Hochul takes aim at institutional housing investors and rent-fixing software in State of the State
- The governor proposed a waiting period for large investors bidding on one- and two-family houses
- Hochul also pitched a ban on landlords using ‘price-fixing software’ that inflates rents
- She promised to provide $50 million in down payment assistance, but details were minimal
Hochul pitched spending $50 million to assist New Yorkers with down payments at her State of the State address on Tuesday, Jan. 15th.
Photo courtesy: Mike Groll/Office of Governor Kathy Hochul
Governor Kathy Hochul announced plans to curb the ability of private equity firms to snap up housing across the state and to ban the use of software to set rents in her State of the State address on Tuesday.
Affordability took center stage during Hochul’s speech, where she also pitched spending $50 million to assist New Yorkers with down payments and dropping another $50 million to build starter homes.
“Our future depends on the ability of every family to afford the essentials of life,” Hochul said Tuesday. “Your family deserves more money in their pockets as well as a place they can proudly call their home.”
The governor’s focus on New York families echoed that of Mayor Eric Adams, who proposed creating more family-sized apartments near schools, grocery stores, and libraries in his State of the City address last week. Both pointed to a major achievement: passing the City of Yes for Housing Opportunity, reforms meant to encourage housing construction that Hochul dubbed “the most consequential statewide housing policy in 50 years.”
Read on for an overview of her proposals on housing and how they could impact NYC.
Blocking big money from buying
Hochul proposed legislation that would curtail hedge funds, private equity firms, and other big investors from buying up single and two-family houses across New York.
“Corporate landlords co-opt our housing stock for short-term rentals,” Hochul said. “Or even worse they just let homes sit vacant while the values soar.”
The legislation would require that these companies wait 75 days before making offers on one- or two-family houses in New York. Hochul also pitched barring these firms from taking advantage of interest deductions and depreciation deductions—two ways property owners can reduce their tax bills.
That 75-day waiting period is a step in the right direction, but what New York really needs to do is build more housing, said Moses Gates, vice president for housing and neighborhood planning at the Regional Plan Association, a research nonprofit.
“In general these are positive steps but I don’t know that they are game changers,” Gates said.
Regarding the waiting period, he said, “The average buyer doesn’t move fast. It’s fair to give them a head start, it’s a step towards leveling the playing field. They still have to make a competitive bid.”
Outlawing algorithm-based rent hikes
Hochul said she would block the use of software that sets rents for landlords, just a week after the U.S. Justice Department sued six national landlords for allegedly inflating rents through algorithms and sharing pricing information.
“If you’re a renter, we’ll also ban price fixing software that inflates rents and costs tenants nationally $3.8 billion a year,” Hochul said.
While Hochul didn’t share many details on this proposal, City Limits reported that she intends to propose “new legislation to crack down on algorithmic abuses that increase the cost of living and force rents sky-high,” Hochul told the outlet.
Hochul’s ban could target software companies such as RealPage, a property management software company that the Justice Department also sued for allegedly pushing up rents nationwide, as ProPublica reported in 2022. (The Justice Department claims that RealPage’s “anticompetitive pricing algorithms,” helped hike rents at 1.3 million housing units nationwide.)
This type of software also gives landlords “an edge over the consumer,” because renters don’t get to see rent data, said Jonathan Miller, president and CEO of real estate appraisal firm Miller Samuel.
“The landlords have access to private information that the public doesn’t have access to,” Miller said. “The landlord has this leverage, and what it appears to do is bias everything higher.”
But it’s unclear if Hochul’s initiative will have an impact on NYC’s renters. City landlords may not need to rely on software to hike rents given their large portfolios, and landlords of rent-stabilized units are prohibited from doing so, noted Allia Mohamed, CEO and co-founder of the rental review platform openigloo.
“I don’t think this software ban will help New Yorkers—because these cases haven’t been super relevant to NYC buildings,” Mohamed said. “It’s an easy promise from the governor, because it will appease renters and won’t upset landlords here.”
Cash for down payments
Hochul would provide $50 million in new state funding to assist New Yorkers struggling to make a downpayment, though it’s not yet clear how those down payment funds would be distributed.
If the state provided prospective buyers with a lump sum of money, that could “make housing prices go higher,” Miller cautioned.
Those funds would also likely have more of an impact on buyers outside of NYC, given the city’s high prices, said Douglas Wagner, director of brokerage services for BOND New York.
“The devil is in the details,” Wagner said. “It would certainly open up homeownership to a wider swath of New Yorkers.”
Hochul also proposed spending another $50 million to incentivize the construction of new “starter homes,” and creating an ombudsman role who can approve new projects more quickly.
Blocking appraisal discrimination
In a document previewing her policies, Hochul also announced plans to tackle appraisal discrimination, though she didn’t discuss that proposal in her Tuesday remarks.
Hochul promised to come up with “a suite of actions to make discriminatory appraisal practices unlawful, enforce anti-discrimination principles in appraisals, and diversify the appraiser workforce,” the document reads.
Hochul’s proposals echo a federal task force meant to tackle bias in home valuations. While the industry certainly lacks diversity, Miller doubted it contained a widespread bias. He noted that the appraiser is often the only party to a transaction that doesn’t have a financial incentive for a sale to close.
