Hochul Proposes Extending 421-a Deadline Until 2030
Developers hoping to make use of a treasured affordable housing tax break may have an extra four years to finish their projects if New York Gov. Kathy Hochul’s proposed budget is approved.
Right now, developers who filed to build projects to benefit from the now-expired Affordable New York tax break, known as 421-a, need to complete their projects by 2026. In Hochul's proposed Fiscal Year 2024 budget, the governor wants to push that deadline back until 2030, per multiple reports.
She didn’t name an alternative to 421-a, which expired in June without a replacement, much to developers’ dismay. Last year, Hochul laid out her proposed alternative to the program, called Affordable Neighborhoods for New Yorkers, which drew support from the industry but never made it into the final budget deliberations. This year, she is instead planning to work with the legislature to find a replacement.
The 421-a tax abatement, and its 2017 replacement, Affordable New York, had attracted significant criticism over the years, with many Democratic lawmakers claiming it was a tax giveaway for developers that was doing almost nothing to create affordable housing.
Developers have said it is impossible to build affordable housing without it; l NYC's Furman Center analysis shows between 2010 and 2020, 68% of all housing developments used 421-a in some way. Developers rushed to get foundations done by June 15 in order to qualify for the abatement before it expired, but the 2026 deadline for completion still applies.
A Real Estate Board of New York survey suggested roughly 33,000 approved units were under threat of not getting built because developers said they wouldn't be able to meet the 2026 deadline.
"The Governor's call for extending the 421-a completion deadline is critical for ensuring that tens of thousands of badly needed rental apartments, including thousands of below market-rate units, get built," REBNY Senior Vice President of Planning Basha Gerhards said in a statement. "We hope the State Legislature will now work with the Governor to enact the common-sense policies needed to produce more of the rental housing New Yorkers desperately need."
Hochul said pandemic-related construction delays spurred asking for the extension, while the cost of a construction loan has gone up as the Federal Reserve has raised interest rates.
The governor pledged to see 800,000 new homes delivered across the state through a range of measures dubbed the New York Housing Compact. She is proposing mandating towns and cities across the state to reduce the restrictions on housing development around transit hubs. She has also raise setting percentage increase goals on housing for certain communities, with downstate needing to increase housing by 3% over three years.
The need for housing is now desperate, and currently moving in the wrong direction. REBNY this week released data showing developers filed applications for 440 projects during the first half of 2022 and applications for just 186 projects during the second half, marking a nearly 60% decrease in the housing pipeline over the course of 2022. The city needs some 500,000 homes by 2030, according to the report.