Billionaires’ Row. Photo: © 6sqft
As part of her State of the State address delivered earlier this month, Gov. Kathy Hochul promised to replace the 421-a tax abatement program with a new “effective” credit. Set to expire in June, 421-a gives New York real estate developers who construct new residential buildings a property tax exemption in exchange for designating a portion of the homes as affordable. As part of her executive budget, Hochul on Wednesday outlined her plan for a replacement program called “Affordable Neighborhoods for New Yorkers.” While the new program calls for the units built to be more affordable, much of the structure of the existing tax abatement remains in place.
The proposed Affordable Neighborhoods for New Yorkers (ANNY) incentive creates a new property tax code, 485-w, which will replace 421-a if approved by lawmakers.
The new program offers fewer options for developers to qualify for the tax break than the existing 421-a program. Under Hochul’s ANNY, developers would have two options to qualify for tax breaks when constructing new rental buildings.
Rental projects with 30 units or more would be required to have at least 10 percent of units affordable to households earning 40 percent of the area median income (AMI), 10 percent affordable at 60 percent of the AMI, and 5 percent at 80 percent of the AMI. The new program would require these apartments to be permanently affordable.
Developers constructing rental buildings with fewer than 30 units would need to make at least 20 percent of the units affordable to households earning 90 percent of the AMI, which translates to an income of $75,240 for an individual or $86,000 for a family of three. These smaller buildings would be required to maintain affordability restrictions for 35 years after construction is completed.
As part of the current program, developers can opt to build affordable apartments at 130 percent of the AMI, which is over $108,000 for a single household or roughly $139,000 for a family of three.
Under the proposed program, all affordable rental units would be subject to rent stabilization permanently, even after the tax break expires.
The governor’s plan would provide more benefits for condo and co-op projects than the existing 421-a program. The current program provides a full tax exemption for 14 years and a 25 percent exemption for six years for condos and co-ops.
Hochul’s plan gives co-ops and condos a full tax exemption for up to three years during construction and for 40 years after work is complete.
Affordable housing advocates say Hochul’s plan is a “handout” to the city’s real estate industry and does not deepen the affordable housing requirements adequately.
“We urge the Legislature to reject this proposal outright so that the City can reallocate these tens of millions of dollars to expand already proven housing programs – including CityFHEPS, a highly successful voucher program that has already connected thousands of New Yorkers to safe and affordable housing,” the Legal Aid Society said in a statement Wednesday.
“Continuing 421-A is bad policy, a colossal waste of tax dollars and a missed opportunity to invest in what actually works for our clients and the communities we serve.”
The current 421-a program underwent a similar rebrand in 2017 when then Gov. Andrew Cuomo introduced legislation that renamed the program “Affordable New York” and extended the tax benefit for developers.
The real estate industry appears to be giving Hochul’s plan the thumbs-up, for now.
“The governor’s proposal provides the private sector with an important tool for producing rental housing at deeper levels of affordability permanently,” Real Estate Board of New York President James Whelan told City and State NY in a statement on Hochul’s plan. “We look forward to continuing to work with the State and City on long-term solutions to address the housing supply crisis in New York City.”
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Tags : 421-a, Kathy Hochul