Gov. Hochul announces changes to 421-a tax break

On Wednesday, Governor Kathy Hochul of New York unveiled housing initiatives for 2022. In the 237-page policy book, Gov. Hochul outlined plans to end 421-a tax abatement and establish a new program. 

The 421-a program grants tax exemption to real estate developers in exchange for building affordable housing units. All new housing developments must contain between 25 to 30 percent of affordable units to qualify for this program. The current version of the 421-a tax break expires in June 2022. 

The abatement is favored by the real estate industry. Currently, the 421-a tax exemption covers approximately 200,000 apartments in New York City. But many housing advocates and lawmakers criticized the program for offering massive tax relief to real estate developers in exchange for a low number of affordable units. 

“421-a is a multi-billion taxpayer-funded giveaway to developers that subsidizes construction of luxury housing,” Assemblymember Linda Rosenthal tweeted. 

Governor Hochul offers to restructure the tax abatement to serve more lower-income households. The new program requires carbon-neutral and electrification-ready building systems to help meet the city’s climate goals. In addition, the new version of tax exemption supports the construction of smaller buildings and promotes low- and moderate-income homeownership options. 

Overall, the new changes to the 421-a program have been well-received by the real estate industry. The Real Estate Board of New York released a statement in support of “creating a new program that incentivizes the development of rental apartments and produces more affordable housing for New Yorkers.”

Resources:

“Hochul Promises to Lift Residential FAR Cap, Replace 421a, Study Triboro RX,” by Rebecca Baird-Remba (Commercial Observer, 2022)

“2022 State of the State Governor Kathy Hochul,” (2022)

“Real Estate Developers Already Worrying About 421a Expiring Next Year,” by Rebecca Baird-Remba (Commercial Observer, 2021)

“Hochul Takes on 421-a. Will It Be a Rebrand of the Existing Developer Tax Break?” by David Brand (City Limits, 2022)

“REBNY Statement on Governor Hochul’s State of the State Address Housing Proposals,” (REBNY, 2022)

“NYC 421a Tax Abatements - What Are They And How To Verify,” by James McGrath (Youreevo)

“What NYC's New Tax Abatement Program Means For Attorneys,” by Matthew Perlman (Law360, 2017)