421A NYC Real Estate Tax Incentive Program

Tax incentives and abatements are among the driving forces that keep the New York City real estate market growing even after down years. Abatements work by not increasing the assessed value of a home after renovations are complete. Exemptions work by providing tax credits to defray increased property taxes after renovations are complete. If you are gearing up to renovate your home or building, are working on a new development project, or live in a rental apartment that has taken advantage of the exemption, you should know about the city’s 421a (and 421b – now expired) tax incentive programs.

421a

421a, also known as “Affordable NY,” is a temporary tax exemption program started in 1971 to encourage development throughout the 5 boroughs. Under the program, new construction on vacant or underutilized land receives a tax exemption on the value added to the site when a development goes up. The program was renewed in 2016 under new terms by Governor Cuomo (better wages for construction workers) and Mayor de Blasio (additional affordable housing requirements). Under the previous version of the program, approximately 3,570 units were built every year from 1971 to 2016. Because of higher costs associated with construction and because the new program only allows developers to apply for the program once their projects are nearly complete, the revised version of the program is expected to create 2,500 units annually. Projects currently utilizing 421a must begin construction by June 15, 2022 and be completed on or before June 15, 2026. The program is set to expire or be renewed in 2022. Applications for 421a are found here. Since savings are meant to be passed along to tenants,  find out whether your rental home is receiving the exemption by searching for your address here.

There are 6 options for taking advantage of 421a. All income requirements for affordable housing units are based on a percentage of area median income (AMI):

Option A: For rental housing developers

Project size: Between 7-299 units
Location: Anywhere in NYC
Tax exemption: 25 years plus 10 year tax phase-in period
Percentage of affordable units required: 25%
Breakdown of affordable units:

  • 10%: families of four with a combined income of $36,240
  • 10%: families of four with a combined income of $54,360
  • 5%: families of four with a combined income of $117,780

Other programs project can take advantage of:

    • 4% low income housing tax credits
    • Tax-exempt bonds

Option B: For rental housing developers

Project size: Between 7-299 units
Location: Anywhere in NYC
Tax exemption: 25 years plus 10 year tax phase-in period
Percentage of affordable units required: 30%
Breakdown of affordable units:

  • 10%: families of four with a combined income of $63,420
  • 20%: families of four with a combined income of $117,780

Other programs project can take advantage of:

  • Any subsidies the city offers

Option C: For rental housing developers

Project size: Between 7-299 units
Location: Anywhere in NYC except beneath 96th Street in Manhattan
Tax exemption: 25 years plus 10 year tax phase-in period
Percentage of affordable units required: 30%
Breakdown of affordable units:

  • 30%: families of four with a combined income of $117,780

Other programs project can take advantage of:

  • None

Option D: For condo developers

Project size: Between 7-34 units
Location: Anywhere in NYC except beneath 96th Street in Manhattan
Tax exemption: 14 years plus 6 year tax phase-in period, as long as buyers who purchase during the tax exemption period agree in writing to live in the unit as their primary residence for at least the first 5 years of home ownership
Initial Assessment Value: Up to $65,000 per unit


Option E: For rental housing developers

Project size: 300 or more units
Location: Manhattan south of 96th Street, parts of Brooklyn’s Community Districts 1 & 2, Queens Community Districts 1 & 2 ; projects outside of these areas can qualify for the program as long as they have 300 or more units and comply with the wage guidelines
Tax exemption: 35 years as long as construction workers receive at least $60/hour in Manhattan and $45/hour in Brooklyn and Queens
Percentage of affordable units required: 25%
Breakdown of affordable units:

  • 10%: families of four with a combined income of $36,240
  • 10%: families of four with a combined income of $54,360
  • 5%: families of four with a combined income of $108,720

Other programs project can take advantage of:

  • Tax-exempt bonds
  • 4% low income housing tax credits

Option F: For rental housing developers

Project size: 300 or more units
Location: Manhattan south of 96th Street, parts of Brooklyn’s Community Districts 1 & 2, Queens Community Districts 1 & 2 ; projects outside of these areas can qualify for the program as long as they have 300 or more units and comply with the wage guidelines
Tax exemption: 35 years as long as construction workers receive at least $60/hour in Manhattan and $45/hour in Brooklyn and Queens
Percentage of affordable units required: 30%
Breakdown of affordable units:

  • 10%: families of four with a combined income of $63,420
  • 20%: families of four with a combined income of $117,780

Other programs project can take advantage of:

  • Any subsidies the city offers

Option G: For rental housing developers

Project size: 300 or more units
Location: Parts of Brooklyn’s Community Districts 1 & 2, Queens Community Districts 1 & 2 ; projects outside of these areas (with the exception of Manhattan below 96th Street) can qualify for the program as long as they have 300 or more units and comply with the wage guidelines
Tax exemption: 35 years as long as construction workers receive at least $45/hour in Brooklyn and Queens and $60/hour in Manhattan
Percentage of affordable units required: 30%
Breakdown of affordable units:

  • 30%: families of four with a combined income of $117,780

Other programs project can take advantage of:

  • None

 

421b (many homes still benefit from this program but applications are no longer accepted as of 2011)

421b was a ten year partial tax exemption program for newly constructed or renovated 1-2 family homes. In order to qualify for the program, renovated homes had to undergo improvements that increased the assessed value of the home by at least 40%. The program provided up to 2 years of exemption during construction, 2 years at 100% exemption afterwards, and then 6 years during which the exemption phases out. The home must have been entirely residential as well as owner-occupied.

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