The 485x program, which replaces the expired 421a program, was introduced as part of New York State’s 2024 annual budget bill and is designed to promote affordable housing development in New York City. This tax incentive program incorporates affordability criteria and construction wage requirements based on the size and location of a project. Below is an overview of the program’s key aspects and how it functions.
The primary goal of the 485x program, formally known as the “Affordable Neighborhoods for New Yorkers” tax incentive, is to encourage the development of affordable housing projects in New York City. The program applies to projects commenced after June 16, 2022, and before June 15, 2034, with completion required by June 15, 2038 and grants tax benefits for 10, 20, 35 or 40 years following completion of construction.
The program offers several tiers of tax benefits based on the size and location of a project. For Very Large Rental projects with over 149 units located in Zones A or B, benefits extend up to 40 years, with a complete exemption for the first 35 years. Large Rental Projects with 100-149 units, or 150+ units located outside of Zones A or B, as well as modest rental projects with 6–99 units, receive similar benefits but for shorter durations of 35 years respectively.
Click here to view a clear diagram of various levels of benefits for each of the available options.
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Click here to view a clear diagram presenting the various affordability options available.
The program does not impose rent stabilization on market units.
Certain construction wages for projects exceeding 99 units are mandatory. The wage standards are defined based on the size of the project and its location.
The program requires building service employees in developments with over 30 units to be paid the 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 90% AMI.
The program requires a developer to, over the course of the design and construction, make all reasonable efforts to spend on contracts with Minority and Women Owned Business Enterprises (M/WBE firms) for at least 25% of the total applicable costs.
To participate in the program, eligible sites must file a preliminary notification – “Registration Notice” with the New York City Department of Housing Preservation and Development (HPD). For projects that commenced construction between June 15, 2022 and June 15, 2024, the notification must be by December 15, 2024. Projects commencing after June 14, 2024, must file within six months of their Commencement Date. Failure to register a project timely, may result in significant penalty fees.
Moreover, participants are required to notify the NYC Comptroller’s Office and HPD 90 days before construction begins if their project is subject to the construction wage requirements. Failure to notify may result in penalties of up to $5,000 per day and forfeiture of the exemption if construction starts without the required notice.
The program fee is a tiered structure based on the size of the project. For example, sites with over 100 residential units must pay $5,000 per dwelling unit, while smaller projects incur lower fees.
The 421-a tax abatement program provides a structured pathway for developers to achieve property tax relief while contributing to New York City’s affordable housing stock. By balancing incentives with compliance requirements, including affordability allocations and wage standards, the program serves as a critical tool for sustainable housing development in NYC. For developers, understanding and meeting the program’s detailed criteria can unlock valuable tax benefits, making projects both viable and beneficial to the city’s housing goals.