On April 10, 2017, Governor Andrew Cuomo signed into law a renewal and extension of the critical property tax exemption program historically known as “421-a” now re-named the “Affordable New York Housing Program” (ANYHP) under NYS Real Property Tax Law 421-a (16). ANYHP allows NYC developers to acquire property, obtain financing and build residential projects knowing they can substantially reduce their projects’ property taxes as-of-right by making a set percentage of their units affordable (at least 25% or at least 30% for rental projects), and satisfying other requirements. Both new projects and projects already under construction can qualify for ANYHP benefits. Projects commencing construction on and after January 1, 2016 and on or before June 15, 2022 may qualify for ANYHP benefits provided that they meet the eligibility requirements and complete construction on or before June 15, 2026. Projects which commenced construction in 2015 and prior can ‘opt-in’ and elect to qualify for ANYHP benefits if they have not received benefits on or before June 15, 2015 as long as the completed project complies with the new ANYHP requirements. Projects which filed a “Letter of Intent” with NYC HPD on or before September 12, 2024 can complete construction as late as June 15, 2031 provided they do not use Affordability Options “C” or “G” (30% of units affordable at or below 130% of AMI). Rental projects (except for the 300+ unit projects described below) can receive the standard thirty-five (35) year ANYHP benefit. Homeownership projects can receive the twenty (20) year capped ANYHP benefit. Projects of three hundred (300) or more units in specific locations (Manhattan - south of 96th Street, parts of Brooklyn and Queens) must pay a designated hourly construction wage (currently $60 in Manhattan and $45 in both Brooklyn and Queens) and, in exchange, will receive an enhanced thirty-five (35) year property tax exemption (enhanced property tax exemption in years 26 - 35) and be subject to affordability requirements for a longer period. Projects of 300 or more units elsewhere in the City may also elect to comply with the construction wage requirements (Brooklyn/Queens wages) and Affordability Option E, F or G to receive enhanced ANYHP benefits.
Financing Affordable: Trends, Challenges and More ANYHP DUE DILIGENCE CONSIDERATIONS 1. Projects that may be “grandfathered” under Old 421-a program (by commencing construction by December 31, 2015) may be able to opt-in to ANYHP program. 2. Switching from the Old 421-a program to the ANYHP program may require maintaining eligibility for Old 421-a until ANYHP eligibility is confirmed. 3. Projects commencing construction January 1, 2016 through June 15, 2022 can potentially qualify for ANYHP program. 4. Was a 421-a LOI timely filed with HPD to allow completion as late as June 15, 2031? 5. ANYHP program eligibility requirements must be met.
ANYHP LENDER CONSIDERATIONS 1.
New 421-a application process is different. Under the old 421-a program, developers could obtain a Preliminary Certificate of Eligibility after commencement and before completion of construction. Under the new program, applications are only accepted after completion of construction (i.e., issuance of TCO or CO for all residential units). The timeline for receiving benefits under the new program can vary according to project details. HPD could take months before issuing New 421-a Certificate of Eligibility.
2. Lenders will want an opinion of counsel as to the eligibility of a project to receive benefits. HPD will not issue such New 421-a opinions of counsel so 421-a counsel must provide. 3. Loan documents should build in milestones for New 421-a application process, including: a. HPD approval of certain ANYHP requirements can be obtained prior to completion of construction. b. HPD approval of marketing materials. Notice of Intent to Market is to be filed with HPD nine (9) months prior to completion date. c. HPD will require that a 421-a Restrictive Declaration is executed and recorded against the property, plus all affordable units and certain market units rented and registered with DHCR. d. Loan documents should allow six (6) months post completion of construction for issuance of New 421-a Certificate of Eligibility, with additional time provided that borrower is diligently pursuing same. e. 2019 Rent Stabilization changes should be carefully considered, particularly the ability to high rent deregulate market units. Only ANYHP / New 421-a allows market units to achieve high rent deregulation (which has otherwise been repealed for all other Rent Stabilized properties), so the ability to achieve market rents during the ANYHP restriction period will depend on the initial rents for these units.