Gov. Hochul unveils new program to replace 421-a tax abatement
Earlier in January, Gov. Hochul revealed her plans to replace the 421-a tax exemption program that will expire in June. The new program is called “Affordable Neighborhoods for New Yorkers” (ANNY) and was announced as a part of the Fiscal Year (FY) 2023 Executive Budget.
The 421-a tax abatement program allows real estate developers across New York to pay lower property taxes in exchange for building affordable housing units. The program grants tax exemption for 15 to 25 years.
The current version of the 421-a tax break is widely used in the real estate industry. But many progressive lawmakers and non-profit organizations have long advocated for increasing the affordability requirements to qualify for the developer tax break.
The new Affordable Neighborhoods for New Yorkers (ANNY) program will have a new tax code, 485-w, 6sqft reports. The proposal will increase the affordability requirements. In addition, it will reduce the number of options to qualify for this program from six to three, according to Kramer Levin.
Option A would apply to rental developments with 30 or more units and require at least 25% of the units to be affordable. This 25% include: 10% for households at or below 40% of the area median income (AMI), 10% for families at or below 60% of the AMI, and 5% for households at or below 80% of the AMI.
Option B includes rental projects with fewer than 30 units. To qualify for Option B, 20% of the residential units must be available to households at or below 90% of the AMI. Moreover, all affordable rental units under this program will be permanently rent-stabilized, even after the tax break expires.
Finally, homeownership projects will receive a tax break under Option C. This option requires 100% of the units to be affordable to families at or below 130% of AMI.
The governor’s proposal extends the full tax exemption period for co-ops and condos from 14 years to 43 years (up to 3 years during the construction and 40 years after the project is completed).
Overall, the new 485-w tax benefits program is in many ways similar to the existing 421-a incentive. Under the current program, developers can build affordable units at 130% of the AMI, which is about $155,090 for a family of four. The new version of the tax break lowers the top income band to 80% of AMI, or $95,440 for a four-person household.
Resources:
“Governor Hochul Releases Revisions to 421-a Program,” (Kramer Levin, 2022)
“Hochul outlines replacement for New York’s expiring 421-a tax break program,” by Devin Gannon (6sqft, 2022)
“Area Median Income,” (NYC Housing Preservation & Development)
“421a Exemption,” (NYC Department of Finance)
“Tax Credits and Incentives: 421-a,” (NYC Housing Preservation & Development)
Categories
Recent Posts
