The Upside to Albany’s Corruption Crisis: New Yorkers May Actually Get Real-Estate Reform

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New York State Capitol
Photo: Larry Lee Photography/© Corbis. All Rights Reserved.

It has been 18 whole days now since anyone in New York State government has been arrested or indicted. Albany’s familiar rhythms have returned: By day, the clutches of lobbyists huddle around tables inside the Dunkin’ Donuts beneath the state capitol; by night, the clusters of older legislators huddle at the bar of the New World Bistro.

There’s still a wariness in the air, though, a fear that the whinings of Adam Skelos are not the final embarrassments to be yielded by Preet Bharara’s tapes (and new corruption details could arrive as soon as next week, when Skelos and his father, Dean, the former Senate Republican majority leader, are expected to be formally indicted).

So the mood and momentum among state legislators is toward doing the bare minimum and getting out of town on June 17, when the spring session is scheduled to end. That would be a switch from what’s traditionally and semi-affectionately known as “the Big Ugly” — a frantic late-night dash to pass a collection of unrelated bills. But scandal has dominated since January, when Shelly Silver was toppled after two decades as Assembly leader. “This has been the worst session ever,” a Long Island Republican senator says. “I can’t wait to get out of here.”

Which means punting several of the biggest issues. Mayoral control of the public schools will probably be extended for three years, with some tinkering. The state’s expiring rent regulations could get the same treatment — though the new Assembly speaker, Carl Heastie, says he’s going to make a stand for tenant-friendly changes like the repeal of “vacancy decontrol,” which allows landlords to charge market-rate rents after an apartment’s price rises above $2,500 per month.

The greater missed opportunity, though, would be on one of the most contentious subjects. The state created the 421-a tax abatement back in the bad old days of the 1970s as an incentive to developers; in the ’80s it was amended to require the building of affordable housing. It has worked, in some ways: More than 7,500 below-market-rent apartments were built as a result last year. But 421-a is expensive, costing the city as much as $1.1 billion in foregone tax receipts in 2014. And there have been abuses, like the end-of-session deal two years ago that granted five recently built luxury Manhattan high-rises a giant tax break.

Bharara and his investigators have been diligently connecting the dots between real-estate cash and alleged political favors. For instance, at the heart of the case against Skelos and son is Glenwood Management, which has long been a prolific donor to state Democrats and Republicans alike.

Here’s where Albany’s corrupt-a-thon could actually pay off for the citizenry. State political leaders are eager to look somewhat less beholden to real-estate cash; the industry knows that the recent run of bad publicity has weakened its hand, and it is eager to preserve the larger tax benefits of the program.“We can build condos and make a profit,” a real-estate insider says. “You can’t build rental housing without some subsidy.”

The rare confluence of needs has created an opening. The industry, for instance, is encouraging a proposal to eliminate 421-a’s geographic restrictions. Instead of being limited to particular neighborhoods, the requirement that 20 percent of subsidized development units be affordable would apply citywide, and — theoretically — stimulate the building of more below-market units.

That idea, which has been championed in the city council by Brad Lander, would be a win for Mayor Bill de Blasio, who has made building affordable housing one of his highest priorities. De Blasio also wants to raise the percentage of affordable units to 25 or 30 percent, and he’s proposed that Albany impose a “mansion tax” on condos, co-ops, and homes that sell for more than $1.7 million. Significantly — and surprisingly — de Blasio’s agenda has the support of the Real Estate Board of New York.

Predictions of a calm Albany conclusion, though, are based mostly on the legislature’s desire to get out of town quietly. And they come with one large caveat: Governor Andrew Cuomo.

The governor has already been talking up tougher campus sexual assault rules and an education tax credit program that could help needy families, parochial schools, and wealthy donors. Cuomo has generally been opposed to tax increases. On the items crucial to the city — rent regulation and 421-a — the governor hasn’t really weighed in yet, instead suggesting “the parties work it out among themselves.”

For the past few days Cuomo has been tending to his partner, Sandra Lee, after her breast cancer surgery. But no one expects the low profile to continue. “The governor loves splashy initiatives,” a Cuomo insider says. “I wouldn’t be surprised if he spends Memorial Day weekend coming up with some big package to push in the final three weeks.”

Because after a period of tumultuous, involuntary change in Albany, a passive Andrew Cuomo would be the biggest shift yet.