What to Know: Proposed 421-a Replacement Program (Affordable Neighborhoods for New Yorkers)

As many real estate developers are aware, the 421-a program that they have relied on for decades is set to expire in June 2022. The program went through many revisions over the years, including in April 2017 when it was renamed “Affordable New York.”

As part of the Education, Labor and Family Assistance budget bill announced in January 2022, Governor Kathy Hochul outlined a plan to incentivize the creation of more affordable housing in New York. Her proposal to replace and expand upon the 421-a program is called the Affordable Neighborhoods for New Yorkers (ANNY) program. ANNY would be the result of the creation of a new property tax code 485-w. The new program does not offer as many options as there were under the 421-a program.

ANNY would create two options for developers constructing new residential rental buildings. Under both Option A and B, all affordable units would be subject to rent stabilization permanently, even after the proposed 485-w tax break expires. The affordability restrictions for Options A and B are as follows:

Option A: (Residential rental building with 30 units or more)

• Not less than 10% @ 40% of area median income (AMI)
• Not less than 10% at 60% AMI
• Not less than 5 % @ 80% AMI
• Apartments under the program are permanently designated as affordable and must meet those affordability requirements indefinitely.

Option B: (Residential rental building with less than 30 units)

• Not less than 20% @ 90% AMI
• Affordability restrictions of units under the program are only required to be maintained for 35 years after construction is completed.

Benefits of Options A and B:

1. Up to three construction benefit years at 100% savings above preconstruction base year
2. 25-year tax exemption at 100% savings above preconstruction base year
3. Additional ten-year tax exemption at a percentage equal to the percentage of affordability (presuming non-residential square footage is less than 12%)

The proposed ANNY program offers a new incentive for development of condominium and co-op buildings. Under this option, 100% of the units must be sold to individuals or families with an income not to exceed 130% AMI. By adhering to these affordability requirements, the following benefits can be obtained (presuming non-residential square footage is less than 12%).

1. Up to three construction benefit years at 100% savings above preconstruction base year
2. 40-year tax exemption at 100 % savings above preconstruction base year