New York recently adopted the Affordable Neighborhoods for New Yorkers (ANNY) Tax Incentive and the Affordable Housing from Commercial Conversions (AHCC) Tax Incentive programs, as well as a host of other new and modified laws pertaining to multifamily housing density, rent regulations and tenant protections. In this series, the attorneys in Cole Schotz’s Real Estate Practice explore some of the initiatives and changes included as part of the Fiscal Year 2024/2025 Executive Budget that will impact developers and owner/operators of properties located in New York City.
THE AFFORDABLE HOUSING FROM COMMERCIAL CONVERSIONS (AHCC) TAX INCENTIVE
A second tax exemption program, AHCC, provides for tiered exemptions for the conversion of non-residential buildings (other than hotels and class B multiple dwellings) to multifamily dwellings, provided that (i) at least 25% of units are affordable, (ii) at least 5% of units are set aside for rental to tenants with area median income (AMI) up to 40%, (iii) there are no more than three income bands (not to exceed 100% AMI) and (iv) the weighted average of all income bands for affordable housing units does not exceed 80% of AMI. Further, the conversion project must have a commencement date after December 31, 2022 and on or prior to June 30, 2031, and a completion date on or prior to December 31, 2039.
Program benefits and requirements are as follows:
- For eligible projects receiving a permit on or prior to June 30, 2026, and located in Manhattan, south of 96th Street (the “Manhattan Prime Development Area”), (i) 100% exemption during construction and (ii) 90% exemption for 30 years (which decreases to 80% the following year and is further decreased by an additional 10% each year thereafter until the exemption expires at the end of the 35th year)
- For eligible projects receiving a permit on or prior to June 30, 2026, and located outside of the Manhattan Prime Development Area, (i) 100% exemption during construction and (ii) 65% exemption for 30 years (which decreases to 50% the following year and is further decreased by an additional 10% each year thereafter until the exemption expires at the end of the 35th year)
- For eligible projects receiving a permit on or prior to June 30, 2028, and located within the Manhattan Prime Development Area, (i) 100% exemption during construction and (ii) 90% exemption for 25 years (which decreases to 80% the following year and is further decreased by an additional 10% each year thereafter until the exemption expires at the end of the 30th year)
- For eligible projects receiving a permit on or prior to June 30, 2028, and located outside of the Manhattan Prime Development Area, (i) 100% exemption during construction and (ii) 65% exemption for 25 years (which decreases to 50% the following year and is further decreased by an additional 10% each year thereafter until the exemption expires at the end of the 30th year)
- For eligible projects receiving a permit on or prior to June 30, 2031, and located within the Manhattan Prime Development Area, (i) 100% exemption during construction and (ii) 90% exemption for 20 years (which decreases to 80% the following year and is further decreased by an additional 10% each year thereafter until the exemption expires at the end of the 25th year)
Note that exemptions do not apply to assessments for local improvements, but no “mini-tax” is required. As with 421-a and section 485-x, prevailing wage requirements for building service employees will apply.
