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 NEIGHBORHOODS FOR NEW YORKERS (ANNY) TAX INCENTIVE

The ANNY Tax Incentive program enacted pursuant to new section 485-x of the New York Real Property Tax Law provides for tax exemptions for new multifamily housing developments (including eligible conversions) commenced after June 15, 2022, but on or prior to June 15, 2034, and having a completion date on or prior to June 15, 2038. ANNY replaces the Affordable New York Housing Program (“421-a”), which expired in June 2022.

Program benefits and requirements include:

• For eligible projects comprised of 150+ units located in “Zone A” or “Zone B” (defined below) (a “Very Large Rental Project”) with 25% of units set aside for rental to tenants with a weighted average area median income (“AMI”) up to 60% and no more than three income bands (not to exceed 100% AMI), (i) 100% exemption for up to 5 years of construction for projects located in “Zone A” and up to 3 years of construction for projects located in “Zone B” and (ii) 100% exemption (other than from the “mini-tax”) for 40 years
• For eligible projects comprised of 100+ units (a “Large Rental Project”) with 25% of units set aside for rental to tenants with AMI up to 80% and no more than three income bands (not to exceed 100% AMI), (i) 100% exemption (other than from the “mini-tax”) for up to 3 years of construction and (ii) 100% exemption (other than from the “mini-tax”) for 35 years
• For eligible projects comprised of 6 to 99 units (a “Modest Rental Project”) with 20% of units set aside for rental to tenants with AMI up to 80% and no more than three income bands (not to exceed 100% AMI), (i) 100% exemption (other than from the “mini-tax”) for up to 3 years of construction, (ii) 100% exemption (other than from the “mini-tax”) for the first 25 years and (iii) an exemption equal to the affordability percentage (other than from the “mini-tax”) for the next 10 years
• For eligible projects comprised of 6 to 10 units located outside of Manhattan with a maximum of 12,500 sf of residential floor area (a “Small Rental Project”) with 50% of units that are rent stabilized, (i) 100% exemption (other than from the “mini-tax”) for up to 3 years of construction and (ii) 100% exemption (other than from the “mini-tax”) for 10 years

Note that (i) the “mini-tax” refers to real property taxes on the assessed valuation of the land and improvements at an eligible project prior to commencement of construction, calculated at the then-applicable tax rate, and (ii) exemptions do not apply to assessments for local improvements.

Subject to limited exemptions involving collective bargaining or similar arrangements, section 485-x also introduces a minimum wage and benefit requirement for trade-workers providing services on Very Large Rental Projects and Large Rental Projects:

• Very Large Rental Projects located in “Zone A” (i.e., Manhattan south of 96^th Street and the neighborhood tabulation areas of Long Island City-Hunters Point (QN0201), Greenpoint (BK0101), Williamsburg (BK0102), South Williamsburg (BK0103) and East Williamsburg (BK0104)) must have a minimum hourly rate for wages and benefits to trade-workers equal to the lesser of $72.45/hour or 65% of the greatest prevailing rate for wages and benefits within a classification
• Very Large Rental Projects located in “Zone B” (the neighborhood tabulation areas of Old Astoria-Hallets Points (QN0102), Queensbridge-Ravenswood-Dutch Kills (QN0105), Brooklyn Heights (BK0201), Downtown Brooklyn-DUMBO-Boerum Hill (BK0202), Fort Greene (BK0203), Clinton Hill (BK0204), Carroll Gardens-Cobble Hill-Gowanus-Red Hook (BK0601), Park Slope (BK0602) and Prospect Heights (BK0801)) must have a minimum hourly rate for wages and benefits to trade-workers equal to the lesser of $63.00/hour or 60% of the greatest prevailing rate for wages and benefits within a classification
• Large Rental Projects must have a minimum hourly rate for wages and benefits to trade-workers equal to $40.00/hour

The foregoing rates are subject to 2.5% increases, annually, beginning July 1, 2025, and are in addition to prevailing wage requirements for building service employees (which were also required under 421-a).