NYC Real Estate Tax Incentives – 421-a, 485-x and 467-m Housing Programs

The 421-a and 485-x programs are key provisions of the New York State Real Property Tax Law aimed at promoting property tax exemptions to encourage redevelopment and rehabilitation, particularly focused on low-income housing.

The 421-a program, initiated in New York City in 1971, has expired, however, the 485-x program succeeds the 421-a program, aiming to incentivize the redevelopment of underutilized or vacant properties through similar tax incentives. Applications for the 485-x program are available for registration online for projects that commenced construction after June 15, 2022, and on or before June 15, 2034. The construction completion deadline for 485-x projects is June 15, 2038.

Details on the benefits and requirements of the 485-x program are summarized below, which include potential tax exemptions for up to 40 years based on the number of low-income housing units provided. Further details of the program are outlined on the NYC Housing Preservation & Development website.

Property Tax Benefit Table

Property Type	150+ Units in Zone A or Zone B (Option A)	100+ Units Outside Zone A or Zone B (Option A)	6-99 Units Including Manhattan (Option B)	6-10 Units Outside Manhattan (Option C)	Condos - Outside Manhattan (Option D)
Construction Period Benefits	Up to 5 Years (Zone A) and Up to 3 Years (Zone B)	Up to 3 Years	Up to 3 Years	Up to 3 Years	Up to 3 Years
Property Tax Benefit	40 Years	35 Years	35 Years	10 Years	20 Years
Wage Requirements	Construction Wage Requirement	Construction Wage Requirement	No Construction Wage Requirement	No Construction Wage Requirement	Construction Wage Requirement if 100+ Units

Based on the requirements above, it can be noted that projects with up to 99 units do not have a prevailing wage requirement and can be considered one of the more popular choice for developers under the 485-x program as a result. Thus, there has been a unique surge in residential building applications with 99 units in NYC.

This new tax exemption program can significantly reduce the financial burden on property owners and developers, making it more feasible to invest in and sustain long-term redevelopment projects. However, it should be noted that the affordable units will be permanently affordable and permanently rent stabilized under 485-x.

In addition to the 485-x and 421-a programs, there is also the 467-m program which incentivizes conversions of non-residential buildings to residential use. Its key features include:

• 35-Year Benefits for projects started by June 30, 2026.
• 30-Year Benefits for projects started by June 30, 2028.
• 25-Year Benefits for projects started by June 30, 2031.
• No construction wage requirements, lowering costs.

Projects in the Manhattan Prime Development Area, which are areas south of 96th Street, receive enhanced benefits, which further incentivize conversions in high-demand areas through the 467-m program.

All in all, it remains uncertain whether these new programs will successfully succeed highly acclaimed programs like 421-a, but it represents a positive stride forward. The demand for affordable housing is expected to escalate in the future, which will only spur on the increasing importance of robust support programs that promote an increase in housing availability in New York City.

For more information on the 421-a, 485-x and 467-m programs, please consult Citrin Cooperman's Real Estate Industry Practice.