|Dear Member:The State Legislature passed an Omnibus Housing Bill last night which contains many items beneficial to our industry: a four year extension of the coop-condo abatement program, a four year extension of 421a and rent regulations, a four year extension of J-51and a two year extension of economic incentives for Lower Manhattan and the boroughs. The bill does not include a New York City Mansion Tax.
Here are the highlights to these programs.
The coop/condo abatement has been extended for four years, until June 30, 2019. There is no change in the eligibility requirements and in the amount of the benefit.
421A PARTIAL TAX EXEMPTION PROGRAM
The program has been extended to June 15, 2019.
Regarding wages for construction, the law requires that a memorandum of understanding be executed before January 16, 2016 between the largest trade association of residential real estate developers and the largest trade association representing building and construction workers with membership in New York City that includes provisions regarding wages and benefits for construction workers on buildings over 15 units that receive 421a benefits. If a memorandum of understanding has not been executed by that date, the new construction aspect of the program will be suspended and no new applications accepted.
A project seeking to vest benefits under the current program has until December 31, 2015 to meet the commencement of construction requirements. For those members who have the ability to commence construction, including those who have commenced after June 15, 2015, such projects meeting the requirements will be covered by the current law.
The new program which would take effect on January 1, 2016 would require any rental project in the city that receives 421a to provide on-site affordable housing. Here are the three options an owner may select:
Affordability Option A: 10 percent at no more than 40 percent of AMI, 10 percent at no more than 60 percent of AMI and 5 percent at no more than130 percent of AMI. Years 1-25 would have a 100 percent exemption; only the mini tax would be paid. In years 26-35 there would be a 25 percent exemption, requiring that 75 percent of the taxes plus the mini tax would be paid. Projects would be eligible to receive tax exempt bonds and tax credits.
Affordability Option B: 10 percent at no more than 70 percent AMI; 20 percent at no more than 130 percent AMI. Years 1-25 would have a 100 percent exemption; only the mini tax would be paid. Years 26-35 there would be a 30 percent exemption, requiring that 70 percent of the taxes plus the mini tax would be paid. These projects would be eligible for substantial government assistance.
Affordability Option C: 30 percent at no more than 130 percent AMI; Years 1-25 would have a 100 percent exemption; only the mini tax would be paid. Years 26-35 there would be a 30 percent exemption, requiring that 70 percent of the taxes including the mini tax would be paid. These projects would not be eligible for substantial government assistance. Also, this option is not available in Manhattan south of Ninety-Sixth Street.
The new program contains a homeownership option-Affordability Option D-which would provide 421a benefits for condominium or cooperative housing projects containing not more than 35 units located outside Manhattan where 100 percent of the units shall have an average assessed value not to exceed $65,000 upon the first assessment following the completion date and where each owner of any unit shall agree in writing to maintain the unit as their primary residence for no less than five years from the acquisition. A homeownership project that meets the eligibility requirements receives a 20 year benefit. Years 1-14 would have a 100 percent exemption, only the mini tax would be paid. For the final six years there is a 25 percent exemption requiring that 75 percent of the taxes plus the mini tax would be paid. However, no exemption shall be given for any portion of a unit’s assessed value that exceeds $65,000.
Extended Affordability Program: The new law adds an extended affordability program. 80/20 projects which commenced construction before July 1, 2008 may elect to become an extended affordability project by retaining their 20 percent affordable units at 80 percent AMI and add 5 percent more at 130 percent AMI, for 15 years. A project that meets these requirements would receive a 15 year exemption at 50 percent a year which would commence at the expiration of their current exemption. (If the 80/20 project was receiving a 25 year benefit the extended affordability benefit would be for 10 years.) In addition, these projects must pay prevailing wages for their building service workers. All affordable housing units shall be subject to rent stabilization. At the end of the extended affordability period, the affordable units shall have the right to remain as rent stabilized tenants for the duration of their occupancy. Upon vacancy, an affordable unit shall remain fully subject to rent stabilization unless the unit is entitled to be removed because its monthly rent exceeds the deregulation threshold. The application for any extended affordability property shall be filed with HPD on or before the later of: December 31, 2016 or eighteen months after the expiration date of the initial benefits.
Other changes to the 421a program include:
RENT REGULATIONSRent regulations have been extended until June 15, 2019. The legal rent for high rent and high income, high rent deregulation has been increased to $2,700, and beginning January 1, 2016 and annually thereafter the maximum legal regulated rent for the deregulation threshold shall be increased by the same percentage as the most recent one-year renewal adjustment adopted by the rent guidelines board. For apartments in which the tenant prior to vacancy was receiving a preferential rent the vacancy allowance increase on the legal regulated rent will be limited in the following manner: The legal regulated rent increase shall not exceed:1. five percent if the last vacancy lease “commenced less than two years ago”;2. ten percent if the last vacancy lease “commenced less than three years ago”;3. fifteen percent if the last vacancy lease “commenced less than four years ago”; and4. twenty percent if the last vacancy lease “commenced four years ago or more”. These restrictions do not apply to apartments leased at the legal regulated rent.The recapture period for Major Capital Improvements (MCI) has been extended, but still remains permanent:
This change applies to any determination issued by the Division of Housing and Community Renewal after the effective date of the law.The State and City are authorized to provide a real property tax abatement to compensate owners for the loss in value due to the extension of the MCI recapture periods. J51The final date for completion of renovation projects eligible for J-51 benefits is extended to June 30, 2019. ECONOMIC INCENTIVESThe Industrial and Commercial Abatement Program (ICAP) which provides tax incentives for renovation and new construction was extended two years, allowing applications to be filed until March 1, 2019. The Relocation and Employment Assistance Program (REAP) which provides tax credits of $3,000 per eligible employee per year was extended for two years to June 30, 2017. This extension includes the aspect of the program that applies to Lower Manhattan and to the other boroughs. The Commercial Revitalization Program (CRP) which includes a real property tax benefit to tenants, as well as the Commercial Rent Tax (CRT) exemption and the Energy Savings Program, was extended for two years. CRP is available for leases commencing by March 31, 2018. The CRT benefit is available for leases commencing by June 30, 2017. The energy programs allow approval of applications filed by June 30, 2017. The Sales Tax Exemption program for the World Trade Center, the World Financial Center and Battery Park City was extended to cover leases with terms commencing by September 1, 2019. The Sales Tax Exemption program for the other areas of Lower Manhattan, generally south of Frankfort and Murray Streets, was extended to cover leases with terms commencing by September 1, 2017. The Commercial Expansion Program (CEP) which provides real property tax benefits for tenants in designated commercial districts in the boroughs was extended for two years to June 30, 2018. LOFT LAW The law reopens applications under the 2010 Loft Law expansion for an additional two years and establishes compliance language for loft units. The changes to the 421a program and rent regulations are expected to raise questions as these changes are implemented. We will continue to update you about these issues and how they should be addressed. Please contact the Research Department (firstname.lastname@example.org or 212-616-5209) with any questions.Cordially,
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