Super Lawyers magazine recently interviewed me about the possibilities of office to residential conversions in NYC. Here are some insights I shared during the interview:
- Thanks to NYS’s new 467-m “Affordable Housing from Commercial Conversions” aka AHCC property tax incentive program, OTR conversions creating rental apartments now make great economic sense. In exchange for making 25% of units affordable and satisfying other eligibility criteria, owners can lower their property tax bills by up to 90% for decades after the conversion. By contrast, an OTR rental conversion with no property tax incentive can expect to pay property taxes of around 30% of rents, a formidable number that often stops OTR conversions altogether.
- Since 467-m was enacted in April 2024 I’ve been discussing with developers and lenders plus writing about it and tracking HPD’s draft materials and rules (which are now available for public comment): https://www.rosenbergestis.com/blog/2024/04/updated-4-22-24-summary-of-the-2024-housing-laws-2/ and https://www.rosenbergestis.com/blog/2024/08/cashflow-crunch-property-taxes-during-467-m-conversions-to-residential-use/have.
- I’ve also been presenting webinars and CLE classes about 467-m and other major new and extended property tax incentive programs (the new 485-x program for new construction and the 421-a (16) program it replaced), including an upcoming CLE on November 20, 2024, at the NYC Bar Association: https://www.nycbar.org/cle-offerings/introduction-to-nyc-property-tax-incentives-for-affordable-housing/
(Pictured from L to R: Daniel M. Bernstein, Jonathan L. Mechanic, and Ross F. Moskowitz)
Key Developer Considerations of 467-m
OTR developers have been keenly focused on these and other 467-m related issues:
- Satisfying lenders about the incentive’s as-of-right nature and benefits.
- Affordability and construction requirements.
- Programming amenity spaces.
- Phased conversion issues.
- Condominium formation.
- Coordination with property tax certiorari representative.
Key Deadline: Commencement Date on or before June 30, 2026
- The longest 467-m benefit (35 years) is available for conversions which have a “Commencement Date” on or before June 30, 2026.
- HPD has stated that DOB issuance of any of the following permits will constitute the Commencement Date of a 467-m project:
- DOB NOW Job Type: ALT-CO – New Building with Existing Elements to Remain a. DOB NOW Work Type: General Construction
- DOB NOW Job Type: Alteration CO a. DOB NOW Work Type: General Construction
- DOB BIS Job Type: Alteration Type 1 a. DOB BIS Work Type: OT – General Construction
Start Planning Your 467-m Project Now
We have been assisting many developers of OTR projects plan to comply with 467-m requirements and to optimize their project. A NYC’s largest real estate only law firm, R&E is perfectly suited to assist with land use, construction contracts, condominium formation, lease preparation, tax certiorari and any other legal needs of OTR projects. For more information, please contact Daniel M. Bernstein at 212-551-1257 or your R&E attorney.