421-a tax exemption
As currently written, the program also focuses on promoting affordable housing in the most densely populated areas of New York City.
Longer exemption periods apply in less densely populated areas of the outer boroughs and upper Manhattan.
Under the original program, areas in which developers qualified for the tax break included all of Manhattan and portions of the rest of New York City.
Real Estate Board of New York (REBNY) President James Whelan in January 2022 "indicated support for Gov.
Kathy Hochul's proposed Affordable Neighborhoods for New Yorkers program, a rebrand of the expiring 421-a tax break.
[6] The rules for the 421-a tax exemption include several "enhanced affordability areas" in parts of Manhattan, Queens, and Brooklyn.
[8] In response to this trend, the state passed the original 421-a tax exemption program in 1971, with the goal of encouraging the construction of more residential housing in the city.
The goal of doing so was to decrease the large tax burden an increased valuation of the property would create for the developer, which would then encourage residential housing creation in the process.
[2] In 1976, the state legislature passed amendments preventing the Department of Housing Preservation and Development (HPD) from rescinding certificates of eligibility for any projects started on or after July 1, 1976.
The 1981 amendments also allowed the HPD to restrict access to the program for areas that did not need the tax incentives or should be used for non-residential purposes.
Also, the state mandated that the New York City Board of Estimate review all local restrictions on 421-a benefits for approval.
Additionally, the state passed laws that officially restricted benefits for projects in Manhattan: Areas in Manhattan eligible for the exemption were reduced, and previously non-commercial sites now had to be underutilized for three years prior to construction to become eligible for the 421-a tax exemption program.
[11] In addition, the 1985 legislation allowed for a 25-year exemption period if the project took place in a neighborhood preservation area, was in an area eligible for mortgage insurance made available by the rehabilitation mortgage insurance corporation, or received funding under the Neighborhood Reinvestment Corporation Act.
[2] Starting in 2006, the Geographic Exclusion Area (GEA) was expanded to include other parts of New York City outside of Manhattan.
For the part of the GEA in Manhattan south of 110th Street, the owner had to provide affordable housing in order to get any 421-a tax benefits.
For such projects, a ten-year tax exemption could be obtained through building affordable units offsite, via a "negotiable certificate" from the city's Department of Housing Preservation and Development.
The city's Independent Budget Office estimated that the union-level wages requirement would increase the cost of Mayor Bill de Blasio's affordable housing plan by $2.8 billion.
[16] In response to this issue, Governor Cuomo brought both union leaders and real estate executives together to create a deal on paying union-level wages on 421-a projects.
[24] As part of the 2017 plan, all housing developments must include between 25% and 30% affordable units to qualify for the program, with several ways for builders to meet that requirement.
[10] The exemption program excludes luxury condominiums projects after a proposal to include them was defeated in the state legislature.
Under the old version, developers were obligated to reserve half of the new residential units for existing residents of the surrounding neighborhood.
The money was previously held up due to disagreements between Democrats and Republicans in the state government on the usage of those funds.
The Association for Neighborhood Housing and Development, an interest group that advocated for non-profits and affordable housing groups, claimed that the city needed that extra money to make up for expected cuts in federal funding to the city over the next year, and that luxury development companies should have to pay full taxes on the property, not get a deduction.
Senator Brad Hoylman stated that the dollars devoted to the 421-a program should instead go directly to creating affordable housing.
[25] Real estate trade groups, in response, claim that the exemption program makes it feasible to build residential housing in the first place.
