Mayor de Blasio Issues Draft 421a Legislation

 

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Written by Claire Haaga Altman, Director of Affordable and Supportive Housing Development Services

May 27, 2015- Mayor Bill de Blasio submitted to lawmakers in Albany a draft of legislation that would alter the 421-a tax abatement program, which is set to expire on June 15. The bill would also impose a tax on sales of condo, co-ops and homes that are worth more than $1.7 million to raise funds for affordable housing. This proposed legislation, which affects New York City, is part of the Mayor’s ambitious goal to build or preserve 200,000 units of affordable housing in the city.

Read the full bill here. 


Part A

The preamble to the bill discusses the need for $1.9 billion additional in funds to fill a projected gap in financing the Mayor’s 200,000 unit affordable housing program. This bill is proposing to generate revenue to close this gap through a tax on transfer of high value residential real properties and is expected to generate $1.9 billion over 10 years.

The tax on transfers valued at $1.75 million but not over $5 million will be 1% of consideration or economic interest. Tax on transfers valued to more than $5 million will be $50,000 plus 1.5% of the consideration over $5 million.

All of the tax collected pursuant to this section shall be used for development and preservation of affordable housing (defined as “affordable to persons of low and moderate income”).


PART B: 421a Amendments

421a benefits generally means exemption from real property taxation pursuant to this section.

There would be three Affordability Options for any eligible site:

Affordability Options:

Option A (25% affordable units):

 Option B (30% affordable units):

 Option C (30% affordable units):

Defining “affordable housing unit:” The bill defines  “affordable housing 40% unit”  as units rented to  households with incomes not more than 40% of AMI, and so on for “60% unit,” “70% unit,” and “130% units.” The affordability restrictions apply upon initial rental and upon each subsequent rental following a vacancy adjusted at the time the household initially occupies the unit.

Other Defined Terms:

Rent Stabilization

Benefit Term:

Benefit

New eligible sites (except hotels) that comply with this law shall be exempt from all real property taxation other than assessments for local improvements. A RENTAL PROJECT THAT MEETS ALL OF THE REQUIREMENTS OF THIS LAW SHALL RECEIVE A 35 YEAR BENEFIT; A HOMEOWNERSHIP PROJECT (COOPS AND CONDOMINIUMS) SHALL NOT BE ELGIBLE FOR 421a BENEFITS.

For eligible projects, only taxes to be paid are those that were applicable during the tax year prior to the commencement date of such eligible multiple dwelling.

If the aggregate FAR of commercial, community facility and accessory use space in an eligible site (other than parking which is not located more than 23ft above the curb level) exceeds 12% of the aggregate floor area, then any 421 a benefits shall be reduced by a percentage equal to such excess.

Once an application is made for Affordability Option A, B or C,  it can’t be changed during the restriction period.

No concurrent abatements or exemptions with 421a are permitted.

No voluntary renunciation or termination of 421a benefits during restriction period unless the “agency – HPD” authorizes such in connection with a new tax exemption law.

Termination of benefits may be done by City agency if non compliance.

Other Provisions:

Rent Levels

Other Restrictions:

Revocation: Failure to comply with above shall result in revocation of any 421a benefits.

Prevailing wages: Building service employees get applicable prevailing wage for entire restriction period  except in buildings with less than 30 units or in which all of the units are affordable housing and not less than 50% are affordable to households with incomes less than 125% of AMI.

Replacing demolished units that were previously affordable:

Replacement ratio: if new building replaces old building with any dwelling unit 3 years prior to commencement date, then such new building shall contain at least 1 affordable unit for each prior unit that existed and was demolished.

Application Dates: Applications for benefits must be filed not later than 1 year after the completion date of a building.

Election:  rental project with a commencement date on or before 12/31/2015 that has not received benefits prior to the effective date of the chapter of the laws of 2015 that added this subdivision may elect to comply with this subdivision and receive 421a benefits pursuant to this subdivision.

Extended affordability period: For existing projects with 421a benefits, for a 20 year benefit property, the proposed legislation would provide an additional 15 years and 10 additional  years  for a 25 benefit period for existing projects if 80% of the units are affordable and not less than an additional 5% are affordable 130% units. Extended benefit is 50% exemption from real property taxation other than for assessments for local improvements for the extended benefit term.

Extensions of current 421 legislation: current 421a tax exemption program would continue to apply to new multiple dwellings that commence construction on or before December 31, 2015, provided that such multiple dwellings receive their first temporary or permanent certificates of occupancy covering all residential areas on or before December 31, 2019. Commencement would be defined as the date upon which excavation and construction of initial footings and foundations lawfully begins in good faith or, for an eligible conversion, the date upon which the actual construction of the conversion, alteration or improvement of the pre-existing building or structure lawfully begins in good faith. 

No benefits for 421a shall be conferred on any building in a covered project located in Greenpoint Williamsburg waterfront exclusion area unless the real property is identified in a covered project agreement and that agreement includes affordability restrictions.

Prevailing Wages: All building service employees employed by the applicant in a building whose construction commenced on or after 12/28/2007 shall receive the prevailing wage.  Not covered are buildings with less than 50 units or if 50% of the units are affordable to families with incomes less than 125% of AMI.

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