NYU Furman Center’s Post

A property tax exemption in New York City is necessary to make rental housing development financially feasible across the city’s varied markets, according to a new policy brief by the NYU Furman Center’s Vicki Been, Mark Willis, Matthew Murphy, and Nikki Miller. Without an exemption, the costs associated with development, which are further exacerbated by high property taxes, would significantly hinder new rental development, especially of mixed-income developments that can provide new housing options for lower-income families. "Our modeling of the financial viability of rental projects suggests that they will not happen without a tax exemption unless the prices of land fall significantly, or other forms of subsidy are provided to support development,” write the authors as part of the Furman Center's series on New York's State's Housing agenda. “A new tax exemption is necessary to spur sufficient new construction of rental apartments to meet demand.” The expiration of the city’s 421-a property tax exemption program in June 2022 has triggered calls for a reevaluation of strategies to incentivize housing development across the five boroughs, particularly rental housing that includes affordable units. Check out our summary blog post here: https://buff.ly/3TFndrY Read the the policy brief here: https://buff.ly/3vCM6N2

A property tax exemption in New York City is necessary to make rental housing development financially feasible across the city’s varied markets, according to a new policy brief by the NYU Furman Center’s Vicki Been, Mark Willis, Matthew Murphy, and Elizabeth (Nikki) Miller. Without an exemption, the costs associated with development, which are further exacerbated by high property taxes, would significantly hinder new rental development, especially of mixed-income developments that can provide new housing options for lower-income families. "Our modeling of the financial viability of rental projects suggests that they will not happen without a tax exemption unless the prices of land fall significantly, or other forms of subsidy are provided to support development,” write the authors as part of the Furman Center's series on New York's State's Housing agenda. “A new tax exemption is necessary to spur sufficient new construction of rental apartments to meet demand.” The expiration of the city’s 421-a property tax exemption program in June 2022 has triggered calls for a reevaluation of strategies to incentivize housing development across the five boroughs, particularly rental housing that includes affordable units. Check out our summary blog post here: https://buff.ly/3TFndrY Read the the policy brief here: https://buff.ly/3vCM6N2

A property tax exemption in New York City is necessary to make rental housing development financially feasible across the city’s varied markets, according to a new policy brief by the NYU Furman Center. To aid policy makers in determining whether a property tax exemption is needed to render mixed-income, multifamily rental housing a viable investment, and how a new exemption should be structured, the policy brief argues that a new tax exemption should: ◾ Efficiently spur robust new construction of rental apartments to address the city’s housing shortage ◾ Ensure that the exemption secures as much affordable housing targeted to the households in the city least able to afford stable, high quality housing as is financially feasible, without also inflating land values ◾ Be thoughtfully coordinated with other subsidy programs, zoning initiatives, and the City’s commitment to get housing built in every neighborhood ◾ Meet the City’s obligations under the Fair Housing Act to have more affordable housing in thriving, diverse neighborhoods ◾ Flexibly address the city’s very different neighborhood rental markets, yet be simple to administer and enforce to ensure that developers and owners who take advantage of the exemption live up to their obligations Check out the summary blog post here: https://buff.ly/3TFndrY Read the the policy brief here: https://buff.ly/3vCM6N2

In a recent Forbes article, TAT Associate Phil Renzi discusses how development teams can successfully combine Federal and State tax incentives to ensure projects involving historic buildings and affordable housing are financially feasible. Renzi states, “On their own, historic tax credits and low-income housing tax credits are extremely valuable. Combined, it’s not hyperbolic to say the effect is incredible.” https://bit.ly/3Lj8kIi

Introducing the 485X Tax Abatement: A New Incentive for Affordable Housing Development in New York: New York recently introduced the 485X tax abatement to promote the construction of affordable housing. Passed six months ago, this abatement provides tax incentives for new multifamily development. It comes as a replacement for the 421a program, which ended in June 2022. While 421a projects continue for developments started before its discontinuation, the 485X program offers new opportunities for developers looking to benefit from reduced taxes in exchange for including affordable housing units. Key 485X Options for Developers: Option A: -100+ units: 25% must be affordable at 80% of Area Median Income (AMI). 35-year abatement term. Construction wage: $40/hour. -150+ units: 25% must be affordable at 60% AMI. 40-year abatement term. Construction wage: $63-$73/hour, depending on location. Option B: -11-99 units: 20% must be affordable at 80% AMI. 35-year abatement term. No required construction wage. First 25 years: 100% tax exemption. Last 10 years: Exemption equal to the % of affordable units. Option C: -6-10 units: No affordability requirement, but 50% must be rent-stabilized. 10-year abatement term. No required construction wage. Key Differences from 421a: -Non-affordable units under 485X are fair-market rates during the abatement period, while under 421a, they are rent-stabilized until the abatement expires. -Section 8 units under 485X are permanently affordable. The 485X program is designed to encourage long-term investments in affordable housing while providing flexibility for developers. Different options for varying project sizes make housing development more appealing to investors. Learn more about the 485X tax abatement and how to apply below: 

💡 Did you know: The owner of a median-valued home in Castle Rock ($663,360) pays $37.50 annually in Town property tax. The lion's share of a resident's annual property tax goes to local schools. Another large component of one's property tax payment may be to a metropolitan district; these are taxing entities separate from the Town that exist primarily to fund public improvements to benefit property owners in the district. A provision in the Town Charter restricts annual growth in the Town's property tax revenue to 5.5%, so the Town's mill levy rate actually declined for 2024, to 0.92 mills. The Town expects to bring in only $1.5 million in property tax revenue this year, compared to about $75 million in sales tax revenue.

Multiple Dwellings Relief Abolished: Property Tax Expert Responds to Spring Budget “Research from Cornerstone Tax reveals that new buyers will have to pay upwards of an additional £87,000 for a multiple dwellings relief property. In a surprising move for many, last week’s Spring Budget saw Chancellor Jeremy Hunt abolish the Multiple Dwellings Relief, a popular exemption to Stamp Duty Land Tax (SDLT) first introduced in 2011 as a means to reduce barriers to investment in residential property and stimulate supply in the private rental sector. Between 2022 and 2023, net additional dwellings increased by 234,000, with the number of conversions rising by 4,500 across the country, many Brits will be forced to take on this new financial burden amidst the ongoing cost-of-living crisis, whilst the 2,500 active property developers risk losing a key economic incentive. If contracts were exchanged prior to the 6th March you will retain the relief for the future, if you haven't you have until the 1st June to complete. Many other reliefs remain in place which can substantially reduce your SDLT. Please get in touch if you would like us to check your property purchase or if you have overpaid and due a refund. cward@ctatax.uk.com

Tax Incentives Aim to Drive Real Estate Development Forward It has long been an accepted reality that very little real estate development gets done in New York State without the help of a myriad of tax incentive packages handed out by state and local governments—and the entities that they create. Accordingly, when the New York State legislature allowed its long-standing Real Property Tax Law 421a tax incentive program to expire in June 2022, it effectively put multi-family residential development on ice while cranking up the heat on New York’s long-standing housing crisis. As the acknowledged epicenter of this housing crisis, New York City saw its residential vacancy rate drop to 1.4% in February 2024 – the lowest it has been since 1968.  (https://lnkd.in/ejYjC36q) Now, after two years of uncertainty and plenty of backroom drama, the legislature is back with a replacement program branded the 485x. Predictably, the new program appears to have enough tweaks to appeal to both sides of the housing debate without really solving the problem of affordability or supply. Developers were delighted to see 485x include a 40-year exemption on taxes (up from 35) and a longer sunset provision (10 years) than previous iterations. The give back is that the program tightens affordability requirements in favor of tenants and requires income-restricted units to become permanently affordable. It also includes a complex system of higher wages for workers who build the projects that will clearly impact profitability. Finally, 485x includes many extra details that need to be run through any specific development template before the final cost is known. At this point most observers expect that 485x will provide enough incentive to rejuvenate many multi-family projects that had stalled over the two-year incentive hiatus. The big question is whether it will encourage the tidal wave of development that is sorely needed to reverse the current housing situation in New York State. Stay tuned to see how this develops in New York. Thank you Willets Meyer for this week's Tax Tracker! Please visit our website for more Tax Tracker insights here: https://lnkd.in/gUVD5adG #taxtracker #propertytax #realestatedevelopment

I was quoted a couple of times in this article from The Real Deal about the new 485-x real estate tax exemption program which replaces 421-a. My comments related to concerns with lower AMI requirements and broadened labor rate mandates under the new program. #seidenschein #nyhousing #nychousing #nycrealestate #nyrealestate #taxincentives #421a #multifamilyhousing #multifamilyrealestate #multifamily #development #realestatedevelopment #inclusionaryhousing

Federal and state tax incentives offer opportunities to help ensure projects combining historic buildings and affordability are financially feasible, as when the Low-Income Housing Tax Credit #LIHTC is combined or “twinned” with the Historic Tax Credit (HTC). #hud #usda #affordablehousing #developers