JavaScript seems to be disabled in your browser. For the best experience on our site, be sure to turn on Javascript in your browser

affordable ny

DSA Company Report On 421a

by development site advisors

As you may or may not know, the current 421-a tax exemption, also known as Affordable New York, is set to sunset on June 15, 2022. 421-a has long been a useful tool to encourage development due to its generous property tax exemption. This exemption had an impact on the property’s value and our research will explain its effects.

Development Site Advisors® maximizes the value of development sites for sale. We are the only firm in New York City that specializes in this sector, as we recognize the complexity of development sites as an asset class. Due to various nuances such as New York City Zoning regulations and the 421-a program, development sites require a more thorough analysis than other properties and our firm can provide that for you.

In the following analysis, we will break down the 421-a tax exemption program and guide you through its effects on the real estate market.


Property tax may constitute about 40-60% of the operational cost of a property, which is a hefty sum to developers and property owners. To incentivize the development of residential real estate, the 421-a tax exemption program was created in 1971. The government subsequently included provisions that mandates the creation of affordable housing units for the developers to qualify for the tax exemption.

In exchange for 25% to 30% of rental units being set aside as affordable and income-restricted, the property owner could receive 35 years of property tax benefits, with the first 25 years exempting 100% of property taxes.

As people begin to learn and understand the benefits of the 421-a program, more participants signed up. In 2015, developers took advantage of the last 12 months of the precedent 421-a program which incentivized them to pay more for development sites. As a result, Brooklyn, Queens and Upper Manhattan showed a general trend of a higher average price per buildable square foot in 2015 compared to 2018 – a year after the program was revived. The creation of affordable housing and the reduced tax burden made the program seem like a win-win situation for both residents and developers.

The precedent 421-a program expired on January 2016 after an unattainable agreement for the program’s extension.

The program was supposed to be extended with two conditions: increase the affordability requirement to 25- 30% from 20% and union-level wages should be paid for eligible projects. Opposition groups claimed that the program operating at the expense of taxpayers benefitted only real estate developers. The increase in wages and construction costs became a stumbling block not only for private developers but also Bill de Blasio’s affordable housing plan. As such, the union-level wage deal was not reached by the deadline. The negotiations continued later in the year concluding that the loss of the program would halt the city’s target in providing affordable housing as each affordable unit would be deemed too expensive to build and operate. The deal was struck between union leaders and real estate executives by lifting some restrictions on 421-a eligible projects which led the revival of the program officially in April 2017. Only certain projects located in the Core Manhattan and East River Waterfront areas along Brooklyn and Queens are required to pay union level wages.


Under the current settings, rental projects eligible to participate in the 421-a program must choose from Options A-G to be complied with for the entire benefit period. These options have different ranges of affordability, location restrictions, public subsidy restrictions and tax credit eligibilities. The U.S. Department of Housing and Urban Development (HUD) defines the median income (100% AMI) each year for NYC – for the year 2020, it is $102,400 for a three-person family.

The commonly used options are B and C.

Option B states that 30% of the rental units must be affordable with at least 10% at up to 70% AMI and 20% at up to 130% AMI. 70% AMI and 130% AMI represent approximate rents of up to $27/sf and $55/sf respectively. Studios, 1 Bedrooms and 2 Bedrooms rents are $1,080, $1,356 and $1,622 per month for 70% AMI while 130% AMI rents are $2,155, $2,700 and $3,235. These targeted rents are calculated based on 30% of annual gross income of each AMI with the assumptions that tenant pays electricity and no electric stove. Option C states that 30% of the rental units must be affordable for up to 130% AMI.

With a more relaxed affordability requirement compared to option B, projects utilizing this option cannot be located south of 96th Street in Manhattan or any other restricted areas. Large projects over 300 rental units in Enhanced Affordability Areas must comply with construction work wage requirement which stands at $60 per hour in Manhattan and $45 per hour in Brooklyn and Queens.

These projects may earn a 100% tax exemption for a 3-year construction period and a 35-year post-construction tax exemption. Enhanced Affordability Areas are primarily located south of 96th street in Manhattan and Community Boards 1 and 2 for Brooklyn and Queens within 1-mile of the bulkhead line.


As the purpose of this research, we compiled 2015 and 2018 development transactions totaling up to 200 data points for neighborhoods in Brooklyn, Queens and Upper Manhattan. In 2015, real estate developers took advantage of the last 12 months of the precedent 421-a program in full effect while in 2018 the program had been revived and running for approximately a year.

The development transactions were analyzed in order to obtain the price per buildable by dividing the transacted sale price with the buildable square foot that the zoning allows. The price per buildable data was adjusted according to the consumer price index (CPI) which was provided by New York MSA to make a fair comparison across the three-year gap.

These neighborhoods across the three boroughs showcased a robust rental market in relation to the condominium market in the same neighborhoods, which can often be sensitive to 421-a regulations.


Based on the collected data, to maximize the value of land for residential development, it is advisable to act while the current program is still in effect.

The program in its current form will be ending next year.

The average price per buildable declined upon the passage of the Affordable New York Program, and a more aggressive program, calling for increased affordability, will likely cause that price to decline even further.

While it is impossible to say with complete certainty where real estate will head in the future, the current climate seems to favor a program overhaul at the very least. Some advocacy groups and political hopefuls are calling for an elimination of the program entirely.

One thing is certain: action must be taken now to reap the benefits before it is gone. If you have been sitting on a parcel, waiting for the right deal to come along, that time is now. To ensure that your property is as attractive as possible to a potential developer, it is in your best interest to sell prior to Affordable New York’s sunset in June 2022

Development Site Advisors® specializes in maximizing the value of development sites for sale. Enjoy our complimentary Sitestimate® evaluation and explore the possibilities offered by your property