As soon as 421-a expired in June 2022, NYC housing developers were clamoring for a replacement for the tax break, which provided property tax exemptions of up to three decades for developments that included a set percentage of affordable housing.
Now that they have one—it's called 485-x—everyone started sharpening their pencils and reading the fine print and trying to calculate whether the new tax credit will spur the development of more affordable housing units in the city than 421-a.
A trade group that was involved in negotiations over construction wage levels baked into housing provisions of the state's newly enacted budget bill thinks it won't.
"The new tax exemption program for housing production, 485-x, will produce less housing than its predecessor, 421-a," declared James Whelan, president of the Real Estate Board of New York (REBNY), in a statement.
The 485-x tax credit creates a tiered system of incentives that imposes stricter requirements on larger projects.
To be eligible for tax exemptions under 485-x, builders will be required to set aside either 20% of the units in smaller buildings or 25% in larger ones at below market rents for people making no more than the area median income (AMI), with the average AMI limited to no more that 80%, according to a report in The City.
All projects with more than 100 units will have minimum construction wage requirements of $35 an hour—with two sets of higher wages for large projects in Manhattan south of 96th Street and on the waterfront and adjacent areas of Queens and Brooklyn.
Buildings with more than 150 units in Manhattan south of 96th Street and on the Brooklyn waterfront must adhere to the highest wage scale and set aside 25% of the units as affordable at an AMI averaging 60%.
In return, developers of projects larger than 150 unit in these areas will get 40-year tax breaks, five years longer than the exemptions granted to the smaller projects.
REBNY and the Buildings and Constructions Trades Council conducted negotiations on wage requirements for 485-x but failed to reach an agreement. Earlier this year, REBNY reached an agreement with the Mason Tenders District Council on a wage and benefit floor of $40 per hour for projects with 100 units or more, regardless of location, according to a report in TRD.
In the bill that was passed, Gov. Kathy Hochul adopted requirements for larger projects that are closer to a percentage of prevailing wage rates.
The highest wage requirement covers projects with 150 or more units south of 96th Street in Manhattan, as well as Williamsburg, East Williamsburg and Greenpoint in Brooklyn and Long Island City in Queens. Construction workers on those projects must get wages and benefits worth at least $72.45 per hour or 65 percent of the prevailing rate, whichever is less.
Workers on projects of 150 or more units within parts of Astoria and Queensbridge in Queens, and Dumbo and Brooklyn Heights in Brooklyn, must be paid the lesser of $63 per hour or 60 % of the prevailing rate.