Program Objective:

The primary objective of the 421-a program is to incentivize the construction of affordable housing units by offering tax abatements on new development or significant conversion projects. The program applies to projects commenced after December 31, 2015 and prior to June 15, 2022, with completion required by June 15, 2026*. The program is designed to support New York City’s housing needs by requiring a set percentage of affordable units and mandating wage standards for construction workers on large-scale projects. 

Tax Benefits and Duration:

The 421-a program grants property tax exemptions for periods of 20 years for condo projects and 35 years for rental projects. The tax incentive will freeze the assessed value to what it was one year prior to commencement of construction. A full exemption is available for the construction period and a bulk of the benefit period. In the last years of the benefit period, the incentive phases out and is based on the percentage of affordable housing units provided. 

Affordability Criteria:

• 421a offers several options to address affordability:

• 421a Options A and E: 10% of residential units allocated to 40% AMI, additional 10% of the residential units at 60% AMI, and additional 5% of the residential units at 130% AMI

• 421a Options B and F: 10% of the residential units allocated to 70% AMI and additional 20% of the residential units at 130% AMI
• 421a Options C and G: 30% of the residential units allocated to 130% AMI

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• Depending on the project size and location, and weather the property will receive governmental subsidies, certain restrictions apply to the affordability options available to the project 

• • The affordable unit mix must comply with HPD’s Test A (proportionality) or Test B, and no more than 70% of a story may be allocated to affordable housing 
  • Affordable housing units are subject to rent stabilization for the duration of the benefit period, with the stabilization extended for the duration of the affordable tenant’s occupancy.
• If dwelling units were demolished, removed or reconfigured within 3 years prior to construction, at least an equal number of affordable housing units are to be provided

Market Unit Provisions:

Market units are to be registered as rent stabilized if the rent collected during the initial occupancy is below the Luxury Decontrol Threshold (the exact amount fluctuates annually). Market units that are rented above the Luxury Decontrol Threshold are exempt from rent stabilization requirements.  

Condo Project Requirements:

Although the Rent Act of 2015 heavily focused on mixed-income rental properties, there are still options available for developers seeking to build homeownership projects. A condo project may qualify for the 421a(16) Homeownership if the following requirements are met:

• Upon the first assessment following completion, the average assessed value for all units may not exceed $65,000
• Each purchaser during the benefit period must agree in writing to maintain the unit as his or her primary residence for at least the first 5 years of ownership
• There must be executed deeds recorded for each unit within 12 months of completion
• The project may not be located in Manhattan
• The project may not contain more than 35 units

Construction Wage Requirements:

Certain construction wages are required for projects with more than 300 units that are located in an Enhanced Affordability Area. These projects receive an enhanced benefit schedule.

Prevailing Wage for Building Service Employees:

The program requires building service employees in developments with over 30 units to be paid a prevailing wage. However, certain exemptions apply for buildings with 100% affordable units where at least 50% of the units are restricted to no more than 125% AMI.

Filing fees:

The program filing fee is $3,000 for every residential unit in the project.