Hochul to propose letting city replace 421-a tax abatement, affordability unclear. She'll propose extending completion for vested projects. B5 could qualify.

Governor Hochul Announces Next Phase in Long-Term Housing Strategy Will Focus on Increasing Housing Supply in New York City, Gov. Kathy Hochul announced Jan. 9, as part of her State of the State address.

The notable section for Atlantic Yards/Pacific Park watchers is this:

Incentivizing Construction of New Housing, Including Affordable Housing

The expiration of the 421-a tax abatement program in 2022 put the construction of an estimated 30,000 units of housing in New York City at risk. To avoid losing thousands of units of housing already under construction, Governor Hochul launched a pilot program in July 2023 to replicate the 421-a program’s benefits and obligations for projects located within the Gowanus rezoning area in Brooklyn that were already vested in the tax abatement program when it expired.

As of December 2023, the Governor’s Gowanus program has received 19 applications that could yield up to 5,500 units of housing, including 1,400 units of affordable housing.

To help the City unlock the potential for thousands more rental units, Governor Hochul will propose legislation to allow New York City to offer a tax abatement for new rental construction to replace the expired 421-a program.

The Governor will also propose a citywide extension of the completion deadline for the expired 421-a program to ensure the City does not lose out on tens of thousands of units of housing under projects that are currently vested in that program.

Note: Erik Engquist of The Real Deal called Hochul's plan "Hopeless, but at least calls lawmakers’ bluff."

He argued that her challenge to legislators to "cede control to New York City on two important things: property taxes on rental projects and a cap on housing density" would lead to no action, given their previous willingness to let 421-a expire without a replacement

Even if they do devolve control to City Council, he argued that the latter body would ask for too much.

What's it worth?

A successor to 421-a could, as the real estate industry insists, restart housing production.

B5, center-left, plus (built) B4. Dattner Architects

But the devil is in the details. The previous version of 421-a, which gave tax breaks for buildings with 30% middle-income units at 130% of Area Median Income (AMI)--the equivalent to market-rate in certain neighborhoods--was widely derided.

Hochul's 2022 proposed replacement, 485-w, did offer more affordability than the previous version, but didn't fly, in part because it was seen as too little and also because legislators were negotiating other aspects of the housing package.

Saving B5?

The extension was something Hochul proposed last year, as well.

If it passes, that means buildings that started--were vested thanks to some installation of footings--by the construction commencement deadline of June 15, 2022--should get an extension for completion.

That could mean that B5 (700 Atlantic Ave.), the first tower slated to be built over the Vanderbilt Yard, could qualify--at least if construction of an expensive platform proceeds.

Developer Greenland USA had planned to start construction one year after the platform started, but the platform did not start, as planned, in spring 2022.

If B5 does proceed, it could contain 30% "affordable" units at 130% of AMI. It could have 478 market rentals and 204 affordable ones.

Other housing proposals

Hochul also said that, among other proposals, she'd seek:

• legislation to allow New York City to offer a financial incentive for the construction of affordable housing units in office conversion projects.
• legislation to allow New York City to lift the cap on floor area ratio [12 FAR] for housing "to maximize housing construction, including affordable housing construction"
• a $500 million capital fund to support the development of state-owned sites for housing.