A recent rule change by the New York City Department of Housing Preservation and Development will significantly impact the development of residential projects. Starting October 13, 2017, residential developments benefitting from the 421-a/Affordable New York tax exemption program can no longer generate a floor area bonus to be transferred or sold to a separate receiving site.

The City's stated intent is to prevent new residential condominium projects that lack on-site affordable housing from benefitting from an inclusionary housing bonus generated on a separate site. The practical impact will be felt by rental projects that participate in the 421-a program, but will not be able to sell excess affordable floor area that cannot be utilized on-site (either because the bonus is unavailable or has been reached).

In addition, new residential projects seeking to maximize their development potential by participating in the Inclusionary Housing program will either have to provide on-site affordable housing, or purchase Inclusionary Housing certificates from an affordable development that does not participate in 421-a. However it is increasingly unlikely that developers will be able to find such an affordable development, a fact that will greatly complicate attempts to participate in the Inclusionary Housing program without providing on-site affordable housing.

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