The New York State 485x Tax Incentive
Affordable housing is a topic that occupies the minds of many - not only across New York State, but across the United States of America. Responding to the needs of its citizens, in 1971, New York lawmakers enacted the 421a tax abatement program into law. This legislation, in brief, incentivized builders and developers with tax breaks for up to 35 years based on the affordability of new units in rental buildings and the percentage of such units within each specific building.
After the program expired in 2022, applications via permit for multifamily housing construction dropped dramatically - 78 percent - according to the Real Estate Board of New York. To make matters worse, this took place in the midst of great housing shortages across New York City.
This development, as part of a seemingly ever-evolving crisis and in the face of great outcry by struggling New York families, led New York Governor Kathy Hochul to introduce the Affordable Neighborhoods for New Yorkers 485x tax incentive into her 2024 budget. This program, expanding upon the framework of the expired 421a plan, aims to provide a tiered system of tax breaks and other benefits for developers who set aside certain amounts of affordable units in newly built buildings. Additionally, the legislation includes wage benefits for construction workers who work on such projects, in accordance with the wishes of unions including the New York City District Council of Carpenters.
Some of the terms of this complex new program include:
Extended tax exemptions of up to 40 years for developers to make long-term investments in affordable housing, instead of the old 35 year term.
Stricter affordability requirements - lowering the upper limit income qualifying for affordable housing from 120 percent to between 60 and 80 percent of area median income.
A permanent affordability requirement - mandating the units remain affordable permanently.
Increased wage requirements which mandate minimum wages for construction workers working on hefty projects (i.e. construction workers building structures with over 100 units must make at least $40/hour, with yearly increases adjusting for inflation). The requirements for such wages vary based on location and building size.
For more detailed information regarding the governor’s housing initiatives, see here.
Governor Hochul’s plan did not come without backlash, and there are certainly those who feel that she should have gone farther in her reforms. However, many feel that the new legislation was a good start in addressing the housing crisis that is hitting the pockets of tenants, landlords, developers, and construction workers, alike.
As ever-changing housing requirements and regulations are enacted, our team of experienced professionals here at the Law Office of Marc Scolnick, PC is ready to provide you with the support you need to navigate the complexities of this new law. Call us today at (718) 554-6445 to schedule a FREE consultation so we can assist you in your legal matters.
Sources:
https://therealdeal.com/new-york/2024/04/24/developers-weigh-in-on-new-yorks-485x-tax-break/
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