zoning codes, the threshold would be capped at 20 units.
Land use attorneys say the changes could significantly speed up the construction pipeline and free up resources for projects.
“The new exemptions in New York City are not so large that they’re shocking,” said Christian Harned, an expert on environmental development policy with Herbert Smith Freehills Kramer. “They don’t necessarily result in significant adverse impacts, and so [the reviews] are really resulting just in delays to projects that could otherwise generate much-needed housing.”
The final framework largely mirrors the reforms Gov. Kathy Hochul proposed at the outset of budget negotiations, and includes components of legislation previously introduced by State Sen. Rachel May.
The reforms would also exempt public school projects in New York City from environmental review, though childcare centers were left out. Lawmakers also agreed to raise the exemption thresholds for projects in cities outside the five boroughs.
At one point during negotiations, lawmakers weighed tying the exemptions to affordability mandates and prevailing wage requirements. But as of Friday, those provisions had not made it into the final package.
J-51 renewal and expansion
The J-51 property tax break is set to expire next month, and state lawmakers are racing to renew — and reshape — the long-running program as part of budget negotiations in Albany.
The abatement applies to certain multifamily buildings, condos and co-ops that undergo renovations, and the real estate industry considers it a key incentive that helps make major capital upgrades and climate-related retrofits financially viable.
Gov. Kathy Hochul included an updated version of the program in her executive budget, while State Sen. Brian Kavanagh, who chairs the Senate housing committee, is advancing his own bill that would similarly overhaul the tax break.
Both proposals would extend the program for 10 years, a significant departure from the typical four-year renewal cycle. Each also increases the benefit cap, allowing owners to receive abatements covering up to 100 percent of what the city classifies as “reasonable” rehabilitation costs, up from the current 70 percent ceiling.
But differences remain between the two plans. Kavanagh’s version would expand eligibility more aggressively, extending the tax break to buildings with at least 90 percent rent-regulated units — a change aimed at critics who argue the current rules leave out older housing stock most in need of investment. His proposal would also broaden eligibility for condos and co-ops.
Under current rules, condos and co-ops are only eligible if they fall below an average assessed unit value of $45,000. Hochul’s proposal raises that threshold to $60,000, while Kavanagh’s bill pushes it to $75,000 and, critically, ties future increases to inflation.
“Inflation would take a lot of that value away over the next ten years,” Kavanagh said, “so that’s a significant issue that needs to be addressed.”
Kavanagh said he’s optimistic a compromise will be reached in the budget. If not, he expects the measure to clear before lawmakers adjourn for the summer on June 4.
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