New York City has introduced proposed rules for two new property tax break programs, 485x and 467m, designed to stimulate multifamily housing development and office-to-residential conversions. These tax incentives aim to tackle the city’s housing crisis by promoting the construction of affordable units and utilizing underused office spaces.
485x Tax Program Highlights
- Replaces the expired 421a program, which previously incentivized affordable housing.
- Requires developers to allocate at least 25% of project costs to minority- and women-owned businesses (MWBEs) during the design and construction phases.
- Lower income thresholds for affordable units—targeting households earning 77% of Area Median Income (AMI), down from 80%, to make housing more accessible.
- Uncertainty surrounds how developers can demonstrate "reasonable effort" to meet MWBE requirements, especially for projects initiated after 421a expired but before 485x was introduced.
467m Tax Program Highlights
- Focuses on office-to-residential conversions to repurpose vacant office spaces into housing units.
- Developers will need to comply with new affordability guidelines but await final rules before proceeding with applications.
Concerns for Developers
- Penalties for non-compliance: There’s anxiety over potential penalties, which could be as high as 1,000% of the tax benefits, though details on enforcement are still lacking.
- Affordability standards: While a small adjustment from 80% to 77% AMI may not seem significant, it could still impact developers' financial models.
- Wage requirements: Developers are waiting for clarification from the city comptroller on wage mandates for workers on qualifying projects.
These programs are a response to New York’s ongoing housing crisis, but developers must navigate through regulatory complexities and compliance risks to take advantage of the incentives.
Disclaimer: This content is meant for informational purposes only and is not intended to be construed as financial, tax, legal, or insurance advice.
