Relates exemption of new multiple dwellings from taxation; in relation to establishing the affordable housing tax exemption program; and to repeal certain provisions of such law relating thereto

Section three repeals paragraph (p) of subdivision 17 of 421-a.

Section four adds a new 421-aa affordable housing tax exemption program, which would, in a city having a population of one million or more, set 421-aa eligibility requirements and benefit periods for multiple dwellings that commence construction after December 31, 2015 and on or before June 15, 2021, and that complete construction on or before December 31, 2025. Such multiple dwellings would be required to contain at least six dwelling units created through new construction or eligible conversion that are operated as rentals, or as a homeownership project outside the borough of Manhattan Such multiple dwellings would need to provide affordable housing either onsite or offsite through one of three affordability options as rentals or a separate option for homeownership projects, in order to be eligible for thirty-five years of exemption from real property taxation, other than assessments for local improvements. Such multiple dwellings would receive a 100% exemption from real property taxation during the construction period for a maximum of three years, a 100% exemption from real property taxation for the first 25 years following completion, and, for the final 10 years of the exemption period, an exemption from real property taxation equal to the percentage of affordable units included in such multiple dwelling. Such multiple dwellings would continue to pay taxes on the assessed value of the land and improvements during the tax year prior to commencement of construction, and all assessments for local improvements. The 421-aa benefit would be reduced by the aggregate floor area of commercial, community facility and accessory use space, other than parking which is located not more than 23 feet above the curb level, in excess of 12% of the aggregate floor area. The three affordability options available to rental type projects seeking the 421-aa benefit would be: (a) not less than 10% of dwelling units affordable to those at or below 40% of area median income ("AMI"), not less than an additional 10% at or below 60% of AMI and not less than an additional 5% at or below 130% of AMI, with no governmental assistance other than tax exempt bond proceeds and 4% tax credits; (b) not less than 10% at or below 70% of AMI and not less than an additional 20% at or below 130% of AMI; and (c) not less than 30% at or below 130% of AMI, with no governmental assistance. The affordability option for homeownership projects would require that 25% of the units on average have an average assessed value of $75,000 or less. These affordability requirements for rentals would apply throughout the 421-aa benefit period at both initial rental and upon vacancy. Such affordable units could not be rented on a temporary, transient or short-term basis, nor converted to cooperative or condominium ownership. Tenants below such maximum AMIs would be expressly allowed to occupy such affordable units. All rental dwelling units would have to be accessed through the same street entrances and lobbies, and no such entrance or lobby could serve some rental dwelling units to the exclusion of others. The affordable dwelling units in all of the three affordability options would remain rent stabilized until the first vacancy following the expiration of the 421-aa benefits, even if such benefits are revoked. Unless preempted by other governmental requirements, such affordable units would be required to have a unit mix proportional to the market rate units, or at least 50% of the affordable units would be required to have two or more bedrooms and no more than 25% of the affordable units could have less than one bedroom. Applicants for 421-aa benefits would be required to provide prevailing wages for building service employees as required under current law. The fiscal officer would be authorized to enforce the prevailing wage requirement, and would be required to present evidence of any noncompliance to the department of housing preservation and development. If dwelling units existed on the site three years prior to commencement of construction, the number of affordable units provided must equal or exceed the number of such units that were removed or demolished. Concurrent exemptions or abatements are prohibited. The department of housing preservation and development would be authorized to permit the voluntary termination of 421-aa benefits only in connection with the commencement of a new tax exemption pursuant to either RPTL section 420-c or the Private Housing Finance Law. The department of housing preservation and development could also terminate or revoke 421-aa benefits for noncompliance. Applications would have to be filed within one year after completion, and the department of housing preservation and development would be authorized to require a filing fee of $3,000 per dwelling unit unless lesser fees are authorized pursuant to rule for governmentally-assisted projects. The department of housing preservation and development also could require by rule that applications be filed electronically.

Section five and six amend subdivision 13 of section 421-a of the real property tax law and would allow for condos to be applicable to the 421-a program that remains in effect.

Section seven of the bill provides a severability clause. Section eight of the bill provides for effective dates.

Justification

In 1971, RPTL section 421-a was implemented to provided tax benefits for the construction of new residential buildings in New York City. Over the last forty-five years, the State Legislature has periodically revised the program. The program was suspended in January, 2016.

There continues to be a great need to address the shortage of affordable housing in New York City. This legislation would provide for a replacement program, the 421-aa program.

Under the proposed legislation, affordability requirements will be a Citywide prerequisite to receiving any 421-aa benefits. The bill provides developers with three options for rental properties and one option for homeownership projects, and limits additional subsidies to certain options. Only dwelling units operated as rentals or on a condominium and cooperative basis will be eligible for benefits, and all rental dwelling units must be accessed through the same street entrances and lobbies. Each eligible project will get 35 years of benefits, and the last 10 years of such benefits will be based upon each project's specific percentage of affordable units. Rather than a bifurcated application process in which applicants must file one application for construction period benefits and another application for final benefits, applicants will file a single application within one year after completion, and construction period benefits will be applied retroactively. Any dwelling unit that was on the site three years prior to commencement of construction or conversion and was thereafter demolished, removed or reconfigured, must be replaced with an affordable dwelling unit.

Eligible multiple dwellings must have a commencement date after December 31, 2015 and on or before June 15, 2021 and a completion date on or before December 31, 2025. The language makes clear that if an eligible site contains multiple tax lots, and application may be submitted with respect to one or more of such tax lots, and the 421-aa benefit would run separately with respect to each tax lot.

Applicants for 421-aa benefits would be required to provide prevailing wages for building service employees as was similarly required under the 421-a program. The 421-aa program would provide that all construction workers shall be paid an hourly compensation package that is no less the sum of the affordable housing wage rate and the health benefits supplement rate for each work hour worked. As of the effective date of this legislation, the affordable housing wage rate would be $15 per hour and the health benefits supplement rate, $1.50 per hour. The affordable housing wage rate would increase $1.50 each year to $21 per hour effective January 1, 2020. For eligible sites located in the borough of Manhattan south of ninety-sixth street which contain more than three hundred dwelling units, construction workers in the aggregate shall be paid an average hourly wage, inclusive of fringe benefits, of no less than fifty-five dollars per hour (exception when an eligible multiple dwelling has at least 50% affordable units).

Finally, the legislation would also allow condominiums and cooperatives to be grandfathered into the 421-a program still in effect.

Legislative history

New Legislation

Fiscal implications

None to State

Effective date

This act shall take effect immediately and be deemed to have been in full force and effect on and after January 1, 2016.