On April 23, 2024, the New York State Legislature passed a number of significant measures intended to increase housing production, particularly in New York City. The new measures, which are discussed below, include a new tax exemption for new construction which will replace the expired 421-a program, an extension of the completion deadline for projects vested under the 421-a program, a new tax exemption for the conversion of nonresidential buildings to residential use, and the elimination of the 12 floor area ratio (FAR) cap for residential use.
Elimination of 12 FAR Cap
As previously reported in our client alert on April 26, 2024, the state Legislature has amended the Multiple Dwelling Law to allow the FAR for residential use to exceed 12 FAR in certain circumstances. For more details, please read our client alert here.
Tax Exemption for New Construction (Affordable Neighborhoods for New Yorkers — Section 485-x of the Real Property Tax Law)
In comparison to the expired 421-a program, the new 485-x tax incentive program increases certain affordability requirements, eliminates the 130% income band, requires that all units be permanently affordable and includes new minimum construction wage requirements. The following table identifies the new program's requirements and benefits by building size and location.
|
Rental Units |
Affordable Units |
AMI* |
Tax Exemption |
Construction Wage (minimum hourly)** |
|
6 to 10 (outside Manhattan on lots with less than 12,500 sf of residential floor area) |
50% stabilized |
100% exemption during 3-year construction (up to 3 years) and following 10 years |
None |
|
|
6 to 99 |
20% |
80% |
100% exemption during construction (up to 3 years) and following 25 years; exemption equal to affordability percentage from years 26 to 35 |
None |
|
100 or more |
25% |
80% |
100% exemption during construction (up to 3 years) and following 35 years |
$40 |
|
150 or more in Zones A and B*** |
25% |
60% |
100% exemption during construction (up to 3 years) and following 40 years. |
Zone A: $72.45 or 65% of prevailing wage; Zone B: $63 or 60% of prevailing wage |
* Weighted average of Area Median Income (AMI) with no more than 3 income bands and no band to exceed 100% of AMI
** Hourly wage increases by 2.5% per year beginning on July 1, 2025
*** Zone A = Manhattan south of 96th Street, Brooklyn Heights,
Downtown Brooklyn, Greenpoint, Williamsburg, South Williamsburg,
East Williamsburg
Zone B = Fort Greene, Clinton Hill, Carroll Gardens, Cobble Hill,
Gowanus, Red Hook, Park Slope, Prospect Heights, Queensbridge,
Ravenswood, Astoria, Hallets Point
421-a Deadline Extension
The completion deadline for projects vested under the expired 421-a program has been extended to June 15, 2031. In order to qualify, construction must have commenced by June 15, 2022, and the project must comply with affordability Option A, B, D, E or F — Options C and G, which provided for 30% affordable at 130% of AMI, are no longer available. Developers will also need to file a letter of intent on a form to be promulgated by the New York City Department of Housing Preservation and Development within 90 days following the promulgation of such form.
Conversions (Affordable Housing from Commercial Conversions for Tax Incentive Benefits Program)
The new tax exemption program for the conversion of existing nonresidential buildings (except for hotels) to residential use requires that 25% of the units be permanently affordable at a weighted average of 80% of AMI, with at least 5% of units at 40% of AMI. The exemption period ranges from 25 to 35 years. The tables below identify the tax exemption based on location and permit issuance date.
35-year benefit for projects that receive a building permit by June 30, 2026
|
Year |
Manhattan South of 96th Street |
Remainder of City |
|
1 – 30 |
90% |
65% |
|
31 |
80% |
50% |
|
32 |
70% |
40% |
|
33 |
60% |
30% |
|
34 |
50% |
20% |
|
35 |
40% |
10% |
30-year benefit for projects that receive a building
permit by June 30, 2028
|
Year |
Manhattan South of 96th Street |
Remainder of City |
|
1 – 25 |
90% |
65% |
|
26 |
80% |
50% |
|
27 |
70% |
40% |
|
28 |
60% |
30% |
|
29 |
50% |
20% |
|
30 |
40% |
10% |
25-year benefit for projects that receive a building
permit by June 30, 2031
|
Year |
Manhattan South of 96th Street |
Remainder of City |
|
1 – 20 |
90% |
65% |
|
21 |
80% |
50% |
|
22 |
70% |
40% |
|
23 |
60% |
30% |
|
24 |
50% |
20% |
|
25 |
40% |
10% |
City of Yes for Housing Opportunity
On April 29, 2024, the Department of City Planning referred the City of Yes for Housing Opportunity zoning text amendment to the city's 59 community boards. As reported in our earlier client alert, the proposal includes a number of significant text changes in an effort to encourage housing construction, including eliminating parking requirements, allowing for more housing conversions by extending the universe of buildings eligible for relaxed light and air standards of the Multiple Dwelling Law, allowing a 20% FAR increase in medium- and high-density zoning districts in exchange for providing affordable housing, and allowing smaller units and shared housing. Following the community boards' 60-day review period, the zoning text amendment will be reviewed by the five borough presidents, the City Planning Commission and the City Council. For more details, please read our client alert here.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.