Governor Hochul has announced that she and legislative leaders have reached an agreement on the framework of a new housing deal. While details are still emerging, the proposed agreement is expected to introduce a replacement for the expired 421-a tax incentive, aiming to boost affordable housing development. Additionally, the agreement will likely extend the construction completion deadline for projects vested under the prior 421-a law, as well as create a new tax incentive program for office-to-residential conversions.

As we await the release of the new bill, the key components of the deal are reported to include:

• A six-year extension for the completion of projects vested under the prior 421-a law. Projects utilizing this extension are expected to be prohibited from electing Affordability Option C, which permits all of the project’s affordable units to be affordable at up to 130% of Area Median Income (“AMI”).
• The introduction of the 421-a replacement, to be known as Section 485-x, which will provide a benefit period of up to 40 years.
• The Section 485-x tax incentive will require that affordable units be available to households earning up to 80% of AMI, although it remains unclear if these projects must set aside 20% or 25% of the units as affordable.
• Labor rate requirements under Section 485-x will apply to projects with 150 units or more. It is currently uncertain if there will be any geographic area limitations to this requirement.
• A new tax incentive for office-to-residential conversions.  Affordability requirements of this new program have not yet been announced.

The housing deal also introduces a version of “good cause eviction.”  Reports indicate that the proposal limits rent increases to 10 percent, or the consumer price index plus 5 percent, whichever is lower. It does, however, exclude high rent apartments from these limitations.  New construction is also expected to be exempt from good cause eviction for 30 years.

More information on the specifics of the deal is anticipated as discussions continue. Stay tuned for further updates.

Any questions? Please contact one of the firm’s partners:

Alvin Schein  aschein@seidenschein.com

Adam A. Levenson  alevenson@seidenschein.com

Jason C. Hershkowitz  jhershkowitz@seidenschein.com

David Shamshovich dshamshovich@seidenschein.com

Jane Rosenberg  jrosenberg@seidenschein.com

Seiden & Schein, P.C.

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