CAN THE NEWLY ENACTED HOUSING LAWS IN NEW YORK STATE SATISFY OWNERS, TENANTSAND DEVELOPERS ALIKE?

The recently enacted housing law package in New York State brings about many changes that are
important to understand for real property owners and developers. While there are multiple
significant changes, which will be touched on below, perhaps the most anticipated part of the
legislative package is the new 485-x incentive program, which seeks to replace the expired 421-a
program.

The 485-x program in the Real Property Tax Law offers property tax incentives to developers as the
government seeks to jumpstart new construction of residential apartments, which plummeted
once the 421-a exemption expired. The 485-x program will have tighter restrictions on both the
income requirements of tenants as well as wage requirements for those workers participating in the
construction of the buildings.

For example, generally for buildings under 100 units, the new law will require 20% of the units to be
set aside at below market rents for those making a weighted average of 80% percent of area median
income (AMI). The AMI is considered $139,800 for a family of three. As the building size grows, the
requirements become more stringent. Those buildings with 100 to 149 units will be required to
have 25% of the units set aside for those with the same 80% of AMI as listed above. For any
buildings with 150 plus units, 25% of the units must be set aside for those making 80% of AMI as
well, while projects of this size in certain designated zones in the City must set aside 25% of units
for those making 60% of AMI.

There are also increased wage requirements that are based on the location of the project, with the
highest amount being required for projects of 150 or more units and located south of 96th Street in
Manhattan and some other prime locations in Brooklyn and Queens.
Other important newly enacted housing related provisions to be aware of include new tenant
protections and the potential for New York City to use its land use review process to increase its
Floor Area Ratio (FAR) cap.

The potential increase of the FAR cap will allow for bigger residential projects, so long as those
projects include affordable units. This will work in tandem with the 485-x program, which can
potentially be used to increase the size of existing properties while obtaining property tax benefits.
New tenant protections in the recently enacted laws amount to a scaled back version of “good
cause eviction,” for which housing advocates have been clamoring. Under these new provisions,
rent increases will be limited to the lesser of 10% of existing rent or 5% plus the Consumer Price
Index. For rent increases over those amounts, landlords will have the ability to rebut the
presumption that those rent increases are “unreasonable” by showing increases in costs
associated with fuel, utilities, insurance, maintenance, taxes and certain significant repairs.

Finally, Individual Apartment Increases (IAI’s) for rent stabilized apartment units, which were
severely limited by the provisions of the 2019 Housing Security and Tenant Protection Act, will be
increased slightly. Instead of increases based on improvements to rent stabilized apartments being
limited to $15,000 and only for a limited amount of time, the new law allows for the increases to be
permanent and sets a higher cap of $30,000, with some other minor changes.

If you have an existing residential building or plan on developing real estate, Schroder & Strom LLP
can help you navigate the provisions of this new law and answer any questions you have regarding
your property tax assessment.