Get Ready for Affordable New York
By Frank Fortino
It’s official. The NYC expediting industry has its new 421a.
This past weekend, New York legislators in both the Assembly and the Senate approved “Affordable New York.” The Affordable New York legislation went into effect on Monday, April 10, when Governor Andrew Cuomo signed the 2018 state budget.
Following last week’s negotiations, the governor’s sign-off came as no surprise. The final program hadn’t changed much since he originally introduced it earlier this year.
The new legislation offers seven affordability options for developers. Tax abatements vary, depending on the percentage of affordable units within a project and their affordability, calculated as a percentage of local median income. Half of these options only apply to large developments of at least 300 units.
Key changes from 421a include the following:
- Establishes minimum wages for construction workers on participating projects—an average hourly wage of at least $60 in Manhattan and $45 in Brooklyn and Queens—which will be confirmed by independent monitors
- Extends the maximum abatement period from 25 years to 35 years for developers of multifamily projects with 300 rental units or more in an “enhanced affordability area,” which includes all of Manhattan below 96th Street and waterfront areas of Brooklyn and Queens, provided the builders pay the above-mentioned wages
To qualify for the tax break, smaller developments will have to rent 25-30% of their apartments at below-market rates. In addition, affordable units must stay rent-stabilized at specific income levels for 40 years.
While 421a was originally passed to kick-start a sluggish construction industry, we live in a completely different world today, with an explosion of new development throughout the five boroughs. Yet the need for affordable housing remains high.
Under Affordable New York, developers get the tax breaks they need to create more affordable apartments. Construction workers get above-market wages on participating projects (and developments outside the specified zones can “opt in” by paying the higher wages). And New Yorkers will get an estimated 2,500 units of affordable housing per year.
Will those benefits justify the $8.4 billion revenue loss projected by the Independent Budget Office over the next decade?