Practice Areas

421-a Real Estate Tax Benefits

The 421-a program provides a partial real estate tax exemption to newly constructed Class A Multiple Dwellings, including cooperatives and condominiums, throughout New York City. 421-a benefits are also available in certain situations where new Class A cubic content is constructed on top of an existing structure. Please note that projects commencing on or after December 28, 2007, July 1, 2008 and July 1, 2009 are subject to certain changes to the 421-a program. A property must continue to meet certain site eligibility requirements to qualify for a 421-a partial real estate tax exemption. Under the program, the land must have been vacant, predominantly vacant, under-utilized or improved with a non-conforming use thirty-six months before construction commences.

General Changes

The Geographic Exclusion Area ("GEA") boundaries have been greatly expanded, and the GEA now constitutes all of Manhattan as well as large areas of Brooklyn, Queens, the Bronx and Staten Island. The Greenpoint-Williamsburg Waterfront Exclusion Area is a separate GEA which has been in effect since 2005 and has different requirements related to affordable housing.

July 1, 2008 Changes

Major 421-a changes apply to projects commencing construction on or after July 1, 2008 (and, in a few cases, earlier on or after December 28, 2007):

1. Projects in the GEA must provide on site affordable housing to be eligible for 421-a benefits. There are several variations on the GEA affordability requirements depending on whether or not the Project is constructed with substantial governmental assistance ("SGA") pursuant to a program for the development of affordable housing which we can discuss with you. Developers alternatively can acquire 421-a Negotiable Certificates from a developer of Affordable Housing provided same are still available and only partial benefits will be obtained.

2. Projects outside the GEA will be subject to a cap on exemption benefits (the "Exemption Cap") unless constructed with SGA or 20% of units are affordable at or below 60% of AMI. Projects will be subject to a limitation on the maximum exemption available to a residential unit. Initially, HPD has set the Exemption Cap at $65,000 per unit. Benefits for non-residential space is significantly reduced.

3. All affordable units within the GEA are subject to rent stabilization for 35 years.

4. Elimination of the 421-a Negotiable Certificate Program. No new 421-a Negotiable Certificates will be issued by HPD unless an affordable project is the subject of a 421-a Written Agreement already executed with HPD. Existing 421-a Negotiable Certificates will not expire and can still be used with some limitations.

5. Projects must contain at least four (4) dwelling units. Exceptions apply for projects constructed with substantial governmental assistance pursuant to a program for the development of affordable housing.

6. Prevailing wage requirement. Projects containing fifty (50) or more dwelling units must pay the prevailing wage (as determined by the NYC Comptroller pursuant to Section 230 of the Labor Law) to certain building employees. Exceptions apply for projects with fewer than 50 dwelling units or where certain affordable housing requirements are met.

7. Elimination of as of right twenty-five (25) year 421-a benefits in Neighborhood Preservation Program ("NPP") or Rehabilitation Mortgage Insurance Corporation ("REMIC") areas. Only projects in NPP or REMIC areas that meet on-site affordability requirements or receive SGA will be eligible to receive 25 year 421-a benefits. Projects located within the GEA and also in either an NPP or REMIC area must also meet all GEA requirements to receive extended 421-a benefits.

Duration

Based on the location of the property, the date of commencement of construction and whether the project consists of the required percentage of affordable units, or is constructed with SGA or has 421-a Negotiable Certificates of a certain vintage, it may be eligible for construction period benefits plus either 10, 15, 20 or 25 years of post-construction benefits as follows:

10-Year Post-Construction Benefits
Manhattan (south of 110th Street), commencing construction on or after July 1, 2008 and no later than June 30, 2009 requires 421-a Negotiable Certificates of a certain vintage.* Negotiable Certificates of any other vintage will only provide eligibility for 421-a benefits subject to the Exemption Cap.

15-Year Post-Construction Benefits
Outer Boroughs or Manhattan north of 110th Street commencing construction on or after July 1, 2008 and no later than June 30, 2009 requires 421-a Negotiable Certificates of a certain vintage.* Negotiable Certificates of any other vintage will only provide eligibility for 421-a benefits subject to the Exemption Cap.

20-Year Post-Construction Benefits
Manhattan south of 110th Street commencing construction on or after July 1, 2008 if 20% of dwelling units meet certain affordability requirements or are constructed with SGA.

25-Year Post-Construction Benefits
Outer Boroughs and Manhattan north of 110th Street commencing construction on or after July 1, 2008 if 20% of dwelling units meet certain affordability requirements or are constructed with SGA.

* Negotiable Certificates produced under Written Agreements which were executed prior to December 28, 2006.

Please contact Jay G. Seiden at .(JavaScript must be enabled to view this email address) to discuss your project's eligibility for 421-a benefits.