421a Tax Abatement Program - An OverviewJust as J-51 is New York City's economic redevelopment program that applies to properties undergoing rehabilitation, the 421a tax abatement program applies to new construction of multiple dwellings that include co-op housing and condominiums. This program is administered by HPD (NYC Department of Housing Preservation and Construction). Various aspects of the 421a tax abatement program form the focus of this article. The 421a tax abatement benefits vary. This variation depends on the location of the property in NYC, whether an applicant has met the requirements of affordable housing or not, and whether an applicant has carried out construction with substantial governmental assistance or not. The eligibility criteria for the 421a tax abatement program have been fixed by HPD. The implementation of the program benefits is in the hands of Finance after an applicant's application has been approved by HPD. The applicant receives from HPD a Certificate of Eligibility and forwards the same to Finance along with the 421a application. Eligibility criteria: They include new construction of multiple dwellings on vacant lots or improved with a non-conforming use within a three year period, excluding the year in which construction began. Eligibility criteria for buildings in the exclusion area entail government assisted construction as well as coupled with minimum requirement of 20% affordable units. Alternatively, for dwellings in the exclusion area, the owner needs to participate in the affordable housing construction program. Except for the above cases, exclusion area dwellings are not covered in the 421a tax abatement program. Tax abatement benefits granted under the 421a program include an upto 3-year construction exemption period with an additional 10-year post-construction exemption period. This latter period consists of a 2-years full exemption followed by an 8-years phase out period. Alternative periods for post-construction exemption are 15-years (11-years full exemption + a 4-years phase out), 20-years (12-years full exemption + an 8-years phase out), and 25-years (21-years full exemption + a 4-years phase out). The assessed value is based on the increase in real estate property tax resulting from the above work. Projects that receive governmental assistance or those that contain 20 -percent affordable units, projects located in Manhattan, the other pockets, or other designated areas are eligible for the above cited longer exemption periods. Initial rents are decided by Tax Incentive Programs (TIP). All rental units are subject to rent stabilization for the period for which tax abatement benefits are available. Procedural requirements: The property developer sends an application to TIP and a Certificate of Eligibility is received by the developer. Finance implements the benefits after receipt of the certificate. Once construction is initiated, an application for benefits can be made immediately thereafter. Various notices as applicable are then required to be filed. The 421a tax abatement program gets its name from the 421a online application form, which an applicant needs to fill-in and submit to TIP. |