New York City housing developers have been waiting for a replacement tax break since the Affordable New York Housing Program (known as 421-a) expired in June 2022. That time has come. The Fiscal Year (FY) 2025 New York State budget includes two new tax exemption programs — the Affordable Neighborhoods for New Yorkers Program (ANNY), or 485-x, and the Affordable Housing from Commercial Conversions Program (AHCC). These programs are part of Albany’s plan to tackle the housing crisis in New York City.
Affordable Housing for New Yorkers Program (485-x)
The 485-x program provides property tax exemptions from 10 to 40 years based on project size and location. This tiered system also sets wage requirements for construction workers and limits rents. To illustrate, a project of 100 units could qualify for 35 years of property tax exemption if it pays its construction workers at least $40/hour in 2024 and makes at least 25% of its residential units affordable for households earning no more than 80% of the area median income (AMI). This program expires June 15, 2034, and projects started under it must be completed by June 15, 2038.
Below are some of the requirements and benefits for the tiered ANNY program:
*Zone A is any tax lot located entirely south of 96th Street in the borough of Manhattan or in any of the following neighborhood tabulation areas, as most recently defined by the Department of New York City Planning: Brooklyn 0101, Brooklyn 0102, Brooklyn 0103, Brooklyn 0104 and Queens 0201.
Zone B is any tax lot located entirely in any of the following neighborhood tabulation areas, as most recently defined by the Department of New York City Planning: Brooklyn 0201, Brooklyn 0202, Brooklyn 0203, Brooklyn 0204, Brooklyn 0601, Brooklyn 0602, Brooklyn 0801, Queens 0105 and Queens 0102
Affordable units in very large, large and modest rental projects are permanently subject to affordability requirements. Rent-stabilized units in small rental projects must remain permanently rent-stabilized. Market rate units are not subject to rent stabilization.
Affordable Housing from Commercial Conversion Program (AHCC)
AHCC, the second tax exemption program in the 2025 New York budget, provides partial property tax exemption for converting existing commercial buildings to residential use. Like 485-x, AHCC has certain requirements for affordable housing and area median income (AMI). To qualify, at least 25% of the units need to be affordable with an average of 80% AMI, with at least 5% of units at 40% AMI. Affordable units are limited to three income bands, none of which exceed 100% of AMI.
The property tax exemption lasts 25 to 35 years depending on location and the year the conversion work began, and the exemption can be as much as 90% off the effective residential tax rate. In addition, during the construction period, the building will receive 100% exemption of the property tax.
New York officials hope developers take advantage of these property tax incentives to tackle the ongoing housing crisis in New York City. Developers have the opportunity to repurpose underutilized office spaces and revitalize commercial areas.
Floor Area Ratio
The FY 2025 New York State budget also amends a 1961 law on floor area ratio (FAR) to remove the cap and allow a dwelling to exceed a 12.0-floor area ratio, which limits a building’s square footage in proportion to the size of its lot. The FAR cap is lifted in a city with a population of one million or more when the project sets aside at least 25% of rental units as affordable at 80% AMI outside of a historic district.
For More Information
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