NYC Department of Housing Preservation and Development (NYC HPD) first created 421-a in 1971 to grant partial tax exemptions to developers in exchange for the creation of affordable housing. Since its inception, HPD has opened, closed, and modified the 421-a program serval times. On April 20, 2024, the 421-a deadline was extended a final time for certain eligible existing projects. Ultimately, however, HPD is closing the project and replacing it with a new “485-x” tax exemption program.
485-x was created as part of the Affordable Neighborhoods for New Yorkers Tax Incentive program, also known as “ANNY Program.” These benefits are available to Multiple Dwellings or Homeownership Projects that contain six or more dwelling units, commenced after June 15, 2022, and on or before June 15, 2034, and are completed on or before June 15, 2038. Refer to section below for detailed requirements by project type.
HPD is currently working on launching the project and, while not yet accepting applications for the program (as of 8/1/24), they have made preliminary reference information available. For more information and updates, questions should be directed to 485-x_anny@hpd.nyc.gov or call (212) 863-6603.
What is new in 485-x vs 421-a?
- Extended tax exemptions
- Timeline of exemptions extended from 35 years to 40 years
- Stricter affordability requirements
- Permanent affordability
- Increased wage requirements
What are the dates?
- Adopted on April 20, 2024
- Project construction start: June 15, 2022 – June 15, 2034
- Construction completion: June 15, 2038
Which projects are eligible?
- Determined by building size, location and tenure (Hotels are not eligible).
- Option A: Large Rental Projects and Very Large Rental Projects
- Large Rental Projects with 100 or more residential dwelling units that meet the eligibility requirements receive a 35-year benefit and up to three years of Construction Period benefits.
- 25% of the units must be Affordable Housing Units at an average of 80% Area Median Income (AMI) with no more than 3 AMI income bands allowed with the highest band capped at 100% of AMI
- Very Large Rental Projects with 150 or more residential dwelling units located in Zones A and B that meet the eligibility requirements receive a 40-year benefit , up to five years of Construction Period benefits in Zone A and up to three years of Construction Period benefits in Zone B.
- 25% of the units must be Affordable Housing Units at an average of 60% of AMI with no more than three AMI income bands allowed with the highest band capped at 100% of AMI.
- Large Rental Projects with 100 or more residential dwelling units that meet the eligibility requirements receive a 35-year benefit and up to three years of Construction Period benefits.
- Option B: Modest Rental Projects
- Modest Rental Projects with at least 6 and no more than 99 residential dwelling units that meet the eligibility requirements receive a 35-year benefit and up to three years of Construction Period benefits.
- 20% of the units must be Affordable Housing Units at an average of 80% AMI with no more than three AMI income bands are allowed with the highest band capped at of 100% AMI.
- Modest Rental Projects with at least 6 and no more than 99 residential dwelling units that meet the eligibility requirements receive a 35-year benefit and up to three years of Construction Period benefits.
- Option C: Small Rental Projects
- Small Rental Projects with at least 6 and no more than 10 residential dwelling units that meet the eligibility requirements receive a 10-year benefit and up to three years of Construction Period benefits
- At least half of the units must be rent stabilized
- The project cannot be located in Manhattan
- The project cannot be located on a zoning lot that permits residential floor area exceeding 12,500 sq. ft.
- Small Rental Projects with at least 6 and no more than 10 residential dwelling units that meet the eligibility requirements receive a 10-year benefit and up to three years of Construction Period benefits
- Option D: Homeownership Projects
- Homeownership Projects with at least 6 units must have an assessed valuation (AV) per square foot (SF) that does not exceed $89 per SF upon the first assessment after the Completion Date. Homeownership Projects that meet the eligibility requirements receive a 20-year benefit and a Construction Period benefit for up to three years
- Each owner of a unit in a Homeownership Project must agree in writing to maintain the unit as their primary residence for at least the first five years of ownership
- A Homeownership Project cannot be located in Manhattan
- Homeownership Projects with at least 6 units must have an assessed valuation (AV) per square foot (SF) that does not exceed $89 per SF upon the first assessment after the Completion Date. Homeownership Projects that meet the eligibility requirements receive a 20-year benefit and a Construction Period benefit for up to three years
Wage Requirements
- The Building Service Employees prevailing wage requirements are enforced by the New York City Comptroller and provide that all Building Service Employees employed by the Covered Building Service Employer at an Eligible Site must receive the applicable prevailing wage for the duration of the applicable benefit period even if such benefits are revoked or terminated 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 Housing units are affordable to and restricted to occupancy by persons or families at or below 90% of AMI.
- Construction Work on Eligible Sites with at least 100 units is subject to the requirements of Labor Law Sections 220 and 220-b, but must offer a minimum wage of $40/hr which will increase by 2.5% annually.
- Construction Work on Eligible Sites with at least 150 units located in Zone A is subject to the requirements of Labor Law Sections 220 and 220-b, but must offer a minimum wage that is the lesser of either $72.45/hr (increasing 2.5% annually) or 65% of the greatest prevailing rate of wages and supplements within a classification; and
- Construction Work on Eligible Sites with at least 150 units located in Zone B is subject to the requirements of Labor Law Sections 220 and 220-b, but must offer a minimum wage that is the lesser of either $63/hr (increasing 2.5% annually) or 60% of the greatest prevailing rate of wages and supplements within a classification.
- All Eligible Sites with Project Labor Agreements are exempt from these requirements, and a contractor and owner may be excluded with respect to construction employees performing work on an Eligible Site under a Collective Bargaining Agreement or a Jobsite Agreement that expressly waived these wage provisions.
Other Provisions
- A Market Unit shall not be subject to Rent Stabilization unless, in the absence of ANNY Program Benefits, such Market Unit would be subject to Rent Stabilization.
- 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.
- If the land on which an Eligible Site is located contained ANY dwelling units three years prior to the 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, provided, however that Small Rental Projects would have to contain one Restricted Unit for each dwelling unit that existed on such date and was thereafter demolished, removed or reconfigured,
- HPD must promulgate rules implementing the 485-x requirement that Eligible Sites, over the course of their design and construction, make reasonable efforts to spend at least 25% of total applicable costs on contracts with minority and women owned businesses.
- In addition to revocation, HPD impose fines after the expiration of the applicable benefit period and after notice and opportunity to be heard, for violations of the affordability and Rent Stabilization Requirements schedule and method of calculation to be promulgated by HPD in rules and will be applicable to whomever owns Eligible Site at time of violation; failure to pay may result in lien or other available remedies.
References
https://www.nyc.gov/site/hpd/services-and-information/tax-incentives-485-x.page
https://www.nyc.gov/site/hpd/services-and-information/tax-incentives-421-a.page