Don't call it a comeback! A new agreement has been reached in the expired 421-a tax exemption program with the Real Estate Board of New York and the Construction Trades Council of Greater New York, upon final approval from New York State Legislature.
This is an important step to entice developers to include new affordable rental units in their projects, which previously they maintained would not be financially feasible without the program. The 421-a program, which was started in the 1970s, was used to encourage residential construction by offering the developers significant tax breaks for an extended period of time. The program officially expired in January 2016, after a consensus could not be met with regards to construction wages.
The new agreement calls for projects with 300 or more apartments, in Manhattan south of 96th Street, to have average construction wages (including benefits) of $60 per hour. In the boroughs of Brooklyn and Queens, covering parts of Community 1 and 2, average construction wages (including benefits) will be $45 per hour. Projects offering more than 50% of their units as affordable are excluded from the wage and benefit obligation.
Projects that began prior to the expiration of the 421-a program may opt into the new agreement upon final approval. Under the new agreement, developers offering 20% or more affordable units will receive an extension of 15 years in the property tax benefits; which was previously a 20-year exemption and will now increase to 35 years. In exchange, the rent restricted units are required to remain affordable for 40 years, up from 35 years.