It’s no secret that the State of New York is in the midst of a housing shortage. In Governor Hochul’s State of the State Address, she proposed to work with local governments to help infuse New York with 800,000 new residential units over the next decade. (Governor Hochul Announces Statewide Strategy to Address New York’s Housing Crisis and Build 800,000 New Homes | Governor Kathy Hochul (ny.gov)) Mayor Adams echoed the Governor’s sentiments by pledging to support the construction of 500,000 residential units in the City over the next decade. (Mayor Eric Adams unveils ambitious plan to build 500,000 affordable homes in the next decade – CBS New York (cbsnews.com))
Nothing spurs residential development like property tax incentives and abatements – especially in NYC. Despite the housing crisis, the NYS Legislature allowed its most valuable tax-incentive development tool (RPTL 421-a) to expire in 2022, leaving countless multifamily projects in limbo. RPTL 421-a is a 50-year old statute that has incentivized the construction of apartments and condominiums across the City of New York by exempting 100% of property taxes through construction and phasing the taxes in over the following 25 years.
In July, after the Governor and Legislature were unable to reach a legislative agreement to revive or revise 421-a, the Governor signed an Executive Order that offered a similar tax exemption to builders who have projects pending in a very specific section of NYC that was rezoned in 2021 for affordable housing development – Gowanus, Brooklyn. Under the Governor’s plan, residential projects currently under construction and located in the Gowanus rezoning district may make an application to NY’s Empire State Development agency for a 35-year PILOT (payment-in-lieu-of-taxes) agreement that would mirror the exemption that the project would have received under 421-a. Hopefully this is a sign of things to come from the State. Without tax incentives, residential developers and their investment budgets may fly South for more than just the winter.
Thank you to Ryan C. Hild for this week’s Tax Tracker!