Hochul’s FY 2027 Budget Would Extend and Reform J-51 Again: What NYC Buildings Should Know (and Watch)

On January 20, 2026, Governor Kathy Hochul released her FY 2027 Executive Budget proposal. Among the housing items is a bill that would “reauthorize and reform” J-51 by creating a new New York City rehabilitation tax abatement for certain residential buildings that complete eligible renovation work after June 30, 2026 and before June 30, 2036.

This matters because J-51 has historically been one of the main as-of-right property tax tools that building owners and co-op/condo boards look to when budgeting for major building repairs and upgrades. The current version of the program – often referred to as the J-51 Reform Program (J-51 R) – is still relatively new. This Budget proposal would increase the benefit level, extend the timeline, and expand eligibility for certain homeownership buildings.

A quick refresher: what the current J-51 Reform Program looks like

Under the City’s current J-51 Reform Program (J-51 R) enacted December 30, 2024, eligible projects must complete work after June 29, 2022 and on or before June 29, 2026. The benefit is generally an abatement of existing real property taxes spread over up to 20 years, capped in the aggregate at 70% of the project’s approved Certified Reasonable Costs (CRC), and limited to 8⅓% of CRC per year. For eligible co-ops/condos, the annual abatement is also capped at 50% of the building’s taxes in a given 12-month period.

For co-ops and condos, one of the big gating items in the current program is eligibility based on assessed value: the building must meet an “average assessed valuation” limitation of $45,000 per dwelling unit as of the commencement date.

What the Governor’s FY 2027 Budget proposal would change

Based on the proposed Budget bill (ELFA Part O), here are several changes that stand out.

1) The headline change: 70% of CRC → 100% of CRC

The proposed program would allow an abatement up to 100% of total CRC (still spread over time, and still subject to annual limits). Practically, that’s a meaningful +43% increase in the maximum benefit.

Example (simple math):
If a project has $500,000 of approved CRC, the current 70% cap is $350,000. A 100% cap would be $500,000: an increase of $150,000 (about 42.9% more than $350,000).

2) A longer planning horizon: completion window extended to 2036

The proposed program would apply to eligible preservation work with a completion date after June 30, 2026 and before June 30, 2036, and it keeps a “not more than 30 months” gap between commencement and completion.

For boards and owners, that longer runway can change behavior. A program that runs through 2036 is easier to incorporate into (i) multi-year capital planning, (ii) procurement and staged construction, and (iii) project scopes that are partly driven by energy and building-systems requirements (including LL97-related retrofits).

3) More co-ops/condos may qualify: assessed value limit rises to $60,000/unit

The proposed budget bill defines a co-op or condo “homeownership average assessed valuation limitation” as $60,000 per dwelling unit – that’s the maximum AV in the year of commencement of construction.

This is one of the most direct ways the proposal could broaden participation for co-ops and condos that were just outside the current $45,000/unit threshold.

Nevertheless, the $60,000/apartment max is not tied to inflation. A $40,000/apartment co-op today could quickly become a $65,000/apartment co-op in a few years and thus no longer eligible for J-51. This may encourage more co-ops and condos to commence their construction sooner rather than later.

4) The 20-year term and annual caps remain, including a 50% tax cap for homeownership

The proposal keeps the familiar framework: the abatement may run for up to 20 years, the annual abatement may not exceed 8⅓% of total CRC, and for eligible homeownership buildings the abatement in any 12-month period may not exceed 50% of the real property taxes payable for that period.

5) CRC schedule updates: “at least every three years”

The proposed bill defines the “Certified reasonable cost schedule” as a table of maximum unit cost limits that must be “established, and updated at least every three years, by” HPD.

That requirement is notable because CRC schedules can lag construction pricing and inflation if they are not updated regularly, which can reduce the approved CRC (and therefore reduce the benefit) even where actual project costs are higher.

6) Application fees appear to stay on the same structure

The proposed bill sets a non-refundable filing fee of $1,000 plus $75 per apartment (over six). In other words, the fee structure tracks what applicants are used to seeing under the current program, despite complaints from larger buildings that had advocated for reduced application filing fees.

7) Rentals: the 50% affordable-unit threshold remains – and the MCI waiver timing shifts

The Budget memo continues to describe eligible rental housing as buildings where at least 50% of the units are affordable (i.e, < 80% of AMI), plus Mitchell-Lama and government-subsidized categories. There is no scaling, so a building where 49% of the apartments are below on average 60% of AMI, for example, would be totally ineligible, even though it’s providing deeper affordability than a building with 51% of the apartments at 80% AMI, and may need the J-51 tax abatements just as much or more.

The proposed bill also includes a Major Capital Improvement (MCI) waiver concept for eligible rentals, but with a timing change: HPD “shall not require an owner to file such waiver until the application for rehabilitation program benefits has been approved.” For some owners, that timing may matter because it lets them evaluate the expected tax benefit before committing to waive potential rent-side benefits tied to the same work.

What’s still unknown (and what to watch)

This is a Budget proposal, and details can change in negotiations. Even if enacted, implementation details (forms, guidance, processing time, and enforcement) often drive whether as-of-right programs are used widely.

A few practical questions to watch:

• Transition timing: How the State/City will treat projects that span the June 30, 2026 line (and what documentation will be required to show commencement/completion).
• Administration: How quickly HPD will issue guidance, update the CRC schedule, and process applications.
• Economics: Whether the 50% affordable-unit and AMI thresholds for rentals will be revised (or whether future proposals introduce scaled benefits rather than an “all or nothing” cutoff).
• Co-ops/Condos: Whether the $60k/apartment max will be tied to inflation increases, or if condos could be based on the lesser of the median or average.

Practical steps for boards and owners now

If you’re considering major building work in the next few years, this is a good time to:

1. Inventory likely J-51-eligible scopes (façade, roof, windows, boilers/mechanical, elevator modernization, energy upgrades, etc.).
2. Check your assessed valuation per unit (especially for co-ops/condos that were near or above the limits: currently $45,000/unit, anticipated $60,000/unit).
3. Coordinate early with your professionals (real estate tax attorney, tax incentives & affordable housing attorney, engineer/architect, managing agent, CPA) so you can document scope, timing, and costs in the format agencies typically require.
4. Track the Budget process and be ready to adjust timelines if the proposal is enacted. The target Budget enactment date is April 1, 2026, but New York often misses that deadline and uses extenders to run late.

See our prior J-51 blog posts from the past 13 months:

• J-51 Updates for January 2026
• Happy 2nd Birthday to the State’s J-51 Enabling Law – and a Call to Extend the Program
• Final J-51 Reform Rules Adopted: What Property Owners Need to Know
• The Long Road to a Reformed J-51 Program
• New J-51 Property Tax Abatement Program

The law is complicated. Trust your valuable property tax reductions to attorneys who can help you navigate the evolving complexitites. Contact R&E attorneys Benjamin Williams, Esq. or Daniel Bernstein, Esq.

Disclaimer: This post is for general information only and is not legal or tax advice. Eligibility and benefits depend on building-specific facts and final enacted language and guidance.