The 130% AMI Conundrum

(Updated 9-24-19)

It has been nearly a year since the City clarified the rules related to Affordable New York Housing Program (new 421-a). However, the developers of rental buildings are still struggling with the previously unfamiliar processes of Housing Lotteryand tenant selection for income-restricted units.

Based on the latest sample of projects participating in the new 421-a program, the overwhelming majority are buildings containing less than 300 units. Consequently, the developers have to choose between Affordability Options A, B, or C.  If no other incentives are at play (i.e. Inclusionary Housing, Low-Income Housing Tax Credits, HPD financing, etc.), developers tend to select the Affordability Option C with its very generous 130% AMI income limitation. The current maximum allowable rents and household income limits for 130% AMI apartments are as follows:

A quick review of these figures shows that 130% AMI rents do not look or feel very “affordable” in the conventional sense of the word. In many neighborhoods of the City, the market rate rents are significantly lower the the maximum 130% AMI rents.

$2,542 for a brand new one-bedroom unit in prime Williamsburg might seem like a decent bargain, while in East New York (Brooklyn) this amount is 50-60% above the median market rate for a one-bedroom unit. This creates a unique challenge for developers whose projects are located in all but very few high-income neighborhoods of the City. The maximum allowable 130% AMI rents are simply not attainable. If the affordable units are advertised at these rates, no one will ever rent them.

How Do You Make Them Affordable?

In order to make a particular 130% AMI unit affordable, we recommend the following 3-step process:

STEP 1. Estimate the market rate rent for a unit of comparable size and description.

A. This is the most important step, and it requires you to compile all relevant data about the affordable unit, including the following:

• Overall size of the unit
• The size of each room
• Unit’s location within the building (light exposure, floor, views, etc.)
• Amenities (balcony, appliances, building services included in the rent, etc.)
• Closet space
• Neighborhood features
• Proximity to public transportation
• Parking availability
• Type of finishes inside the unit (flooring, cabinets, closets, countertops, etc.)
• Season the unit becomes available

B. Imagine that you are are listing this unit on an open market and estimate a fair market net rent.

• Consult a real estate broker assisting you with the lease-up of market rate units
• Search for comparable units on the public websites (Streeteasy, Apartments.com, Zillow, etc.)
• Be conservative in your estimate
• Make sure your estimate is based on the net monthly rent and does not take into account any tenant incentives like concessions or discounts

STEP 2. Set the affordable unit rent at 85-90% of Fair Market Estimate determined in Step 1.

• If the affordable units are priced fairly, the lease-up process through Housing Lottery runs a lot more efficiently
• The more you discount the affordable rents, the faster the units will be leased

(The third step is required for projects located in high-end neighborhoods where the market rate rents are higher than the 130% AMI rents listed in the table above)

STEP 3. Adjust the rent to the Maximum 130% AMI level (LIMITED APPLICATION)

• If the building is located in a high-income high-growth area where the market rate rents are very high, adjust the affordable rent down to the maximum allowable level.

The Housing Lottery must be administered by an approved Marketing Agent. Because of the myriad of administrative and procedural requirements of the Housing Lottery, the Intent to Market the affordable units must be filed at least 9 months prior to completion of construction.

MGNY Consulting is an approved Marketing Agent and Marketing Monitor. We have been serving the NYC developer community since 2008 and assist our clients in tax exemption matters and affordable housing lease-up.

See our Step-by-Step Guide to new 421-a here

Get our updates first on Google. Deadlines move: ICAP applications now run to March 1, 2029, and this year’s surcharge exemption deadline moved twice before landing on October 6. Tap the button and Google adds MGNY Consulting to your preferred sources, so our coverage surfaces first in your results. No signup and no email, and one tap undoes it.

Updated September 2026: how the lottery that markets these units actually runs, from Housing Connect to lease-up, is in the NYC housing lottery, how it works.

The zoning program that requires many of these units in the first place is explained in what mandatory inclusionary housing is.

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