Cuomo’s crisis: What a weakened or departing governor means for real estate
Governor has long been seen as an ally of the industry
When the real estate industry wanted an alternative route to comply with a New York City building emissions cap, it looked to Albany. This year, Gov. Andrew Cuomo delivered one in his executive budget proposal.
But that change, and other industry priorities, are now in jeopardy. Cuomo is facing calls from Democrats and Republicans to resign after three women accused him of sexual harassment. Even before those reports emerged, Assembly member Ron Kim had begun pushing for impeachment over the revelation that Cuomo’s administration underreported Covid-19 deaths in nursing homes. The legislature this week moved to strip him of the emergency powers granted at the start of the pandemic, preventing him from issuing new directives and limiting his ability to extend existing ones.
The uncertainty over the governor’s future looms over Albany as state officials work out how to balance the $193 billion budget before April 1. Advocates and elected officials have already taken aim at key proposals, including the emissions workaround, and hope Cuomo’s weakness or absence will give them more leverage.
Beyond the budget, some in the real estate industry are concerned about what the loss of a powerful ally would mean for pandemic recovery and other initiatives, including the renewal of Affordable New York, a property tax break treasured by multifamily developers.
“The governor has generally been a pro-growth pragmatist. The real estate industry has depended on that to keep attention and focus in a positive way on investment in our built environment,” said Kathryn Wylde, the president of the Partnership for New York City. “The governor’s troubles are a real threat to the pace and strength of our recovery.”
When Cuomo, then state attorney general, ran for governor in 2010, he raised hundreds of thousands of dollars from some of the biggest names in the industry. That backing has run into the eight figures during his three terms — and has picked up when issues of particular import cross the governor’s desk.
In 2012, the New York Times reported that a committee largely backed by real estate leaders had raised more than $12 million for Cuomo, making it the largest-spending advocacy organization in Albany. Some of those donors were pushing for a cap on local property taxes that the governor had proposed. Ahead of the renewal of Affordable New York’s predecessor 421a that year, Extell Development’s Gary Barnett and his wife donated $100,000 to Cuomo.
It was Cuomo who set the terms for the renewal of 421a in 2017, ignoring a deal reached by Mayor Bill de Blasio and the Real Estate Board of New York. Instead, he tasked developers and construction unions with hashing out a compromise that included prevailing wage requirements. Though the resulting impasse led to the temporary expiration of the tax break, the governor could take a victory lap when the two sides agreed on Affordable New York.
That tax break is slated to expire in 2022, and some Democrats are calling for its immediate repeal. Cuomo is expected to push for renewal, Wylde noted.
“Generally, the governor brings a more practical and objective approach to all the issues that the advocates want decided on a more ideological basis,” the business leader said. “I think the decisions that have been made on facts and data may be lost in the politics if the governor and his staff are not able to manage some of those conversations effectively.”
The governor’s Local Law 97 amendment would allow building owners to buy renewable energy credits outside the city to offset their properties’ greenhouse-gas emissions, potentially saving some of them millions of dollars. The proposal is backed by the Real Estate Board of New York.
Jonathan Westin, director of the left-wing group New York Communities for Change, said there is now a better chance of removing the governor’s “poison pills” from the budget. Tenant advocates also hope the governor will permit some of their proposals to become law, including the cancellation of rent debt and a good cause eviction bill.
“He has literally no legs to stand on anymore,” Westin declared.
Some are skeptical that the allegations will end Cuomo’s career, though the situation underscores the danger for real estate of relying almost entirely on him — a strategy that backfired after Democrats captured the state Senate in 2018.
“They bought in. They took the Kool-Aid. This guy is really good at his job,” one industry lobbyist said. “They were enamored. But [pinning your hopes on one person] is also shitty planning.”
At the end of the day, the governor protects himself first. And when the time came in 2019 to renew the state’s rent stabilization law, Cuomo read the room: There were more tenants than landlords, and no Republicans to blame.
Landlords were shocked by the tenant-friendly bill that emerged, and when they made an 11th-hour plea to Cuomo to step in, he instead embraced the reforms, calling them “the most sweeping, aggressive protections in state history.”
In 2019 he also considered an annual pied-à-terre tax, although real estate interests ultimately persuaded lawmakers to instead raise transfer taxes on high-end home sales.
One real estate source noted that Cuomo was only an ally when his interests aligned with the industry. In that circumstance, he was a powerful friend.
“One day he is an ally; one day he’s an enemy. It all depends on his personal calculus,” the source said. “You don’t know if you are going to get the handshake or the knife at any moment with Andrew Cuomo.”
The governor’s tenuous position has some worried about the state’s pandemic response. Another industry source also noted that distress at the state level is compounded by uncertainty over who will be elected mayor to lead the city’s recovery.
“Stability in government is good for the real estate industry,” the source said. “It’s just not a good time for the government to be falling apart.”
Georgia Kromrei contributed reporting.
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