IMPORTANT UPDATE: The applications are now being accepted for the New 421-a program (“Affordable New York Housing Program” or “The New Program”).
See details about the New Program in our step-by-step guide.
The New Program was implemented by HPD in October 2017 to replace the expired 421-a program. The provisions of the New Program create several affordability options. To qualify for the tax benefit, developers of all rental projects, regardless of location, must build, market and maintain affordable units.
These affordable units must be properly allocated within the building(s), marketed in accordance with the City rules and procedures, and maintained throughout the length of the exemption.
The condo projects containing no more than 35 dwelling units and developed outside Manhattan may also qualify. In order to be eligible, the average assessed value for all residential units cannot exceed $65,000 immediately after completion of construction. In addition, each buyer must agree in writing to maintain their respective unit as primary residence for no less than 5 years.
See more details about the New Program in our step-by-step guide.
Old 421-a: Still an Option for Some Developers!
The previous 421-a program (421-a(1-15)) is a partial exemption for the new construction of Class A multiple dwellings. The benefits are available for projects that commenced work on the foundation prior to December 31, 2015.
The rules are extremely intricate and require in-depth knowledge and strategic analysis during the planning stages of project development. For example, projects within a “Geographical Exclusion Area” (GEA), are only eligible to receive benefits if affordable housing units are created and maintained, or if the project is constructed with substantial government assistance. MGNY encourages developers of residential buildings to contact us at the acquisition stage in order to determine project eligibility and potential 421-a tax savings.
Developers often refer to 421-a tax benefits as “421-a tax abatement.” Technically, the term abatement primarily refers to fixed or variable amounts of tax discounts applied to the taxpayer’s final bill. Tax exemption, on the other hand, allows for certain portion of the assessed value to be exempt from taxation. Although they both reduce the final tax bill, the calculation and implementation of exemptions and abatements are very different.
The old 421-a application may be filed upon commencement of construction and must be filed before the completion of the project. The preliminary Certificate of Eligibility is issued by HPD upon review and approval of the developer’s application. The benefits are then implemented by the NYC Department of Finance.