After nearly two years, it is a “new day” for real property tax incentives. New York State has launched new and ambitious initiatives to incentivize housing development and make living in New York City more affordable. Recently enacted by the state legislature and signed into law by the governor, the widely publicized housing package extends the deadline to complete construction under the 421-a program and introduces two brand new programs that will undoubtedly increase the production of both affordable and traditional housing in the city. Notably:
- The deadline to complete construction under the 421-a program has been extended until June 15, 2031. To take advantage of this extension, a project must comply with Affordability Options A, B, D, E or F. Affordability Options C and G, which allowed 30% of the units to be affordable at 130% of AMI, are not permitted. In addition, a project seeking to utilize the extension must file a “letter of intent” with the New York City Department of Housing Preservation & Development (HPD), informing the agency of its election. The letter of intent form is to be released by HPD within 60 days, and a project must submit the completed letter of intent to HPD within 90 days of the form’s release.
- The housing package creates a new tax incentive for the conversion of office buildings to residential housing. This new program, known as Section 467-m and entitled “Affordable Housing from Commercial Conversions,” will provide an exemption of up to 90% of a project’s assessed value in return for 25% of the project’s units being made affordable at a weighted average of 80% of AMI (5% of the units must be affordable at no more than 40% of AMI). Seiden & Schein, P.C. will be providing more information regarding this program shortly.
- The long standing 421-a program has been replaced by Section 485-x, known as the “Affordable Neighborhoods for New Yorkers” tax incentive program, which is designed to provide more affordable housing at deeper affordability levels. Eligible projects must have a commencement date after June 15, 2022 and on or before June 15, 2034 and must have a completion date on or before June 15, 2038. Depending upon the size and location of a project, different eligibility options are available. These options are summarized below:
| Type of Project | Small Rental Project | Modest Rental Project | Large Rental Project | Very Large Rental Project – Zone B | Very Large Rental Project – Zone A | Homeownership Project |
| No. of Units | 6 – 10 | 6 – 99 | 100+ | 150+ | 150+ | 6+ |
| Eligible Locations | Outside of Manhattan on zoning lots permitting 12,500 sf or less of residential floor area | No restrictions | No restrictions (subject to the size and location requirements of Very Large Rental Projects) | Brooklyn Neighborhood Tabulation Areas 201, 202, 203, 204, 601, 602 and 801; Queens Neighborhood Tabulation Areas 102 and 105 | Manhattan south of 96th Street; Brooklyn Neighborhood Tabulation Areas 101, 102, 103 and 104; Queens Neighborhood Tabulation Area 201 | Outside of Manhattan |
| Affordability Requirements | None | 20% of units affordable at a weighted average of 80% of AMI | 25% of units affordable at a weighted average of 80% of AMI | 25% of units affordable at a weighted average of 60% of AMI | 25% of units affordable at a weighted average of 60% of AMI | Post-completion average assessment cannot exceed $89 per square foot |
| Rent Stabilization Requirements | 50% of units | Affordable units are rent stabilized. Market rate units are exempt | Affordable units are rent stabilized. Market rate units are exempt | Affordable units are rent stabilized. Market rate units are exempt | Affordable units are rent stabilized. Market rate units are exempt | None |
| Construction Wage Requirements | None | None | $40 per hour (increasing by 2.5% every year starting on July 1, 2025) | $63 per hour (increasing by 2.5% every year starting on July 1, 2025) or 60% of the prevailing wage, whichever is less | $72.45 per hour (increasing by 2.5% every year starting on July 1, 2025) or 65% of the prevailing wage, whichever is less | 100+ units: See Large Rental Project
150+ units in zones A or B: See Very Large Rental Project |
| Duration of Benefits/ exemption from increases | 10 years at 100% | 35 years: 25 years at 100% followed by 10 years at the affordability percentage | 35 years at 100% | 40 years at 100% | 40 years at 100% | 20 years: 14 years at 100% followed by 6 years at 25% |
Please contact Jason Hershkowitz, head of our Tax Incentives Group, at [email protected] or (212) 935-1400, for additional information regarding these exciting new opportunities, and stay tuned for further updates.
Seiden & Schein, P.C.
570 Lexington Avenue, 14th Floor
New York, New York 10022
www.seidenschein.com
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