NYC Implements 485-x Housing Tax Break, 421-a Extension
Developers can move ahead with approved developments under 421-a or reapply for 485-x.
When the New York State Legislature enacted the state’s 2024–2025 budget in April, along with good cause eviction protections for market-rate tenants and updates to individual apartment improvements rules for rent-stabilized apartments, lawmakers replaced the lapsed multifamily tax break known as “421-a.” To incentivize the creation of additional housing supply statewide and particularly in New York City, the lawmakers created 485-x, or “Affordable Neighborhoods for New Yorkers.”
Almost two years after the expiration of 421-a(16), a tax exemption for new multifamily construction that state legislators in Albany allowed to expire in 2022, the state budget legislation extends, to June 2031, the construction deadline for projects that were eligible to receive tax benefits under 421-a(16) but which are not on track to reach completion before the original 421-a(16) completion deadline. To take advantage of the extended 421-a(16) completion deadline, the project owner must first give notice to HPD.
New Program Benefits
The benefits of the new 485-x program are:
- Up to 40 years of exemptions on property taxes, an increase from 35 years under the old program; and
- A longer runway for projects, with the deadline being June 15, 2034.
To realize these benefits, developers must meet a number of complex compliance and reporting requirements. Failure to meet these requirements can result in steep penalties.
485-x Registration Information
HPD recently released registration information for the 485-x development tax break. Registration is just a preliminary step to actually applying for the tax break. The registration requires details on the project, such as where it’s located, when construction will begin, the anticipated completion date, and what affordability levels the developer will choose for the project’s affordable housing units.
All projects participating in 485-x must fill out the registration form within six months of starting construction if the start date was on or before April 20, 2024. Projects that started construction between June 15, 2022, and April 20, 2024, must register by mid-November. As for the 421-a extension, developers must submit letters of intent by Sept. 12.
The actual applications for the new 485-x tax break are not yet available. HPD says it is currently in the process of creating the application forms. Information on submitting a registration notice to apply for benefits can be found at HPD’s 485-x program page at www.nyc.gov/site/hpd/services-and-information/tax-incentives-485-x.page.
421-a Extension
Developers have the option to move forward with approved developments under 421-a with an extended construction completion deadline to 2031, or they can reapply for the new 485-x incentive program. HPD has released a form for developers to submit a letter of intent if they want to receive an extension to the construction deadline under the expired 421-a program. The state budget extended that deadline from June 2026 to 2031. HPD released the Letter of Intent form designating Sept. 12, 2024, the last day to submit an intent to participate in the 421-a(16) extension. The letter of intent to be submitted online can be found at www.nyc.gov/site/hpd/services-and-information/tax-incentives-421-a.page.