New Programs Designed to Assist Production of Housing in New York City

The adopted 2024-2025 budget for New York state includes the enactment of two programs intended to assist the production of housing in New York City: the Affordable Neighborhoods for New Yorkers Program (ANNYP) to replace the expired Affordable New York Housing Program for new construction, and the Affordable Housing from Commercial Conversions for Tax Incentive Benefits Program (AHCC Program) for conversions of nonresidential buildings to residences.¹

This Holland & Knight alert summarizes the major provisions of these programs.

Affordable Neighborhoods for New Yorkers

The most notable changes in ANNYP from the Affordable New York Housing Program are:

• The affordable units are permanently affordable and rent-stabilized.
• The 130 percent income band is eliminated and new affordability requirements are established.
• Construction wage requirements are expanded to cover more buildings and the minimum wages are raised.

ANNYP applies to new construction and enlargements of existing buildings if the floor area of the preexisting building is no more than 49 percent of the total floor area of the enlarged building. To qualify for ANNYP, construction must have commenced after June 15, 2022, and no later than June 15, 2034, and be completed by June 15, 2038. The commencement date for new buildings is the date on which initial construction work on footings and foundations lawfully begins in good faith. For conversions, the commencement date is the date on which actual construction lawfully begins in good faith. The completion date is the date of issuance of a final or temporary certificate of occupancy for all dwelling units in the building.

The following table shows the affordability requirements, benefits and construction wage requirements for ANNYP.

Zone A consists of Manhattan, Greenpoint, Williamsburg, South Williamsburg, East Williamsburg, Long Island City and Hunter's Point. Zone B consists of Fort Greene, Clinton Hill, Carroll Gardens, Cobble Hill, Gowanus, Red Hook, Park Slope, Prospect Heights, Queensbridge, Ravenswood, Astoria and Hallets Point.

In addition to the taxes payable as noted in the table, owners will continue to be required to pay 1) the "mini tax"⁷ and 2) taxes on commercial, accessory and community facility space that exceeds 12 percent of the total floor area in the building. Buildings with more than 150 units in Zone A, however, do not pay the mini tax.

Other Construction Wage Requirements

• The wage requirements listed in the table do not apply to 1) buildings subject to a project labor agreement and 2) employees subject to a collective bargaining agreement or a jobsite agreement that expressly waives the construction wage requirements.
• The owner must notify Housing Preservation & Development (HPD) and the Comptroller at least three months prior to the commencement of construction of the project's location, its anticipated start and completion date, and whether there is a project labor agreement in effect. Failure to provide the required notice is subject to a $5,000 per day fine. Starting construction prior to filing the notice makes the building ineligible for any benefits under ANNYP.
• If the Comptroller finds that the owner (or any person acting on behalf of the owner) has been found guilty of three violations of the wage requirements within a five-year period, the Comptroller is authorized to recapture previously provided tax exemptions and/or terminate future exemptions. The Comptroller is required to notify the applicant after the second violation that a third violation my result in the recapture and/or loss of the exemption. Termination of the exemption does not relieve the owner from the affordability and other requirements of ANNYP.
• Payroll records must be retained for six years from the completion date. An owner may make the contractor responsible for retaining the records, but the owner is jointly and severally liable for any violations by the contractor.

Minority and Women-Owned Business Enterprises

The applicant is required to make "all reasonable efforts" to spend 25 percent of total project costs on contracts with minority and women-owned business enterprises (M/WBE). HPD is authorized to promulgate rules setting forth the actions an owner will be expected to take, the rules of which should be comparable to the actions used by city agencies pursuant to the city's existing M/WBE Program.

Building Service Workers

ANNYP continues the existing requirements relating to building service workers that all persons regularly employed at the building must be paid the prevailing wage as determined by the Comptroller for the entire exemption period.⁸ It adds a new requirement that the applicant must submit with its application and annually thereafter a sworn statement that it is complying with these requirements. In addition, the Comptroller is authorized to require the payment of back wages and fringe benefits for any violation and, in the case of willful violations, the payment of up to three times the amount of back wages and fringe benefits.

Unlike the construction wage provisions, the Comptroller does not have the authority to revoke the exemption or recapture any benefits. Instead, the Comptroller must refer the noncompliance to HPD, which is authorized to revoke where there have been three violations within a five-year period. Termination of the exemption does not relieve the owner from the affordability and other requirements of ANNYP.

Other Affordability Requirements

• All rental units in a building must share the same common entrances and common areas as market rate units and not be isolated to a specific floor or area.
• The bedroom mix of the affordable units shall be proportional to the bedroom mix for the market-rate units or at least 50 percent of the affordable units must be two bedrooms or larger and no more than 25 percent of the affordable units are studios.
• All affordable units must be promptly offered for rental and no affordable unit or restricted unit may be held off the market for a period that is longer than reasonably necessary to perform needed repairs.
• No affordable unit or restricted unit may be rented to a corporation, partnership or other entity or rented on a temporary, transient or short-term (less than one year) basis.
• No affordable unit or restricted unit may be converted to cooperative or condominium ownership.
• Market-rate units are not subject to rent stabilization.

Replacement Ratio

ANNYP continues the requirement from the Affordable New York Housing Program that if a site contained dwelling units three years prior to the commencement of construction, then the new building must have at least one affordable unit for each preexisting dwelling unit. (Buildings under 10 units are required to have at least one affordable or restricted unit for each preexisting unit.)

Other Requirements

• All applicants must file a notice of intent with HPD within six months after the start of work, which notice contains the commencement date and the number of affordable or restricted units. Failure to file the notice of intent is subject to a penalty not to exceed 100 percent of the filing fee.
• The application must be filed within one year of the completion date.
• The filing fee is: 1) $3,000 per unit for buildings with six to 10 units, 2) $4,000 per unit for buildings with 11 to 99 units and for homeownership units, and 3) $5,000 per unit for buildings with 100 or more units. HPD is authorized to issue rules requiring a portion of the filing fee be paid in connection with approving the marketing plan.
• HPD is authorized to establish a schedule of fine and penalties for violations of the affordability and rent stabilization requirements occurring after the expiration of the tax exemption.
• An applicant is allowed to select the lots to be included in the application. This allows, for example, the rental portion of a building containing rental and condo units to receive ANNYP benefits. Similarly, an applicant can choose whether to include commercial units in the application or to apply for benefits under the Industrial and Commercial Abatement Program.

Affordable Housing from Commercial Conversions for Tax Incentive Benefits Program

The AHCC Program provides partial exemption from New York City's real property tax for the conversion of existing nonresidential buildings (except for hotels) to residential use. The principal requirements are:

• Work on the conversion begins between Jan. 1, 2023, and June 30, 2031, and is completed no later than Dec. 31, 2039.
• At least 25 percent of the units are affordable, with at least 5 percent affordable to households whose income at the time of initial occupancy does not exceed 40 percent of AMI as adjusted for family size. In addition, the weighted average for the affordable units cannot exceed 80 percent AMI, as adjusted for family size, there can be no more than three income bands and the maximum income for an affordable unit is 100 percent AMI, as adjusted for family size.
• All affordable units must remain permanently affordable and permanently rent stabilized.

The exemption period ranges from 25 to 35 years depending on the location of the building and the year in which the conversion work starts.

In addition to the exemption set forth in the table, all buildings receive a 100 percent exemption during the construction period. The construction period begins on the later of the commencement date or three years before the completion date and ends on the day preceding the completion date. The commencement date for new buildings is the date on which initial construction work on footings and foundations lawfully begins in good faith. For conversions, the commencement date is the date on which actual construction lawfully begins in good faith. The completion date is the date of issuance of a final or temporary certificate of occupancy for all dwelling units in the building.

Consistent with other tax exemption programs such as the expired Affordable New York Housing Program and the recently enacted ANNYP, where the commercial, accessory and community facility space is more than 12 percent of the total floor area in the building, the space above the 12 percent is not exempt.

Other Requirements

• All rental units in a building must share the same common entrances and common areas as market rate units and not be isolated to a specific floor or area.
• The bedroom mix of the affordable units shall be proportional to the bedroom mix for the market-rate units or at least 50 percent of the affordable units must be two bedrooms or larger and no more than 25 percent of the affordable units are studios.
• All affordable units must be promptly offered for rental and no affordable unit may be held off the market for a period that is longer than reasonably necessary to perform needed repairs.
• No affordable unit may be rented to a corporation, partnership or other entity or rented on a temporary, transient or short-term (less than one year) basis.
• No affordable unit may be converted to cooperative or condominium ownership.
• Market-rate units are not subject to rent stabilization.
• Building service workers must be paid the prevailing wage as determined by the Comptroller for the entire exemption period.⁹ All applicants must submit with their application and annually thereafter a sworn statement that it is complying with these requirements. The Comptroller is authorized to require the payment of back wages and fringe benefits for any violation and, in the case of willful violations, the payment of up to three times the amount of back wages and fringe benefits. Where there have been three violations within a five-year period, the Comptroller is authorized to request that HPD revoke the exemption. Termination of the exemption does not relieve the owner from the affordability and other requirements of ANNYP.
• The application must be filed within one year of the completion date. The application includes a certification that all taxes, water charges and sewer rents currently due and owing on the property have been paid or are the subject of an approved installment agreement.
• The filing fee is "no less than" $3,000 per dwelling unit. HPD may require that a portion of the filing fee be paid in connection with approving the marketing plan.
• HPD is authorized to establish a schedule of fine and penalties for violations of the affordability and rent stabilization requirements occurring after the expiration of the tax exemption.
• An applicant is allowed to select the lots to be included in the application. This allows, for example, the rental portion of a building containing rental and condo units to receive ANNYP benefits. Similarly, an applicant can choose whether to include commercial units in the application or to apply for benefits under the Industrial and Commercial Abatement Program.

 Notes

¹ ANNYP is codified in Section 485-x of the New York State Real Property Tax Law (RPTL) and AHCC in Section 467-m of the RPTL.

² The construction period is the period beginning on the later of the commencement date or three years prior to the completion date and ending on the day preceding the completion date.

³ The affordability percentage is the percentage of affordable units in the building.

⁴ The $40 figure increases by 2.5 percent per year beginning on July 1, 2025.

⁵ The $72.45 figure increases by 2.5 percent per year beginning on July 1, 2025.

⁶ The $63 figure increases by 2.5 percent per year beginning on July 1, 2025.

⁷ The "mini tax" is equal to the taxable assessed value of the property in the year prior to the start of construction multiplied by the tax rate for the applicable year.

⁸ Buildings under 30 units and 100 percent affordable buildings with at least 50 percent of the units restricted to households with incomes do not exceed 90 percent AMI are not subject to these requirements.

⁹ Buildings under 30 units and 100 percent affordable buildings with at least 50 percent of the units restricted to households with incomes do not exceed 90 percent AMI are not subject to these requirements.