The 421-a Tax Incentive program is a partial real estate tax exemption for the new construction of multi-family rental housing. The program was established in 1971 and has been closed, re-opened, and reorganized several times. After the tax exemption was suspended in 2016, the New York state legislature extended the 421-a program in April, 2017, renaming it the Affordable New York Housing Program. This new version has several ammendments, including a tax exemption during construction and new location guidelines.
The current 421-a offers regular and enhanced tax benefits for different projects, depending on geographic location and construction wages. Projects that are eligible for the regular benefit of a 100 percent exemption for up to three years of a construction period, a 100 percent post-construction exemption for 25 years, and a reduced percent exemption equivalent to the percent of development’s affordable units for 10 years. Eligible rental projects with 300 units or more that either are located in an enhanced affordability area in Manhattan, Queens, or the Bronx, or opt into to comply with the minimum average hourly wage requirements for construction workers would receive the enhanced benefit of a 100 percent tax exemption for both the construction period and the full 35 years post-construction. Market units will still be subject to rent stabilization unless they no longer receive a 421-a tax exemption and the monthly rent exceeds the established limit, enabling the the owners to remove these units from rent stabilization upon vacancy.