August 20, 2018
August 20, 2018
New York State is using part of its $163 billion budget to revive the 421a tax abatement program two years after the old program expired. Affordable New York, the new name for the program, aims to create 100,00 units of affordable housing and 6,000 units of supportive housing. Now until 2022, qualifying developers can apply to participate in the HPD Marketing & 421a fillings to provide affordable housing.
The new 421a program has many highlighted changes from the old one. First, any project that commenced construction between 01/01/2016 and 06/15/2019 can qualify in the new tax abatement program. These projects should complete on or before 06/15/2023.
For projects that are currently receiving 421a benefits, owners have other options too. They can extend tax exemption for 10-15 years, if they can preserve current affordable units and also provide additional units.
Another key change to the new program is the emphasis on wages of construction workers. HPD provides detailed information on the required minimum average hourly wage for construction workers . The developers and construction labor unions must agree upon wages for 421a projects that contain more than 15 units. Then, the new program can come into effect.
Under the new program, owners may be eligible for up to 35 years of tax benefits. Enhanced 35-year benefits require a 40-year rent stabilized compliance period. Eligible rental projects not receiving the enhanced 35-year benefit will have 100% exemption for up to three years of construction and then 35-year post-construction exemption (100% exemption during the first 25 years and exemption equal to the percentage of affordable units for the remaining 10 years). HPD provides different affordability options for rental projects to choose and comply with during the benefit period. These options feature different percentages of affordable units required in the building and applicant income requirements.
Don’t be disappointed if your construction missed the eligibility window, see the story of Moinian Group’s Sky development. The developers almost completed the entire project for the building by the deadline. However, they are now one of the first developers receiving a 35-year tax break, providing 29 affordable housing units.