The New 421a Game

Utilize the Affordable New York Housing Program for Your Next Rental Project

The year 2017 marks the return of the vital tax incentive program under New York State Real Property Tax Law Section 421-a(16).
As of October 26, 2017, the HPD rules implementing the program have been adopted.
The new rules provide clarity and outline the procedures that will guide the next generation of residential development in New York City.

MGNY is a pioneering consulting firm in the field of real estate taxation and has obtained tax benefits for hundreds of new construction and rehabilitation projects under old 421-a, ICAP/ICIP, and other incentive programs.
Now, developers turn to MGNY for assistance in procuring tax benefits under the new Affordable New York Housing Program.

To help our clients understand the new 421-a rules, we have outlined a step-by-step approach.
Go to the Step 1 Submit Project Details

Step 1. Planning and Underwriting

A. Design and Test Your Unit Mix

Testing the assumptions under all applicable affordability options is important. HPD provides tools and calculators allowing developers to compare affordability options, select the appropriate unit mix, work through floor-by-floor allocation, and set monthly rents at appropriate levels.

B. Educate Your Lender

Lenders want certainty. However, it is not possible under the new rules to obtain a preliminary certificate of eligibility or any other confirmation from the City assuring that the project would qualify for tax benefits. In this environment of uncertainty, we recommend obtaining a letter of eligibility from an expert in the field of tax exemptions.

C. Contemplate Other Incentives

Most affordability options may be combined with other incentives granted to mixed-income developments (e.g. 4% tax credits (LIHTC), Inclusionary Housing, etc.)

D. Retain a Marketing Agent

The new program requires that the marketing of affordable apartments commences at least 7 to 9 months prior to completion date. It is crucial to prepare for the marketing process as early as possible.

Step 2. Marketing and Lottery

  • Prepare a Notice of Intent to Begin Marketing
  • Submit the Marketing Plan to HPD
  • Participate in all required HPD marketing meetings
  • Place newspaper advertisements and reach out to community contacts
  • Process requests for applications
  • Maintain proper documentation of the marketing process to demonstrate compliance with marketing guidelines
  • Conduct interviews with eligible prospects
  • Send acceptance and rejection letters
  • Send tenant information to HPD for approval
  • Provide updates on the leasing process as required

Step 3. Certificate of Eligibility Application

  • Prepare and file the necessary applications and certifications
  • Prepare and record the restrictive declarations
  • Pay the filing fee of $3,000 per apartment (Note: All apartments within the project are subject to this fee, not just the affordable ones)
  • Process requests for applications
  • Ensure the adherence to rent and income restrictions

Step 4. Compliance and Monitoring

  • Execute the correct rent-stabilized leases
  • Properly register all apartments subject to rent stabilization
  • Develop and implement a compliance plan
  • Ensure continued income eligibility
  • Retain an approved Marketing Monitor

Project Details

We understand that many of the points outlined above require further exploration.
Do not hesitate to contact us to discuss your project in detail.


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