Governor Kathy Hochul’s unveiling of a groundbreaking agreement as part of the FY (Fiscal Year) 2025 Enacted Budget marks a decisive step toward addressing New York’s housing crisis. The agreement introduces a range of measures aimed at spurring housing development and enhancing affordability statewide. Among these measures, the introduction of the 485-x tax incentive and a program facilitating commercial to residential conversions stand out as transformative initiatives set to reshape New York City’s housing landscape.

The 485-x, which replaces the 421-a tax incentive, emerges as a cornerstone of the governor’s strategy to boost the creation of new housing units, with a keen focus on affordable rental housing and homeownership opportunities within New York City. To qualify for Affordable Neighborhoods for New Yorkers (ANNY) tax incentive, new construction and qualified enlargements of existing buildings must begin on or after June 16, 2022, and no later than June 15, 2034. The property tax exemption period varies from 10 to 40 years, depending on several factors. ANNY represents a significant shift in the tax incentive landscape and is meticulously crafted to invigorate the development of new housing units, particularly aimed at enhancing affordability in New York City. This incentive offers developers substantial benefits and credits, encouraging them to embark on qualifying housing projects, thereby augmenting the city’s housing inventory. Furthermore, the extension of the completion deadline for projects under the 421-a incentive program until 2031 provides developers with ample time to finalize their endeavors, bolstering confidence in ongoing developments and fostering the creation of additional housing units in the foreseeable future.

Acknowledging the importance of localized solutions, the agreement empowers localities with the authority to adopt tailored incentives addressing their specific housing needs. This includes incentives for mixed-income and 100% affordable housing outside New York City and support for the development of accessory dwelling units statewide. By granting local governments the autonomy to implement targeted measures, the agreement aims to address housing challenges at the grassroots level, ensuring that solutions resonate with local contexts.

Another aspect of the agreement is the introduction of a new incentive aimed at encouraging commercial to residential conversions in New York City. The Affordable Housing from Commercial Conversions (AHCC) Tax Incentive Benefits program applies to eligible conversions if the conversion begins between January 1, 2023, and June 30, 2031. The property tax exemption period ranges from 25 to 35 years, depending on the building’s location and the year in which the conversion work starts. The AHCC initiative seeks to repurpose underused commercial properties into residential units, tackling the housing shortage and surplus of commercial space in the city. By revitalizing neighborhoods and fostering the creation of new affordable housing options, the AHCC program holds the potential to revolutionize urban landscapes and enhance the quality of life for residents.

As New York pushes to confront its housing challenges head-on, these initiatives underscore a renewed commitment to nurturing vibrant, inclusive communities and harnessing the full potential of the state’s housing market. For stakeholders, particularly developers and investors, the spotlight shines on the new 485x tax incentive and the commercial to residential conversions program, presenting enticing opportunities to engage in affordable housing projects and repurpose commercial properties for residential use in New York City. With innovative incentives and targeted interventions, Governor Hochul’s agreement lays the groundwork for a future where affordable housing is attainable for all property owners across New York.

Ryan experts are available to answer questions regarding this new proposal.