9/28/2019 tax-incentives-421a-main

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421-a
Special Instructions 
Special instructions on how to comply with 421-a rent approval and registration requirements for projects that received HPD notices of
impending revocation in November 2016 or DOF notices regarding potential suspension of 421-a benefits mailed in December 2016.
Click here to download FAQ  

New York State Division of Homes and Community Renewal Instructions on Initial         
Registrations for 421-a Buildings Click here to download  

421-A Changes

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Chapter 20 of the Laws of 2015, which took effect on June 15, 2015, made the following changes to Real Property Tax Law Section 421-
a:

extended the date by which  a project must commence construction  in order to still qualify under the expired 421-a program
(“Expired Program”) from June 23, 2015 to December 31, 2015;
required any project that commenced construction after June 15, 2015 and on or before December 31, 2015 to be completed on or
before December 31, 2019 in order to qualify under the Expired Program;
established a new 421-a tax exemption program for any project that commenced construction between January 1, 2016 and June
15, 2019 and was completed on or before June 15, 2023 (“New Program”) and provided that the New Program would not come into
effect until representatives of residential real estate developers and construction labor unions signed a memorandum of
understanding regarding wages of construction workers performing work on 421-a projects that contain more than 15 units; and
created a new option for owners of some projects that are currently receiving 421-a benefits to extend the exemption for 10 to 15
years in return for agreeing to both preserve the existing affordable units and provide additional affordable units during that period
(“421-a(17) Program”).

Chapter 59 of the Laws of 2017, which took effect on April 10, 2017, renamed tax exemptions issued pursuant to Real Property Tax Law
Section 421-a as the Affordable New York Housing Program and activated the New Program by legislatively establishing requirements
discussed further below regarding minimum average hourly wage requirements for construction workers in rental projects containing
three hundred or more dwelling units.  Chapter 59 of the Laws of 2017 made additional changes to the New Program that are referenced
separately below in the NEW PROGRAM summary.

Click here for more information about the existing program

Click here to view Tax Incentives 421-a Proposed and Adopted Rules 

New Program
The New Program is now available to projects that commence construction between January 1, 2016 and June 15, 2022, and are
completed on or before June 15, 2026. Projects that commenced construction on or before December 31, 2015 also may opt into the
New Program if they have not as yet received 421-a benefits.

Only one application would be required, it would have to be filed within one year after completion, and construction benefits would be
retroactive.

Projects that do not receive the enhanced 35 year benefit would have to comply with the affordability requirements and other
requirements for 35 years.  Projects that receive the enhanced 35 year benefit would have a 40 year compliance period.

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A market unit shall be subject to rent stabilization unless, in the absence of 421-a benefits, the owner would be entitled to remove such
market unit from rent stabilization upon vacancy by reason of the monthly rent exceeding any limit established thereunder.

Rental Projects
Eligible rental projects that are not entitled to the enhanced 35 year benefit would receive:

a 100% exemption for a construction period of up to three years; and

a 35-year post-construction tax exemption (a 100% exemption during the first 25 years and an exemption equal to the percentage
of affordable units during the last 10 years).

These rental projects would be required to choose one of three affordability options and comply with it for the entire benefit period:

Option A

25% of the units must be affordable: at least 10% at up to 40% of AMI, 10% at up to 60% of AMI, and 5% at up to 130% of AMI;
and
the project cannot receive any government subsidies other than tax-exempt bond proceeds and 4% tax credits.

Option B

30% of the units must be affordable: at least 10% at up to 70% of AMI and 20% at up to 130% of AMI.

Option C

at least 30% of the units must be affordable at up to 130% of AMI;

the project cannot receive any government subsidies; and
the project cannot be located south of 96th Street in Manhattan or in any other area established by local law.

Eligible rental projects with 300 or more dwelling units that either are located in one of the enhanced affordability areas (portions of
Manhattan, Queens and Brooklyn) or elect to comply with the minimum average hourly wage requirements for construction workers,
would receive:

a 100% exemption for a construction period of up to three years; and

a 35-year post-construction 100% exemption.

These rental projects would be required to choose one of three affordability options and comply with it through the extended restriction
period (40 years from completion):

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Option E

25% of the units must be affordable: at least 10% at up to 40% of AMI, 10% at up to 60% of AMI, and 5% at up to 120% of AMI;
and
the project cannot receive any government subsidies other than tax-exempt bond proceeds and 4% tax credits.

Option F

30% of the units must be affordable: at least 10% at up to 70% of AMI and 20% at up to 130% of AMI.

Option G

at least 30% of the units must be affordable at up to 130% of AMI;

the project cannot receive any government subsidies; and
the project cannot be located in the Manhattan Enhanced Affordability Area.

Approval, denial or termination of these tax exemption benefits cannot be based upon compliance with the minimum average hourly
wage requirements for construction workers. Furthermore, a project labor agreement satisfies the requirements, and eligible multiple
dwellings with at least 50% of their units affordable to and restricted to occupancy by persons or families at or below 125% of Area
Median Income, are exempt.  The New York City Comptroller is the enforcement agency for the minimum average hourly wage
requirements for construction workers. 

Homeownership Projects
Eligible homeownership projects would receive:

a 100% exemption for a construction period of up to three years; and

a 20-year post-construction tax exemption (a 100% exemption during the first 14 years and a 25% exemption during the next 6
years), subject to an assessed valuation cap of $65,000 per dwelling unit.

Homeownership projects would have to meet the following eligibility requirements:

upon the first assessment following completion, the project must have an average assessed value not exceeding $65,000 per unit;
each purchaser during the benefit period must agree in writing to maintain the unit as his or her primary residence for at least the
first 5 years of ownership; and

the project cannot be located in Manhattan or contain more than 35 units.

Other Noteworthy Provisions of the New Program

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ALL rental dwelling units in an eligible multiple dwelling must share the same common entrances and common areas as the market
rate units in such eligible multiple dwelling and shall not be isolated to a specific floor or area of an eligible multiple dwelling. 
The building service employees prevailing wage requirements are enforced by the New York City Comptroller and provide that all
building service employees employed by an applicant at an eligible site must receive the applicable prevailing wage for the entire
restriction period (35 or 40 years, as applicable) unless:
the eligible multiple dwelling contains less than thirty dwelling units;or
all of the dwelling units in the eligible multiple dwelling are affordable housing units and not less than 50% of such affordable
units are affordable to and restricted to occupancy by persons or families at or below 125% of Area Median Income.
If the land on which an eligible site is located contained ANY dwelling units three years prior to the project’s commencement date,
such eligible site must contain at least one affordable housing unit for each dwelling unit that existed on such date and was
thereafter demolished, removed or reconfigured.
On or before May 31 2021, the Commissioner of the Division of Housing and Community Renewal will issue a report examining the
economic impact of the Affordable New York Housing Program. 

421-a(17) Program
The 421-a(17) Program is only available to rental projects that began construction prior to July 1, 2008 and qualified for a 20-year or 25-
year 421-a tax exemption.

Owners who elect to participate would receive either:

an additional 10 years of 50% exemption (for 25-year benefit properties); or

an additional 15 years of 50% exemption (for 20-year benefit properties). 

During this additional benefit period, the owner would be required to:

rent at least 20% of the units to households whose income does not exceed 100% of AMI (and whose average income does not
 exceed 80% of AMI); and
rent at least 5% of the units to households whose income does not exceed 130% of AMI.

The first requirement is identical to the existing affordability requirement applicable to such projects (it simply extends that requirement
for an additional 10 or 15 years).  The second requirement is an increase over and above the existing affordability requirement.

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