Housing Proposals with FY 2025 Budget: Good Cause Eviction, 421-a Replacement

Rent in New York is increasingly expensive, with many renters struggling to afford rent and save money on the side. There also isn’t any reprieve if one tries to buy to build equity, as homeownership costs can take around 73.1% of a family’s yearly income. Now, new housing provisions in the 2025 New York State Executive Budget tie together both good-cause eviction and the replacement of 421-a in hopes of increasing tenant protections, affordable housing in the city, and bringing more units back on the market.

485-x is the replacement for 421-a

After the 421-a program expired in June 2022, there has been a long gap during which no plan has emerged to replace it, despite Governor Kathy Hochul’s attempts with substitutions such as 485-w. But under the new budget, 485-x is the newest ten-year tax incentive to create housing in New York City with affordable housing and homeownership opportunities. The new program extends the completion deadline for projects from the expired 421-a through 2031, so those who might miss the 2026 cut-off have time for completion. There will be tax benefits for housing construction where smaller buildings will need to have 20% of the units listed with below market rents for people making no more than the area median income (AMI), which is limited at 80%. Larger buildings will need to set aside 25%. 

There is also a minimum construction wage requirement ($35/hour); however, the minimum is higher for new builds under 96th Street in Manhattan and on the waterfront in Brooklyn or Queens, the areas that will most likely generate higher rents ($72.45/hour or 65% current rate, whichever is less).

Hochul is hopeful for the new plan’s success, as 421-a produced an estimated “two-thirds of all newly constructed multifamily housing in the City in the last decade.”  The ultimate goal is for 485-x to help increase the housing supply.

What is Good Cause Eviction? More Tenant Protections

Good cause eviction was enacted immediately (in NYC) after the budget was passed in April 2024 and will be active until 2034. The proposal’s inclusion with the new budget will limit landlords’ potential evictions of tenants. ‘Good Cause’ means that a landlord must have a good reason to evict a tenant, such as illegal behavior, non-payment of rent, or if the building will be demolished or converted (from residential to commercial). States such as California have enacted good cause rules, and Connecticut may soon follow suit and pass legislation to give extra tenant protection. 

There are some exemptions to the Good Cause legislation, such as units with a monthly rent that is greater than 245% of the fair market rent, above (above $5,846 for a studio; $6,005 for a one bedroom; $6,742 for a two-bedroom; and $8,413 for a three-bedroom). This is far above the current average rent in NYC. Other exemptions include small buildings with ten units or less, units already subject to rent regulation, and condos or coops, among a few exceptions.

Protections to help tenants avoid price gouging were also implemented, limiting annual rent increases to no more than 10% or 5% plus the Consumer Price Index (whatever is lower). Additionally, squatters, another controversial topic that has frequently been making the news, are reinforced as not being tenants and, therefore, not having the same rights and protections.

What Else Was Passed With The Housing Proposals Of The 2025 Budget?

Notably, the new budget looks to tackle the the lack of rental inventory on the market and bring back vacant units that are off the market due to being inhabitable or outdated. These are situations where the landlord may have to spend more than they would make in rent to renovate the apartment due to rent control or stabilization. Owners will be able to recoup a portion of the renovation costs over a 15-year period, and there will be $40 million set aside to help bring apartments out of NYC back on the market to contribute to the supply.

The budget also includes a pilot program to legalize basement and cellar apartments in certain areas of the city. Illegal basement apartments have received negative press in recent years due to fatalities from extreme weather that led to perilous flooding. 

In terms of housing discrimination, the Division of Human Rights will strengthen enforcement of Section 8 Housing Choice Voucher discrimination by housing providers or real estate professionals. It will also prohibit insurance companies from refusing to cover affordable housing. 

Stronger enforcement and preventative measures to protect homeowners against deed theft by predatory investors to acquire interests in inherited properties and pressure homeowners to sell their homes. A Transfer on Death Deed has been introduced so homeownership will be protected in the event there is no formal will at the time of an owner’s passing.

Over $600 million in capital funding is allocated to support various housing-related initiatives across New York State, including significant investments in public housing authorities and initiatives like the New York Housing for the Future program, which aims to promote cooperative rental and homeownership in fully affordable housing projects​.

What Is The Community’s Response To The Housing Proposals Such As Good Cause Eviction and 485-x?

While Albany is heralding the housing provisions as a victory, not all feel the same.

Democratic Socialist Association (DSA) claims the bill missed the mark by a lot when it comes to Good Cause Eviction.  

“Governor Hochul’s version is “Good Cause Eviction” in name only—with major carve-outs to make it more palatable to the Real Estate Board of New York (REBNY) and greedy landlords, leaving at least three million tenants unprotected,” said the DSA.

REBNY President Jim Whelan also expressed his reservations about 485-x’s success, stating in a statement that the program will “produce less housing than its predecessor.” He also felt that landlords’ stabilized rent increases would “fail to reverse the declining quality of that housing stock.” 

“We are confident that this package falls far short of addressing the city’s housing needs and must be reassessed in the coming years to put the rental housing market on a solid footing.”