04/30/2024 | Press release | Distributed by Public on 04/30/2024 12:38
Client memorandum | April 30, 2024
Authors: Zachary Bernstein, Anita W. Laremont, Sean Pethybridge
The New York State Budget for the current fiscal year, which was approved by the State Legislature on April 23, 2024, included the passage of legislation on a number of issues related to housing. These new laws will undoubtedly impact housing development in New York City. In this bulletin, we summarize the new legislation related to the new 485-x tax exemption, the 421-a deadline extension, office to residential conversion, and lifting the 12 FAR cap.
This new tax exemption program under Section 485-x of the Real Property Tax Law, and referred to as "Affordable Neighborhoods for New Yorkers," provides a successor to the 421-a program, which was available only to buildings commencing construction before June 15, 2022. As compared to 421-a, the new program increases certain affordability requirements and includes new minimum wage requirements.
The affordability requirements are as follows:
Additionally, the new program allows no more than three income bands for all of the affordable housing units and stipulates that no band may exceed 100% AMI. The units must be made permanently affordable, but market rate units are not required to be rent stabilized.
The program tax benefits, based on building size and type, and location within a wage zone, are as follows:
For buildings with 150 units or more in Wage Zone B, there is a 100% exemption during construction, up to 3 years. This is followed by an enhanced 40-year benefit, during which there is a 100% exemption
The construction wage standard for projects over 150 units varies within the two wage zones, as described below:
The $72.45 and $63.00 per hour wages are set to increase annually at a rate of 2.5%. The zones in which these provisions apply are as depicted below:
Additionally, there are citywide elevated minimum wage/benefit requirements for projects over 100 units, and the law provides certain exemptions for sites subject to a Project Labor Agreement or Jobsite Agreement.
The recent legislation includes an extension for completion of projects vested under the prior tax exemption program pursuant to RPTL Section 421-a. The deadline for completion of projects (i.e., full certificate of occupancy) utilizing affordability Options A, B, E or F has been extended to 2031. This extension is available only to projects that commenced construction by June 15, 2022, and utilization of the extension requires the filing of a "letter of intent" on a form to be promulgated by the New York City Department of Housing Preservation and Development within ninety days following the promulgation of such form. The extension is not available to projects utilizing Option C of the 421-a program (i.e., 30% of units at 130% AMI) or Option D (homeownership units).
The legislation includes a new tax exemption program for certain conversions of existing buildings to residential use. To utilize this new program, 25% of units must be affordable at a weighted average of 80% AMI, including a band at 5% of units at 40% AMI.
The tax incentive varies based on location and permit issuance date as follows:
Under recent changes to the Multiple Dwelling Law, the floor area ratio (FAR) on residential density in New York City will no longer be limited to 12 FAR by state law. With the lifting of this limitation from state law, residential FAR may now be increased to greater than 12 through a City of New York local zoning action that is subject to the requirements of the City's Mandatory Inclusionary Housing program. Rezoning an area to increase the permitted residential FAR is subject to the Uniform Land Use Review Procedure (ULURP). The legislation precludes lifting the cap in historic districts and requires relocation assistance for tenants in place at the time of rezoning.
The legislation also allows General Project Plans (GPPs) enacted by Empire State Development to permit FARs in excess of 12 (through state override of local zoning). Such GPPs are permitted where 25% of the units are affordable at a weighted average of 80% AMI. The prohibition on greater than 12 FAR in historic districts also applies to GPPs, as does the relocation assistance requirement.
The changes and programs described above are a brief overview of the housing issues addressed in the New York State Budget. These policies complement residential zoning regulations, including current initiatives under the City of Yes for Housing Opportunity proposal, an overview of which was provided in our recent April 17 bulletin. If you have any questions, please feel free to contact us.
[1] The Manhattan prime development area comprises all areas of Manhattan located entirely south of 96th Street.
This communication is for general information only. It is not intended, nor should it be relied upon, as legal advice. In some jurisdictions, this may be considered attorney advertising. Please refer to the firm's data policy page for further information.