421-a tax exemption benefits and application process

The 421-a tax exemption can be a game-changer for New York City developers and property owners, offering significant savings on property taxes.

To be eligible, projects must meet specific requirements, such as providing a certain percentage of affordable housing units.

The tax exemption is typically awarded for a period of 10 to 25 years, depending on the project's compliance with affordable housing regulations.

Developers must submit a detailed application, including financial projections and a plan for managing the affordable housing units.

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To be eligible for the 421-a tax exemption, a building must start construction after January 1, 2016, and before June 15, 2022, and complete construction by June 15, 2026.

Buildings that began construction before January 1, 2016, can also participate, but they must not have received benefits under the prior 421-a law. This gives them the option to opt-in to the new program.

In addition, if a site already had dwelling units three years before construction started, the new building must include at least one affordable unit for each existing unit.

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To be eligible for the new 421-a Program, buildings must start construction after January 1, 2016, and before June 15, 2022, and complete construction prior to June 15, 2026.

Buildings that started construction before January 1, 2016, but haven't received benefits under the prior 421-a law can also opt in. This is a great option for those who are just now looking to take advantage of the program.

A key change to the program is the elimination of the requirement that a site must have been underutilized three years prior to the start of construction. This makes it easier for developers to qualify.

However, if a site did contain dwelling units three years before construction began, the new building must have at least one affordable unit for each dwelling unit that existed on that date. This ensures that existing units are accounted for in the new development.

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In order to meet the affordability requirements, the affordable units must either have the same proportional unit mix as the market-rate units. This means that the affordable units must mirror the same balance of studio, one-bedroom, two-bedroom, and three-bedroom units as the market-rate units.

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At least 50 percent of the affordable units must be two bedrooms or larger, which can be a big plus for families or roommates. No more than 25 percent of the affordable units can be studios, which is a significant limitation.

All rental units in a building must share a common entrance with other rental units, which can make the building feel more like a community. This is a requirement to ensure that all units are accessible and equally valued.

No more than 70 percent of the units on a floor can be affordable units, which means that at least 30 percent must be market-rate units. This helps to maintain a balance and diversity within the building.

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To apply for the 421-a tax exemption, you must first submit an application to the Department of Housing Preservation and Development (HPD).

You'll need to get approved by HPD, and if you are, you'll receive a Certificate of Eligibility.

This certificate is crucial, as you'll need to submit it along with the Department of Finance's 421a application.

There are eleven types of 421a exemption benefits, each with varying durations.

To keep your exemption, the NYC Department of Housing Preservation and Development must annually certify your eligibility.

This certification can be done by HPD itself, or by a licensed architect or engineer, if HPD chooses to rely on their certification.

The certificate of eligibility must be annually filed with the assessor.

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The 421-a tax exemption program has specific rules for properties and development. Properties with a 421a exemption can be found in a report that lists them by borough, block, and lot number.

Developers can download this report in Adobe PDF or MS Excel format. The report is available for Manhattan, the Bronx, Brooklyn, Queens, and Staten Island.

To be eligible for the 421-a program, developers must set aside 20% of a project's units for low-to moderate-income tenants. This applies to buildings with 300 rental units or more in certain areas, including Manhattan south of 96th Street and Brooklyn and Queens Community Boards 1 and 2.

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Developers in Manhattan must pay an average hourly rate of $60 (including wages and benefits) for construction workers, while those in Brooklyn and Queens must pay an average of $45.00 per hour.

The 421-a program requires developers to hire independent monitors to audit certified payrolls. This certification must be delivered to the NYC Housing Preservation and Development Department within 120 days of the final Certificate of Occupancy.

Developers may choose to enter into project Labor Agreements, which would allow them to opt out of the 421-a wage requirement in its entirety. However, they would still be eligible to participate in other aspects of the program.

Here is a breakdown of the available reports for properties with a 421a exemption:

The 421-a tax exemption program offers several benefits to developers and construction workers.

Developers can receive a 100 percent tax exemption benefit for 35 years for newly created units with income limitations.

The program also calls for a standard wage for construction workers, with an average hourly rate of $60 in Manhattan and $45 in Brooklyn and Queens.

Developers are required to set aside 20% of a project's units for low-to moderate-income tenants, and must hire independent monitors to audit certified payrolls.

Eligible buildings in Manhattan must pay on average an hourly rate of $60 (includes wages and benefits) for construction workers, while those in Brooklyn and Queens must pay $45.

The NYC tax exemption extension is a big deal for developers and construction workers alike. In 2016, the Real Estate Board of New York and The Building and Construction Trades Council of Greater New York reached an agreement to extend the lapsed 421-a tax exemption program.

The program requires developers to set aside 20% of a project's units for low-to-moderate-income tenants. This is a win for affordable housing in NYC. Developers can receive a tax break for setting aside apartments for affordable housing, but they must agree to pay a standard wage for construction workers.

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The standard wage for construction workers in Manhattan south of 96th Street and in Brooklyn and Queens Community Boards 1 and 2 within one mile of the nearest waterfront bulkhead is $60 per hour, including wages and benefits. In Brooklyn and Queens, the average hourly rate would be $45.00. This is a significant increase from the previous wage requirement.

Developers can choose to enter into a project Labor Agreement, which would allow them to opt out of the 421-a wage requirement in its entirety. However, they would still be eligible to participate in other portions of the program.

The NYC tax exemption extension also includes provisions for independent monitors to audit certified payrolls. Developers must hire these monitors to ensure compliance with the program's wage requirements. The certification will be delivered to the NYC Housing Preservation and Development Department within 120 days of the receipt of the final Certificate of Occupancy.

Here's a breakdown of the tax exemption periods for different types of exemptions:

When you're eligible for tax exemption, you'll enjoy a range of benefits. Buildings subject to the average hourly wage requirement receive an enhanced exemption – 35 years with a 100 percent exemption plus a 100 percent exemption for the construction period (limited to three years). This means you won't have to pay taxes on the property for a long time.

The mini-tax and the 12 percent limitation apply to these buildings, so be aware of those restrictions. You'll still get a significant exemption, which can save you a lot of money in the long run.

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The project timeline for a 421-a tax exemption is quite complex, but I'll break it down for you. The exemption is typically granted for a period of 10 to 20 years.

The first step in the process is to file an application with the New York City Department of Housing Preservation and Development (HPD). This application must be submitted within 6 months of the project's commencement.

The HPD will review the application and issue a determination within 6 months, after which the developer can begin construction.

Multi-Phase Projects can be complex, but the good news is that they're eligible for benefits under the new 421-a Program if the entire project meets the affordability requirements.

Projects that involve multiple buildings or phases can be a bit tricky to navigate, but the key is to focus on the overall project rather than individual buildings or phases.

Sites containing more than one building or being constructed in multiple phases are eligible for benefits under the new 421-a Program provided that the project as a whole meets the affordability requirements.

The affordability requirements are a crucial factor to consider when planning a multi-phase project, so be sure to review the program's guidelines carefully to ensure your project meets the necessary standards.

In order to qualify, the project as a whole must meet the affordability requirements, not just individual buildings or phases.

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Construction must have begun after January 1, 1975 and before June 15, 2015.

Construction that began before January 1, 1978 is eligible for exemption, provided it was completed by the date fixed by the NYC Department of Housing Preservation and Development, which may be no later than four years after the start of construction.

Construction is considered as begun when excavation or alteration has begun in good faith on the basis of approved construction plans.

Construction must have begun after July 1, 1992 but before June 15, 2015.