Shaping the NYC Skyline

Oct 10 2024 18 mins 2

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In this bonus episode of Shaping the NYC Skyline, we’re once again joined by Jason Hershkowitz, Partner at Seiden & Schein, P.C., to analyze the newly proposed rules from the Department of Housing Preservation and Development (HPD) for the 485-x and 467-m tax exemption programs.

Jason walks us through the key differences between the proposed rules and those under the now-expired 421-a tax exemption program. With these rules still in the public comment phase, Jason emphasizes the importance of developers taking an active role in shaping the final rules before the November deadline.

Key takeaways:

New Filing Requirements: A significant shift under 485-x is the requirement for developers to file an applicant registration within six months of commencing construction, notifying HPD of their intent to apply for the exemption. Additionally, 25% of the application fee is now due when submitting the workbook, a departure from 421-a’s post-construction fee schedule.
MWBE Requirements: The 485-x program introduces a 25% Minority and Women-Owned Business Enterprise (MWBE) spending threshold for project design and construction contracts. While this provides a clear compliance path, questions remain for developers who do not meet the threshold and must demonstrate “reasonable efforts"—a standard still subject to HPD discretion
Construction Wage Thresholds: Jason highlights the expanded wage requirements, which now apply to projects in specific zones and of a certain size. Developers must notify HPD of wage compliance at least three months before construction starts. Penalties for non-compliance include significant fines and potential forfeiture of tax benefits
Permanent Affordability: A critical change in both 485-x and 467-m is the requirement for permanent affordability. Units that are affordable under those programs will remain affordable and rent-stabilized even after the tax benefit period ends, with HPD maintaining oversight, adding a layer of ongoing compliance that didn’t exist under 421-a.

This episode provides essential insights into how developers can navigate the proposed regulations and the public comment process before the rules are finalized. Jason’s practical advice on compliance and avoiding costly penalties is invaluable. Be sure to also check out our earlier episode, The 485-x Tax Exemption Explained: A Deep Dive with Jason Hershkowitz, for a foundational overview of the 485-x tax exemption program.

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