The future of the 421-a property tax exemption in New York City

Credits & Incentives talk with Deloitte

​“Credits & Incentives talk with Deloitte,” is a monthly column by Kevin Potter of Deloitte Tax LLP, featured in the Journal of Multistate Taxation and Incentives, a Thomson Reuters publication. October’s edition summarizes those aspects of the 421-a exemption program--as amended in AB 8323--that would be applicable through June 15, 2019, pending execution of the memorandum of understanding.

New York's 421-a property tax exemption

Federal, state, and local jurisdictions use credits and incentives to encourage certain types of behavior that can range from hiring and new job creation to going green, and everything in between. Over time, however, credits and incentives need to be reviewed to ascertain whether they are still needed and are still accomplishing the goals for which they were established. One such incentive that has been the subject of significant debate in 2015 is New York's 421-a property tax exemption (the 421-a exemption), which creates full or partial exemptions or tax abatements for new or substantially rehabilitated multiple unit dwellings.1

The 421-a exemption was originally scheduled to expire in June 2015. However, with the enactment of Assembly Bill 8323 (AB 8323) on June 26, 2015, the exemption was extended as specified for construction commenced on or before December 31, 2015.2 Also, AB 8323 provides for the further extension of the 421-a exemption program until June 15, 2019, as substantially amended in AB 8323, if representatives of labor and real estate interest groups enter into a memorandum of understanding addressing wage protections for construction workers with respect to buildings of over 15 units that benefit from the exemption.3 As this column goes to press, a memorandum of understanding has not yet been

This article provides an overview of the 421-a exemption program, including its general operation historically, and summarizes those aspects of the program-as amended in AB 8323-that would be applicable through June 15, 2019, pending execution of the memorandum of understanding mentioned above.5

For a complete list of references, download the PDF.

Download the PDF to read the full column

Excerpts from this month's issue

Historical overview 

In the 1970s, New York created the 421-a exemption to spur housing development at a time when new construction in New York City had slowed substantially and the city as a whole was struggling. As time passed and conditions improved, the program was adjusted in the 1980s to encourage the growth of affordable housing units.

As a result of this adjustment, a zone of exclusion (known as the Geographic Exclusion Area or "GEA") was created under the program whereby developments in prime Manhattan locations, i.e., generally south of 96th Street and north of 14th Street, were required to include at least 20 percent affordable housing in order to be eligible for the 421-a exemption.6 Originally, developers could also build affordable housing units elsewhere in the city to obtain affordable housing certificates, enabling the construction of market rate units in Manhattan without including affordable housing.

In the 2000s, the GEA was expanded to include the entirety of Manhattan, as well as certain portions of the remaining four boroughs with strong market values, thus permitting developers to obtain the benefits of 421-a in a greater number of locations.

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Contact us

For more information regarding tax credits and incentives, contact:

Kevin Potter
Deloitte Tax LLP
New York
+1 212 492 3630

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