Part GG of the New York State Budget, known as the Affordable Housing Retention Act (“AHRA”), enables condominium conversions in NYC for certain affordable housing developments. Condo conversions create opportunities for owners of rental buildings to both sell units and take equity out of their properties, while positioning such properties to ensure permanent affordability and other protections for income-restricted units.
Occupied building condominium conversions have been virtually impossible since New York State’s Housing Stability and Tenant Protection Act of 2019 (“HSTPA”) increased the percentage of units which must be sold to tenants in occupancy from 15% to 51% in order to have an effective offering plan. AHRA lowers the threshold to require that as few as 15% of units (in the building, group of buildings or development) be sold to tenants or bona fide purchasers in order to have an effective offering plan. AHRA creates pathways for condo conversions for five types of Eligible Properties, if the sponsor also complies with requirements to impose permanent affordability for income-restricted units and to give tenants protections such as rent stabilization, eviction safeguards, and purchase opportunities. The sponsor must prepare a Preservation plan or offering statement (attaching a regulatory agreement entered into with a relevant housing finance agency for the income restricted units), that is submitted to the New York State Attorney General’s Office, and as detailed below.
Introduction of General Business Law Section 352-eeeee
AHRA enacts a new Section 352-eeeee to the New York General Business Law, and Section 339-mm of the Real Property Law to create a legal framework for the conversion of certain mixed-income rental buildings in NYC to condominium ownership. Under AHRA market-rate units can be converted to for-sale condominium units in exchange for making existing income-restricted units permanently affordable pursuant to a Preservation Plan.
What is an Eligible Project under AHRA?
- Age and Size: The project must have been built after 1996 and contain at least 100 dwelling units.
- Type of Ownership: No Mitchell-Lama, Redevelopment Company, Limited Profit Company property or certain other Private Housing Finance Law properties may qualify under AHRA.
- Affordable Housing Status: A project must contain income-restricted rental units that are either at risk of expiring affordability restrictions or which are subject to permanent affordability but which require additional financial support to remain viable.
- Government Assistance: A project must have received substantial governmental assistance through: (i) NYS Real Property Tax Law Section 421-a; (ii) low-income housing tax credits; (iii) tax exempt bond financing; (iv) NYC inclusionary housing program; or (v) moderate income units required for bond financing.
- No Condominium Prohibition: A project must not be subject to an existing regulatory agreement or law that prohibits conversion to condominium ownership.
- Additional Affordable Units: In some instances, a project must increase the number of income-restricted units or to ensure that at least 20% to 30% of units remain income-restricted in perpetuity.
What Types of Income-Restricted Rental Units Can Qualify?
You will want your Rosenberg & Estis, P.C. attorney to analyze whether your property and its units can qualify as an Eligible Project, but generally, inclusionary housing units under New York City zoning regulations, low income units as defined in various sections of the Internal Revenue Code which are also subject to a regulatory agreement, and units which previously qualified as low income units that continue to operate as such.
What Does A Preservation Plan Involve?
To accomplish a condominium conversion under AHRA the owner must submit a Preservation Plan to the NYS Attorney General which must include the following disclosures:
- Regulatory Agreement: Proof of a Regulatory Agreement with a housing finance agency, ensuring an extended affordability term (in perpetuity) for income-restricted units, which has been agreed to and will go into effect when the condominium conversion is effective.
- List of Income-Restricted Units: A list of all of the proposed income-restricted rental units.
- Qualified Owner: Identity of the Qualified Owner (the nonprofit or community land trust) which will take title to the income-restricted rental units within 365 days of the preservation plan’s consummation. The Qualified Owner’s role is to own and operate affordable housing for low-income households.
- Financial Disclosures: Operating expenses, revenues, allocation of common charges, projected property taxes, rents for income-restricted units and other information.
- Financing For Income-Restricted Rental Units: Clarification of any financing and/or property tax exemptions applicable to the income restricted units.
- Condominium Structure and Governance: Condominium declaration provisions which clarify how the interests of the Qualified Owner will be represented on the condominium board.
- Amenities Access: Commitment that tenants of income-restricted units will have access to building-wide amenities for a nominal fee (not rent), the details of which are to be governed by the Regulatory Agreement.
- Protections For Income-Restricted Units: These include but are not limited to: (i) confirmation of rent stabilization for the extended affordability term (in perpetuity); (ii) disclosure of the rights of non-purchasing tenants; (iii) commitment that vacant income-restricted units will be leased to low-income households, potentially via the NYC Housing Connect platform.
Tenant Opportunity To Purchase Income-Restricted Units
AHRA provides for a tenant opportunity to purchase (“TOPA”), allowing a Qualified Owner to work with tenants of income-restricted rental units who wish to become homeowners. The TOPA option requires affordable offering prices for existing tenants and/or qualified low-income purchasers that must be lower than sales prices offered to bona fide purchasers who are not current tenants.
Reserve Funds Under A Preservation Plan (New Real Property Law Section 339-mm)
AHRA creates RPL 339-mm, which requires the creation of two critical reserve funds upon the consummation of a Preservation Plan: (i) a reserve fund managed by the condominium board of managers – funded by the Sponsor, to be used exclusively for building-wide capital repairs, replacements, and, improvements. The amount required is approximately 3% of the total sales price of all units, modeled after Local Law 70 – the New York City Reserve Fund Law; and (ii) a dedicated capital fund managed by the Qualified Owner equal to approximately 0.5% of the total sales price of all units, which fund is overseen by the local housing finance agency and cannot be used for building-wide replacements.
NYS AG Filing Fees For Filing & Amending Preservation Plans
These include:
- Initial Filing Fee: $750 for offerings not exceeding $250,000; for larger offerings 0.4% of the total offering amount, not to exceed $60,000 (half due upon submission and half upon acceptance).
- Amendment Fees: $750 for each amendment including price change amendments.
- Preliminary Applications: $750 for each application to solicit public interest prior to filing a preservation plan and $750 for each amendment thereto.
- Exemptions: The AHRA fee structure replaces standard filing fees under Section 352-e for Preservation Plans. Nonprofit developers may be exempt from certain fees.
What’s Next?
Within 365 days of the AHRA’s effective date (November 5, 2025) the AG must propose rules necessary to implement AHRA. Rule introduction may occur sooner than 365 days after the effective date.
Is Your Mixed-Income Property An Eligible Project Under AHRA? Could A Condominium Conversion Plan Be An Option?
For detailed analysis of your property’s potential ability to utilize the AHRA, please contact your R&E attorney or Daniel M. Bernstein, Lisa S. Lim or David Z. Goldfischer.