Tax Cap for Rent Regs

Thursday, June 02, 2011

Assembly Speaker Sheldon Silver Assembly Speaker Sheldon Silver (Stephen Nessen/WNYC)

Welcome to Politics Bites, where every afternoon at It's A Free Country, we bring you the unmissable quotes from the morning's political conversations on WNYC. Today on the Brian Lehrer Show, NYS Assembly Speaker (D-64th) Sheldon Silver talks about the deal to cap property taxes and renew rent regulations, plus other remaining items on the legislature's agenda.

Renters in New York City and homeowners outside the city may soon be getting a break on those property taxes and rising rents. 

Assembly Speaker Sheldon Silver and Majority Leader Dean Skelos have agreed to a plan to limit the increases in rates, but the deal isn’t quite done. The proposal would strengthen the rent stabilization law for most renters and cap the tax hikes outside NYC for homeowners at 2% per year.

This is good news for the wallets of those affected, but may have other effects as well, such as on school budgets and the pending expiration of the current rent laws. The bill passed by the Assembly provides for regulation on all increases in rent, will regulate an limit landlords' ability to raise rents, and attempts to limit rent-stabilized and Mitchell Lama housing from moving onto the private market.

Rent regulation and the property tax cap is about giving people certainty that they can afford to live in their homes... People can plan based on those issues.

The Legacy of an Earlier Deal

Under the old "luxury decontrol" laws, if a renter’s incomes rose to $175,000 or if their rent went over $2000, that renter became ineligible for rent control. Silver said he would like to see that change, as rising middle-class incomes and rents brings the previous limits below luxury rates.

In 1997 under Governor Pataki, a battle erupted over rent stabilization laws, with Republicans lobbying to end it entirely. While the outcome was trumpeted as a victory for renters, it included a vacancy bonus for renovated apartments which ultimately took many units — especially in Manhattan — off of rent control and back to private market rates. Silver said the deal was the best they could get at the time.

You have to play the entire game... Our tenants were nervous. Rent regulation had expired.

Sticking Points and Selling Points

Many developers would like to see a renewal of the 421A program, a city tax incentive for developers who include low-income apartments in their projects. Silver said that the current plan makes renewal of 421A contingent on the passage of the rent regulation.

Because rent laws need renewal every few years, one sticking point in the negotiations has been linking the tax cap to rent renewal. The  property tax cap will have to be redebated every few years as well, but advocates for the cap would like it to be a permanent measure. Silver said both the governor and the Senate have committed to using the rent regulation law as a sunset provision. 

I think that’s important. It’s important for tax cap on its own. I think right now we have had escalating property taxes and it’s time to say time out. Let’s see what we’re doing, let’s put the cap in effect but… I think at some point we should say “Let’s see what we have done by it [the cap].”

A Man With a Plan

Silver can see a potential downside to the cap, “depending on government’s commitment to its school districts and its localities.” In 1995 the Assembly passed a cap law that remained in effect only as long as the state government maintained its financial commitment to school districts. School funding has been a major concern of critics of the tax cap deal. Silver has a plan to deal with that, too — reinstate the millionaire's tax, and route that revenue to school districts.

The current iteration of the rent stabilization and property tax cap agreement would include a reintroduction of the millionaires tax. The challenge for Silver will be to get Mayor Bloomberg, Andrew Cuomo and Dean Skelos to drop their opposition of the tax, which only effects those making over a million dollars annually.  Silver said the Assembly reintroduced the tax in the last few weeks and intend to move it forward this year and next, to make it part of the budget debate.

"It would mean, on a state-wide basis, seven to eight hundred million dollars for the balance of this state fiscal year, it would mean four billion dollars next year, in the fiscal year, and it would mean another seven or eight hundred million dollars in the following fiscal year… It’s enough to balance next year the projected budget gap and avoid any further cuts.”

While Silver isn’t optimistic about the reinstatement of the millionaire’s tax, he is hoping that the property tax cap might force the legislature to accept it.

I’m hopeful that this deal on property tax cap will leave no other conclusion that the demand on the state, on the local legislatures will be, fill our school district’s coffers, and how do you do that? By providing them with state revenue, which comes off a progressive tax base as opposed to a regressive property tax.

Same Sex Marriage

Silver said while he wasn’t sure whether the Senate will change its position on gay marriage this month, he is hopeful. While the legislation has died in the Senate on previous attempts, he has no doubt the bill will sail through the Assembly. 

We passed it last year once, we passed it last year twice. There’s no question where the Assembly stands on that issue.

Ethics Deal

An ethics deal would include mandatory disclosure by lawmakers of outside clients. Silver said he and the governor are “in sync” in seeing the need for this type of law. 

I want to point out very clearly, I do no business with the state, I represent no clients with the state. I represent individual claimants in cases involving insurance and I disclose that on my ethics report even though I am not required to. I am perfectly comfortable with a requirement that the Governor’s asking of a full disclosure of representing people who do business before the state or with the state... One of the important things, I believe, is sunshine. That’s what an ethics disclosure law will do.

Check cashing

Everyone but the check cashing industry is opposing a bill passed by both the Senate and Assembly banking committees, which would allow check cashing outlets to provide short-term loans. Critics worry this would enable predatory payday loans. Silver said the assembly is looking at the bill carefully, but would not say he was working to defeat the bill.


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Comments [10]

Kasanra from Brooklyn

Like some one else said, term limits, term limits, term limits. Nothing would fix ethics in Albany better than limiting the time these clowns can create a power base of corruption.

Jun. 04 2011 10:33 AM
Mason Burnham from Rye, NY

We recently moved to Rye for the great schools. While property taxes are high here, our local school board is fiscally responsible. But now we are told that Albany will cap their main revenue source with no exemptions for pension and other mandated costs or declines in state aid. State aid was already cut by 15% this year. Now Albany wants to cap property taxes at 2%, while pension costs for the Teacher Retirement System have increased by 33% and the Employee Retirement System has increased by 46%! The state government tells us to draw down our reserves, but that is not sustainable - to meet expected costs within a 2% tax cap we would be looking at huge deficits within a few short years. All over the state schools are talking about having to cut Kindergarten, librarians, art, music, sports programs, reading recovery programs, teacher aides (which would require children to come home for lunch and no recess).

I am not reassured by Speaker Silver's comments about a 'sunset' period as it will be incredibly hard to recover from even a few years of these draconian cuts.

Albany needs to address the real issue of ballooning pension and mandated costs and not punish responsible school districts because they want to run on the back of a tax cut. A 2% tax cap with no exemptions will ruin our schools and decimate public services, which will negatively impact property values -- the opposite of their stated aim.

Jun. 02 2011 10:36 AM

Term limits. These guys have been in office too long.

Jun. 02 2011 10:23 AM
Xtina from E. Village

Ugh, Sheldon Silver sounds like a fossil. He needs to step aside and get off the gravy train, of feeding at the government trough. Retire already into the sunset.

Jun. 02 2011 10:22 AM
Tawniqua from Manhattan

I truly wish Sheldon Silver would retire. He is part of the problem in Albany and clearly not very willing to change or face the new realities our state faces.

Jun. 02 2011 10:20 AM

There's no protection regarding how rents rise. How can renters plan?! The sheer hypocrisy of Sheldon Silver is something to behold -- and just a tiny fraction of the gross hypocrisy of the New York State legislature, widely recognized as the _most_ corrupt in the United States.

Jun. 02 2011 10:20 AM
Scott from Lower Manhattan

When will the public recognize that rent regulations are simply a tool for propping up a fantasy? The reason market rents are out of control is that housing in this city is scarce and it is scarce because local zoning restrictions make it impossible to build anywhere near the amount of housing needed to meet the demand.

It's one thing to like preserving community character the way zoning ordinances do. It is another to like to keep housing affordable. However, keeping supply down while demand is increasing always pushes prices up. Any attempt to stop that, such as regulating rents, is simply fantasy.

Jun. 02 2011 10:18 AM

Please ask the speaker what he thinks will happen to the markets after all the laid off unified court system employees apply for their unemployment next Monday.

Jun. 02 2011 10:12 AM
Michael A. Genito from White Plains, NY

There are some issues with the constitutionality of the current legislation. The legislation will also most likely impact the market for debt issued by New York State local governments, and require local governments to publish a "material event" required by the SEC under continuing disclosure rules:

A real property tax levy cap may be held to be unconstitutional for violating the relevant provisions of Article VIII, Section 12 of the New York State Constitution, which recognizes the power of the State Legislature to restrict local government taxation of property but also expressly states that "the legislature shall not, however, restrict the power to levy taxes on real estate for the payment of interest on or principal of indebtedness theretofore contracted". The passage of this legislation would most likely result in costly and time-consuming court challenges, which in turn could disrupt the market for bonds and notes, and could possibly result in credit rating downgrades, increasing the cost of debt issuance for local governments.

Potential disruption in the municipal bond market could possibly hamper bond market access for local government debt issuers under acute fiscal distress, such as the City of Newburgh or the County of Nassau, resulting in the State of New York becoming a "buyer of last resort" for local government debt issues.

The ability of local governing boards to override the tax levy cap with a 60% vote does not ensure that a levy cap override, if needed, would be enacted.

Local governments could be forced to choose between providing adequate resources to support operations and investing in infrastructure. Such choices could potentially cause the capital assets of the local government to further deteriorate and substantially increase replacement or reconstruction costs.

Municipalities under extreme fiscal stress could be precluded from issuing Budget Notes or Deficiency Notes due to the constraints of a tax cap with no debt exclusion.

A tax cap could impact existing debt. This debt has defined amortization schedules which must legally be adhered to (unless the debt is refinanced or defeased).

SEC Rule 15c2-12 (continuing disclosure) requirements will require "material event notices" to be filed by all local government issuers advising the market of a material modification of bondholders' rights as a result of imposition of a tax cap.

Michael A. Genito
Commissioner of Finance
City of White Plains, New York

Jun. 02 2011 10:10 AM

If Gov. Cuomo and state legislators want to help _all_ renters, how about allowing us to deduct our rent from our taxes (as owners are allowed to deduct a mortgage). Massachusetts and other states have such a deduction.

Jun. 02 2011 10:09 AM

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