Recent Amendments to the 421-a Program (“Affordable New York Housing Program”)
In light of NYC’s amendment of its rules for the 421-a (“Affordable New York Housing Program”) property tax exemption program, effective February 6, 2021 (the “Amendments”) developers, lenders and purchasers will want to be aware of some major features of the Amendments and other practice pointers:
· Timely File 421-a Workbook With HPD: Workbooks can only be filed with HPD during a “Window” that varies according to the number of Affordable Units (not the # of total units) as follows:
· Small Projects (up to 19 Affordable Units): no earlier than nine (9) months prior to the Completion Date and no later than two (2) months after the Completion Date.
· Large Projects (20 – 99 Affordable Units): no earlier than twelve (12) months prior to the Completion Date and no later than two (2) months after the Completion Date.
· Extra-Large Projects (100 and above Affordable Units): no earlier than fifteen (15) months prior to the Completion Date and no later than two (2) months after the Completion Date.
· Give Enough Time To Market Affordable Units: Otherwise affordable units could be left vacant longer than necessary.
· HPD Will Not Permit Modifications of the Workbook After the Notice of Intent to Market is Filed with HPD: While the Amendments allow for limited post-approval changes to the Workbook until the Notice of Intent is filed (other than the Utility Allowances and the AMI limits in effect upon first Workbook submission), it is best to make sure your project’s plans are final before the Workbook is filed with HPD.
· HPD May Waive 421-a Filing Fee ($3,000 per Dwelling Unit) for 100% Affordable Rental Projects Constructed with Substantial Governmental Assistance.
· Area Median Income (“AMI”) and Utility Allowances Can Change Annually: Given the Covid-19 State of Emergency and market conditions, we are waiting to see whether the 2021 AMI will be lower than the 2020 AMI (which could result in lower rents permitted under 421-a for Affordable Units). You may want to file your project’s Workbook before the 2021 AMI #s are issued and integrated into HPD’s Workbook (which typically occurs in late March or early April of each year).
· Affordable Unit Rent Cannot Exceed Rent of Comparable Market Unit.
· Affordable Units Not Leased Through Marketing Process May Be Subject, at HPD’s Discretion, to HPD Referrals of Homeless Applicants with CityFHEPS Vouchers. If these referrals are not of interest to you, we recommend that your Affordable Unit rents be sufficiently lower than comparable Market Unit rents as to encourage applications by enough income eligible applicants.
· 421-a Unit Mix Requirements Must Be Met: Either through the “Proportionality Test” or the “Two Bedroom Test”.
· 421-a Distribution Requirements Have Been Tightened: Affordable Units must not: a. exceed 70% of the units on a particular story; b. have a separate entrance / exit from Market Units; c. be unable to access Common Areas to which Market Units have access for no charge; d. be excluded from any Building Segment in an Eligible Multiple Dwelling or have a disproportional proportion to Market Units in any such Building Segment; and e. be segregated from Market Units.
· 421-a Commencement Date Deadline is June 15, 2022 and 421-a Completion Date Deadline is June 15, 2026: If you have a project or potential project which you are looking to qualify for 421-a benefits; if you are looking for an attorney opinion letter regarding a project’s eligibility for 421-a benefits; or if you are a potential purchaser or lender who is looking to diligence whether a project may qualify for 421-a benefits, please feel free to contact Daniel M. Bernstein at [email protected] for further information.