NY Renews Affordable Housing Tax Program; Other Housing Provisions
April 23, 2024
Last week, New York Governor Kathy Hochul (D) announced an agreement with the NY legislature on the FY 2025 budget, which will include a new tax incentive for affordable housing and extend the 421a tax credit for existing projects. The law also will introduce new tenant protections. The legislature passed Hochul’s agreement over the weekend.
Why it matters: The 421a program, which provided tax exemptions for NYC multifamily construction projects with 30% of affordable units, expired in June 2022 amid criticism the program benefited developers and wealthy individuals.
- Rent Caps: The bill also included a watered-down version of “good cause eviction”, which can effectively limit rent increases. The legislation allows renters to challenge an eviction due to annual rent increases over 10% or 5% plus inflation (whichever is lower).
- Limited Scope: The good cause eviction automatically applies in NYC while other communities can opt in. The protections are limited to buildings constructed before 2009 and renters under a 245% area median income metric for affordability.
- Office Conversions: The law will allow NYC to rezone buildings and teak the residential floor area ratio (FAR) above 12 times the lot size, though the changes come with limitations and some affordability requirements.
The big picture: Click here for a New York Times story on the recent history of the tax incentive. The topline housing items touted by Hochul include:
- A landmark plan to build more housing in New York City, including establishing the new 485-x tax incentive to construct affordable housing, extending the 421-a tax incentive for six years for projects already in the pipeline, changing the outdated 12 FAR density cap, creating incentives to convert unused office space into affordable housing.
- New initiatives to spur housing creation statewide, including a new 421-p tax incentive to construct housing outside NYC, mandating that $650 million in discretionary funding goes to Pro-Housing Communities, allocating $500 million to build up to 15,000 new homes on state land, and incentives for Accessory Dwelling Units (ADUs).
- Historic protections for tenants and homeowners, including anti-price gouging measures for renters, stronger protections from evictions, new enforcement and preventative measures to protect homeowners from deed theft, and reinforcement of the law that squatters are not tenants.
- More than $600 million in capital funding to support housing statewide.
- Combating housing discrimination against Section 8 voucher recipients and affordable housing providers.
Go deeper: Hochul has been working to revive the incentive and deferred to the real estate industry, city officials, and unions on how to structure the new program, known as 485x. According to The Real Deal, the 485x program:
- Provides a 40-year exemption on taxes, up from 35 years, and requires income-restricted units remain permanently affordable;
- Includes wage requirements for 100+ unit projects; and
- Affordability requirements depending on the size of the building.
The program expires in June 2034.
Contact David McCarthy (dmccarthy@crefc.org) with questions.