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April 29, 2024

The new 485-x Tax Benefits Incentives Program Affordable Neighborhoods for New Yorkers

Overview


In the annual Budget Bill of April 20, 2024, New York State unveiled the "485-x" program. The RPTL § 485-x adopted the Affordable Neighborhoods for New Yorkers Tax Incentive program ("ANNY Program Benefits") to provide a real property tax exemption for the new residential construction and to foster affordable housing development in New York City.


The new tax incentive program replaces the previous 421-a(16) program. While the 485-x program shares many similarities with its predecessor, it introduces stricter income allowances and incorporates construction wage requirements that vary based on the project size.


In addition, the affordability criteria for the 485-x program are determined by a weighted average ranging from 60% to 80% of the Area Median Income (AMI), depending on the scale of the project.


Benefits


  • The program significantly reduces real estate taxes for a period of 10 to 40 years depending on the Affordability Option
  • 100% construction exemption
  • Some options are subject to mini tax which is calculated by using the assessed value frozen at the year prior to the commencement of construction
  • Market units are exempt from rent stabilization under the 485-x program, unlike the 421-a program, where a market unit falling below the Market Rate Threshold ($3,040.09 as of 4.29.2024) during the initial lease-up period was subject to stabilization.

Eligibility


  • Construction commencement & completion
  • The eligible projects must commence on or after June 16, 2022, and no later than June 15, 2034. Projects must be completed by June 15, 2038.
  • Projects that initiated construction before June 15, 2022, are ineligible to participate in the 485-x program, unlike the previous 421-a program, which allowed later opt-ins.
  • Some affordability options have location requirements
  • Minimum 6 dwelling units
  • At least 51% new structure added
  • Must provide 1 affordable unit per each dwelling unit that was on the land three (3) years prior to construction commencement date 

Requirements


  • Affordability Requirements
  • • Different affordability options are provided for different projects depending on the number of the units and location of the property.
  • • Affordable rental units permanently subject to rent stabilization, unlike the 421a restriction listed only for the duration of the benefit

  • Preliminary Filing
  • • Eligible sites are required to submit a preliminary notification to HPD. For projects commencing between June 15, 2022, and April 19, 2024, the notification must be filed within six months after April 19, 2024, or six months after the form becomes available, whichever is later.
  • • For projects commencing after April 19, 2024, the notification must be filed within six months after the project's commencement date or six months after the form becomes available, whichever is later.


  • MWBE 25% Participation Goal Requirement

  • • Applicant demonstrate all reasonable efforts throughout the design and construction phases to allocate at least 25% of the total applicable costs to Minority and Women-Owned Business Enterprises (MWBE). This requirement was not part of the 421a program.

  • Prevailing Wage for Building Service Employees
  • • Properties with 30+ units are subject to prevailing wage 

  • Construction Workers Wage Requirements
  • • Projects with 100+ units are subject to prevailing wage and must comply with labor law sections 220 and 220 B. They are required to pay a minimum hourly wage of $ 40, with an annual increase of 2.5% starting on July 1, 2025
  • • Projects with 150+ units located in Zone A are subject to prevailing wage and must pay workers the lesser of $72.45 per hour (increasing by 2 .5% annually starting July 1, 2025 ) or 65 % of the prevailing  wage
  • • Projects with 150+ units located in Zone B are subject to prevailing wage and must pay workers the lesser of $63 per hour (increasing by 2 .5% annually starting July 1, 2025 ) or 60 % of the prevailing  wage

  • Notification and Records Compliance for Prevailing Wage
  • • Applicants are required to notify both the NYC Comptroller’s Office and HPD 90 days before construction begins if the project is subject to construction wage requirements. Failure to notify can lead to penalties of up to $5,000 per day and forfeiture of the exemption if construction commences before the required notice.
  • • The owner must maintain payroll records according to Labor Law for six years. The General Contractor (GC) can manage payroll records; however, both the GC and the owner will be held liable.


485-x Zones

Zone A

  • Manhattan - south of 96 Street
  • Greenpoint
  • Williamsburg
  • South Williamsburg
  • East Williamsburg
  • Long Island City

Zone B

  • Brooklyn Heights 
  • Downtown Brooklyn 
  • Fort Greene 
  • Clinton Hill 
  • Carroll Gardens 
  • Park Slope 
  • Prospect Heights 
  • Queens bridge

Options