Governor Hochul Announces New Executive Action to Replace 421-a(16) Program for Gowanus Residential Projects

by | Jul 18, 2023 | Industry Updates

On July 18, 2023 NYS Governor Hochul signed an Executive Order to allow residential projects currently under construction and located in the Gowanus rezoning area to apply to participate in an equivalent program to be run by the NYS Empire State Development (“ESD”) (the “ESD Gowanus Program”). The Gowanus rezoning only became law in late 2021, and Gowanus residential projects aiming to benefit from the 421-a(16) property tax incentive had to achieve a 421-a Commencement Date on or before June 15, 2022 and will have to achieve a 421-a Completion Date on or before June 15, 2026. The new ESD Gowanus Program would involve: ESD purchasing residential sites from developers; leasing the property back to developers for a nominal fee and conveying property back to developers at end of benefit period; exempting the property (while owned by ESD) from all property taxes and charging the developers a payment-in-lieu-of-taxes aka “PILOT” equivalent to what property taxes would have been due under the 421-a(16) program.

Other ESD Gowanus Program criteria, per Gov. Hochul, include the following:

In addition to being located in the Gowanus rezoning area, proposals would need to comply with affordability, labor, and other requirements similar to those of the 421-a(16) program and meet certain eligibility criteria, including but not limited to:

  • Currently being vested in the expired 421-a(16) program;
  • Building capacity of at least 50 housing units;
  • Containing affordable housing in compliance with 421-a(16), however participation will require affordable housing units to remain permanently affordable;
  • Full entitlement under City zoning and applicable regulatory codes;
  • and Ability to comply with Empire State Development’s Minority and Women-Owned Business Enterprises contracting requirements.

This program will be presented for approval to the Empire State Development Directors later this week. Each proposal would be subject to a public review process which would include Empire State Development board and Public Authorities Control Board approvals.

In 2021, the New York City Council passed an expansive rezoning covering 82 blocks in Gowanus to build the neighborhood’s capacity to accommodate housing growth. This new program represents an important first step toward saving housing at risk following the expiration of 421-a by allowing several existing residential proposals in Gowanus that are currently vested in 421-a(16) to move forward, unlocking thousands of units of housing, including affordable housing.

Governor Hochul Announces New Executive Action on Housing Crisis to Increase Supply, Create Affordable Housing, and Promote Broader Housing Growth | Governor Kathy Hochul (

R&E will provide updates as the implementation of this policy continues to develop and we obtain greater clarity regarding the ESD Gowanus Program. If you have any questions about the ESD Gowanus Program’s applicability to your Gowanus project or possible expansion to other areas of NYC, please contact your trusted R&E attorney or Daniel M. Bernstein, Head of R&E’s Tax Incentives & Affordable Housing Department, who authored the above.