New Executive order by NYS Governor Hochul, as a replacement to the 421a(16) program for Gowanus projects.

On July 18, 2023, NYS Governor Hochul signed an Executive Order with the objective of facilitating residential projects currently under construction within the Gowanus rezoning area.

The Executive Order paves the way for these projects to apply for participation in the newly established “ESD Gowanus Program” under the administration of the New York State Empire State Development (“ESD”).

The program is in line with the former 421-a(16) program for development proposals currently vested in the expired program in the Gowanus neighborhood in Brooklyn.

Proposals would respond to a request for applications administered by Empire State Development. For eligible proposals, Empire State Development would purchase the privately owned properties for a nominal fee, lease the property back to the original owners for a long-term lease term that would parallel the 421-a(16) benefit period, and deed the property back to the original owner at the conclusion of the benefit period. In exchange, the property owner would make payments equivalent to the reduced taxes the property would have paid if it were to complete construction prior to the expired 421-a(16) program completion deadline of June 15, 2026.

Proposals would need to comply with affordability, labor, and other requirements similar to those of the 421-a(16) program and meet certain eligibility criteria, including but not limited to:

• Located in the Gowanus rezoning area;
• Currently vested in expired 421-a(16) program;
• Building capacity of at least 50 housing units;
• Contains affordable housing in compliance with 421-a(16), however participation will require affordable housing units to remain permanently affordable;
• Full entitlement under City zoning and applicable regulatory codes; and
• Ability to comply with Empire State Development’s Minority and Women-Owned Business Enterprises contracting requirements.

This program will be presented for approval to the Empire State Development Directors later this week. Each proposal would be subject to a public review process that would include Empire State Development board and Public Authorities Control Board approvals.

In 2021, the New York City Council passed an expansive rezoning covering 82 blocks in Gowanus to build the neighborhood’s capacity to accommodate housing growth. This program represents an important first step to saving housing at risk following the expiration of 421-a by allowing several existing residential proposals in Gowanus that are currently vested in 421-a(16) to move forward, unlocking thousands of units of housing, including affordable housing.

So is MIH good or bad?

Drawbacks: This program targets lower income levels, which results in lower rental income. When compared to other privately subsidized programs, this is considered deep affordability. Another drawback would be that developers need to consider that MIH will impose additional bureaucratic procedures and requirements, which can be very daunting/intimidating for laymen. This can also cause project delays, specifically when the process is not coordinated with expertise.

Benefits: The maximum floor area ratios that are otherwise allowed as bonus floor area under the Voluntary Inclusionary Housing Program, are applied to MIH developments as well. In short, the City is compensating for the very deep affordable housing requirements by giving back free floor area. Another benefit to consider is that the MIH affordable housing units may be utilized towards compliance for the affordable housing requirements set forth by the 421a(16) tax exemption program. You can get two benefits for every affordable housing unit.

So is it good or bad? You decide…

But one thing is definite…. If you are developing an MIH site, doing it right is the trick. Hiring the right professionals will surely impact if your property will look good or bad…

For more information on MIH, click here.

FYI: Popular large-scale areas that were rezoned as MIH include, East New York, Harlem and the recently rezoned Gowanus.