Bisnow: Affordable NY tax break expiration fuels uncertainty; might option for units at 130% of AMI (popular for Atlantic Yards) be revised? How much?

Uncertainty Over Affordable New York Abatement Reverberating Through Investment Sales Market, Bisnow reported 12/16/21, following up on previous industry angst:

There is growing angst over the future of the treasured Affordable New York tax break, formerly known as 421-a, and as the expiration date marches closer, there is a sense of resignation in real estate circles that the program is almost certainly set to undergo some market-altering changes. 

Affordable New York is set to expire in June. The program currently allows developers a tax exemption for 35 years if they set aside 25% to 30% of the units for low- and moderate-income tenants when they build a market-rate rental building with more than 300 units. It was last reformed in 2017, when its name changed from 421-a.

Indeed, that tax break is what has fueled the four most recent Atlantic Yards/Pacific Park towers: the completed B15, nearly-complete B4, and the due in mid-2023 B12/B13.

And it's fueled criticism--including from the administration of Mayor Bill de Blasio--that the affordability option chosen (for the first two, and likely the rest) does little to help the needy, given that they are middle-income units targeted for households at 130% of Area Median Income, many earning six figures. There are two other options for rental housing, with greater affordability--but, apparently, less returns for developers.

What's next?

Unclear is whether the program will be renewed, revised, or killed--which is why then Empire State Development Chairman Steven M. Cohen in March raised the possibility of a legislative "fix" to enable the completion of the required 2,250 Atlantic Yards/Pacific Park affordable units.

After all, it seems unlikely that two buildings--surely the minimum to deliver the remaining 876 units--could start before the June 15, 2022 deadline.

Bisnow notes that "the uncertainty is now affecting deal- and decision-making in the city’s investment market," and that some landowners are trying to get sites green-lit to take advantage of the tax break, assuming they'll "be worth more on the sales market in the coming months."

It also means that some sites might be developed as more expensive condos, which are not reliant on the tax break. (That's not likely, at least in the short-term, for Atlantic Yards/Pacific Park.)

“Under the current program, 130% AMI is the most popular affordability option," YuhTyng Patka, the chair of the New York City Real Estate Tax and Incentives Practice Group at Duval & Stachenfeld, said, according to Bisnow. "So there is a possibility that that amount will be decreased.”

That, of course, would be a matter of degree. After all, affordable units targeted to those at, say, 110-120% of AMI, may not reach very different populations, given the likelihood that AMI, a regional figure, continues to rise.