Amd S655, Priv Hous Fin L; amd SS11-2102 & 11-2104, NYC Ad Cd; amd S421-a, RPT L
Imposes a tax on conveyances in the city of New York on conveyances of residential property for $1,750,000 or more, with the revenue therefrom to be used by the city housing authority for bond payments; amends certain provisions relating to the property tax exemption for certain new multiple dwellings.
NEW YORK STATE ASSEMBLY MEMORANDUM IN SUPPORT OF LEGISLATION submitted in accordance with Assembly Rule III, Sec 1(f)
BILL NUMBER: A7945
SPONSOR: Wright TITLE OF BILL: An act to amend the private housing finance law, in
relation to the issuance of notes and bonds by the New York city housing
development corporation; to amend the administrative code of the city of
New York, in relation to imposing a tax on conveyances or transfers of
residential real property for one million seven hundred fifty thousand
dollars or more (Part A); and to amend section 421-a of the real proper-
ty tax law, in relation to tax exemption for multiple dwellings (Part B)
SUMMARY OF PROVISIONS: Part A
Section one sets forth the legislative findings for the bill.
Section two amends section 655 of the Private Housing Finance Law to
authorize the New York City Housing Development Corporation to issue
notes and bonds secured by the revenue stream that will be generated by
the tax imposed by subdivision g of section 11-2102 of the Administra-
tive Code of the City of New York.
Section three amends section 11-2102 of the Administrative Code of the
City of New York by adding new subdivisions g, h, and i. These subdivi-
sions impose an additional tax on conveyances or transfers of residen-
tial real property or economic interests in such property when the
consideration for such conveyances or transfers is greater than $1.75
million. The rate of tax for these conveyances or transfers would be 1%
where the consideration is greater than $1.75 million and not over $5
million and 1.5% of the portion of the consideration over $5 million
plus $50,0000 where the consideration is over $5 million. Subdivision i
provides that the revenue collected pursuant to this additional tax
shall be used for the development of affordable housing.
Sections four and five of the bill amend section 11-2104 of the Adminis-
trative Code to specify that this tax should be paid by the grantee and
that the revenue collected by the Department of Finance pursuant to this
additional tax shall be deposited in a separate account within the
City's general fund for the development of affordable housing.
Section six of this bill provides that the bill takes effect 90 days
after enactment.
Part B
Section one adds two new subdivisions to section 421-a of the Real Prop-
erty Tax Law ("RPTL"). Notwithstanding the provisions of any other
subdivision of section 421-a or of any general, special or local law to
the contrary, new subdivision 16 would, in a city having a population of
one million or more, set new 421-a eligibility requirements and benefit
periods for multiple dwellings that commence construction after December
31, 2015 and on or before June 15, 2019, and that complete construction
on or before June 15, 2023. Such multiple dwellings would be required to
contain at least six dwelling units created through new construction or
eligible conversion that are operated as rentals. Such multiple dwell-
ings would need to provide affordable housing through one of three
affordability options, in order to be eligible for thirty-five years of
exemption from real property taxation, other than assessments for local
improvements. Such multiple dwellings would receive a 100% exemption
from real property taxation during the construction period for a maximum
of three years, a 100% exemption from real property taxation for the
first 25 years following completion, and, for the final 10 years of the
exemption period, an exemption from real property taxation equal to the
percentage of affordable units included in such multiple dwelling. Such
multiple dwellings would continue to pay taxes on the assessed value of
the land and improvements during the tax year prior to commencement of
construction, and all assessments for local improvements. The 421-a
benefit would be reduced by the aggregate floor area of commercial,
community facility and accessory use space, other than parking which is
located not more than 23 feet above the curb level, in excess of 12% of
the aggregate floor area.
The three affordability options available to projects seeking the 421-a
benefit would be: (a) not less than 10% of dwelling units affordable to
those at or below 40% of area median income ("AMI"), not less than an
additional 10% at or below 60% of AMI and not less than an additional 5%
at or below 130% of AMI, with no governmental assistance other than tax
exempt bond proceeds and 4% tax credits; (b) not less than 10% at or
below 70% of AMI and not less than an additional 20% at or below 130% of
AMI; and (c) not less than 30% at or below 130% of AMI, with no govern-
mental assistance. These affordability requirements would apply through-
out the 421-a benefit period at both initial rental and upon vacancy.
Such affordable units could not be rented on a temporary, transient or
short-term basis, nor converted to cooperative or condominium ownership.
Tenants below such maximum AMIs would be expressly allowed to occupy
such affordable units. All rental dwelling units would have to be
accessed through the same street entrances and lobbies, and no such
entrance or lobby could serve some rental dwelling units to the exclu-
sion of others. The affordable dwelling units in all of the three
affordability options would remain rent stabilized until the first
vacancy following the expiration of the 421-a benefits, even if such
benefits are revoked. Unless preempted by other governmental require-
ments, such affordable units would be required to have a unit mix
proportional to the market rate units, or at least 50% of the affordable
units would be required to have two or more bedrooms and no more than
25% of the affordable units could have less than one bedroom.
Applicants for 421-a benefits would be required to provide prevailing
wages for building service employees, unless (a) there are fewer than 30
dwelling units or (b) all of the dwelling units are affordable units and
at least half of the affordable units are affordable to those at or
below 125% of AMI. The fiscal officer would be authorized to enforce the
prevailing wage requirement, and would be required to present evidence
of any noncompliance to the department of housing preservation and
development. If dwelling units existed on the site three years prior to
commencement of construction, the number of affordable units provided
must equal or exceed the number of such units that were removed or
demolished. Concurrent exemptions or abatements are prohibited. The
department of housing preservation and development would be authorized
to permit the voluntary termination of 421-a benefits only in connection
with the commencement of a new tax exemption pursuant to either RPTL
section 420-c or the Private Housing Finance Law. The department of
housing preservation and development could also terminate or revoke
421-a benefits for noncompliance with subdivision 16.
Applications would have to be filed within one year after completion,
and the department of housing preservation and development would be
authorized to require a filing fee of $3,000 per dwelling unit unless
lesser fees are authorized pursuant to rule for governmentally-assisted
projects. The department of housing preservation and development also
could require by rule that applications be filed electronically.
A city having a population of one million or more would be authorized to
enact a local law to restrict, limit or condition the eligibility for or
scope or amount of 421-a benefits in any manner, but such local law
could not take effect until one year after the date of enactment. The
provisions of New York City Administrative Code sections 11-245 and
11-245.1 or of any other local law enacted before the effective date of
subdivision 16 would not restrict, limit or condition the eligibility
for or the scope or amount of 421-a benefits authorized by subdivision
16. Finally, a rental project that commences construction prior to
December 31, 2015 that has not received 421-a benefits before subdivi-
sion 16 becomes effective may opt to receive 421-a benefits pursuant to
subdivision 16.
Notwithstanding the provisions of any other subdivision of section 421-a
or of any general, special or local law to the contrary, new subdivision
17 would, in a city having a population of one million or more, provide
an extended 421-a benefit option to projects that commenced construction
prior to July 1, 2008, and received a 20-year or 25-year tax exemption
under section 421-a prior to the effective date of this act by making at
least 20% of the units affordable to families of low and moderate
income, provided that all residential tax lots operate as rental hous-
ing. For an additional 15 years of extended benefit in the case of a
20-year benefit property or for an additional 10 years in the case of a
25-year benefit property, not less than 20% of the dwelling units would
have to be affordable to those with household incomes at or below an
average of 80% of AMI, with not less than an additional 5% at or below
130% of AMI. These affordability requirements would apply throughout the
extended benefit period at both initial rental and upon vacancy. In
exchange for extended affordability, projects would receive a 50%
exemption from real property taxation, other than assessments for local
improvements, for this extended benefit period. Such projects would
continue to pay the same real property taxes they were paying during
their 20-year or 25-year benefit period on the assessed value of land
and improvements during the tax year preceding the commencement of
construction of such projects. Any extended benefit would be reduced by
the percentage of aggregate floor area occupied by commercial, community
facility, parking and accessory use space exceeding 12% of the aggregate
floor area. A restrictive declaration executed by all parties in inter-
est would be recorded against the real property.
Affordable units could not be rented on a temporary, transient or short-
term basis, nor converted to cooperative or condominium ownership.
Tenants below maximum AMIs would be allowed to occupy such affordable
units. Affordable units would remain rent stabilized during the extended
benefit period, even if the extended benefit is terminated or revoked.
Furthermore, tenants in occupancy after the extended benefit period
could remain as rent stabilized tenants for the duration of their occu-
pancy.
Applicants for the extended benefit would be required to provide
prevailing wages for building service employees, unless (a) there are
fewer than 30 dwelling units or (b) all of the dwelling units are
affordable units and at least half of the affordable units are afforda-
ble to those at or below 125% of AMI. The fiscal officer would be
authorized to enforce the prevailing wage requirement, and would be
required to present evidence of any noncompliance to the department of
housing preservation and development. Concurrent exemptions or abate-
ments would be prohibited. The department of housing preservation and
development would be authorized to permit the voluntary termination of
421-a benefits in connection with a new tax exemption pursuant to either
RPTL section 420-c or the Private Housing Finance Law. The department of
housing preservation and development could also terminate or revoke the
extended benefit for noncompliance with subdivision 17.
Applications for this extended benefit would be required to be filed on
or before the later of December 31, 2016, or 18 months after the 20-year
or 25-year benefit period expires. A filing fee of $3000 per dwelling
unit would be required in connection with any application. The depart-
ment of housing preservation and development also would be authorized to
require by rule that applications be filed electronically. A city having
a population of one million or more would be authorized to enact a local
law to restrict, limit or condition the eligibility for or scope or
amount of the extended benefit in any manner, but such local law could
not take effect until one year after the date of enactment. The
provisions of New York City Administrative Code sections 11-245 and
11-245.1 or of any other local law enacted before the effective date of
subdivision 17 would not restrict, limit or condition the eligibility
for or the scope or amount of the extended benefit authorized by subdi-
vision 17.
Sections two and three of the bill amend RPTL sections
421-a(2)(a)(iv)(A) and 421-a(2)(c)(ii), respectively, to provide that
the existing 421-a tax exemption program would continue to apply to new
multiple dwellings that commence construction on or before December 31,
2015, provided that such multiple dwellings receive their first tempo-
rary or permanent certificates of occupancy covering all residential
areas on or before December 31, 2019. Solely for these purposes, and
notwithstanding any local law to the contrary, "commence" would be
defined as the date upon which excavation and construction of initial
footings and foundations lawfully begins in good faith or, for an eligi-
ble conversion, the date upon which the actual construction of the
conversion, alteration or improvement of the pre-existing building or
structure lawfully begins in good faith.
Section four of the bill amends subdivision 2 of RPTL section 421-a by
adding a new paragraph (j) authorizing the local housing agency to
permit voluntary termination of benefits under the existing 421-a
program in connection with a new tax exemption pursuant to either RPTL
Section 420-c or the Private Housing Finance Law.
Sections five and six of the bill amend subdivision 3 of RPTL section
421-a by authorizing the local housing agency to promulgate rules
requiring that applications be filed electronically.
Sections seven and eight of the bill amend subdivision 6 of RPTL section
421-a to provide that the current requirements for 421-a tax benefits in
the Greenpoint-Williamsburg Waterfront Exclusion Area would continue to
apply to buildings where (a) the real property containing such building
was identified in a covered project agreement executed and recorded on
or before December 31, 2015, and such agreement was not thereafter
amended to include additional real property; (b) at least one building
in such covered project that meets the Greenpoint-Williamsburg Water-
front Exclusion Area affordability requirements commences construction
or before December 31, 2015; and (c) all of the buildings in such
covered project that receive benefits pursuant to RPTL section
421-a(6)(f) completed construction on or before June 15, 2025.
Section nine of the bill amends subdivision 6 of RPTL section 421-a to
provide that covered projects entirely located within the Greenpoint-
Williamsburg Waterfront Exclusion Area are exempt from the assessed
valuation cap.
Section ten of the bill amends the current prevailing wage requirements
for 421-a beneficiaries. The section would exclude superintendents from
the definition of "building service employee," since there are no
prevailing wages for such employees and if there were, they would be
covered because the list is not exhaustive. The section would also
require, in a building receiving benefits under the existing 421-a
program and whose construction commenced on or after December 28, 2007,
all building service employees to receive prevailing wages for the dura-
tion of such benefits, and authorize the fiscal officer to enforce this
requirement and further require such fiscal officer to present evidence
of noncompliance to the local housing agency.
Section eleven of the bill provides for effective dates.
REASONS FOR SUPPORT:
Part A
The current state mansion tax is imposed on real estate conveyances or
transfers of one million dollars or more. This tax is a flat 1% tax
imposed on any such conveyance, such that a $1 million condominium
purchaser would pay the same rate as a $30 million condominium purchas-
er.
The proposed legislative amendment would impose an additional City tax
on conveyances or transfers of residential real property or economic
interests in such property where the consideration for such conveyances
or transfers is greater than $1.75 million. The tax rate for this addi-
tional tax would be 1% where the consideration is greater than $1.75
million and not over $5 million, and 1.5% where the consideration is
over $5 million. This graduated tax will help to ensure that the
purchasers of the most expensive properties in the City will pay more
than the purchasers of more modest homes.
The revenue generated by this additional tax would be dedicated to
affordable housing development. It is projected that it will yield
approximately $1.8 to $2 billion over the next ten years, which would
help to fund Housing New York, the Mayor's five-borough, ten-year plan
to finance the preservation and construction of 200,000 affordable hous-
ing units. That plan is absolutely critical to address the urgent need
for affordable housing.
New York City is experiencing an extreme shortage of affordable housing.
The City's diversity, competitiveness, and economic strength are imper-
iled by the fact that more and more people struggle to live here. Hous-
ing New York lays out a blueprint for preserving and constructing
200,000 units of affordable housing to help address that shortage, but
achieving the goals of Housing New York will require significant commit-
ments of City capital. The mayor has committed $8.2 billion towards the
plan, but at least $1.9 billion more is needed to fully fund the 200,000
units. This tax would fill that critical need.
Part B
RPTL section 421-a has provided tax benefits for the construction of new
residential buildings in New York City since 1971. Benefits are avail-
able for up to a maximum of 25 years, depending upon the location of the
multiple dwellings and the inclusion of affordable housing units. Since
1985, the program has been responsible for generating affordable housing
units in all five boroughs.
The 421-a program was last updated between 2006 and 2008 through a
series of State and local legislative changes. Such changes included:
(1) expansion of the Geographic Exclusion Area, which conditions bene-
fits on providing affordable housing, from Manhattan between 14th to
96th Streets, to all of Manhattan as well as broad areas in the other
four boroughs; (2) elimination of the negotiable certificate program,
allowing market rate buildings in the Geographic Exclusion Area to
receive benefits generated by off-site affordable units; (3) imposition
of an assessed valuation cap so that only a portion of an apartment's
billable exempt assessed value would be eligible for benefits; (4)
35-years of affordability and rent stabilization protection for afforda-
ble rental units in the Geographic Exclusion Area; and (5) prevailing
wages for building service employees in buildings receiving benefits.
The 421-a program must be retooled to adequately address the extreme
shortage of affordable housing in New York City. Reform of the program
is key to Mayor de Blasio's Housing New York goal of preserving and
constructing 200,000 units of affordable housing over the next ten
years. Under the proposed legislation, affordability requirements will
no longer be limited to a specific geographic area but, instead, will be
a Citywide prerequisite to receiving any 421-a benefits. The bill,
instead of applying one affordability requirement to every building,
provides developers with three options, and limits additional subsidies
to certain options. Only dwelling units operated as rentals will be
eligible for benefits, and all rental dwelling units must be accessed
through the same street entrances and lobbies. Each eligible project
will get the same 35 years of benefits, except that the last 10 years of
such benefits will be based upon each project's specific percentage of
affordable units. Rather than a bifurcated application process in which
applicants must file one application for construction period benefits
and another application for final benefits, applicants will file a
single application within one year after completion, and construction
period benefits will be applied retroactively. The site eligibility
requirement, which drains significant time and resources with no real
effect on eligibility, will be eliminated. However, any dwelling unit
that was_on the site three years prior to commencement of construction
or conversion and was thereafter demolished, removed or reconfigured,
must be replaced with an affordable dwelling unit. While these new
requirements will be mandated for projects that commence construction
after December 31, 2015, other projects that have not received 421-a
benefits prior to the effective date of the act may opt to receive their
421-a benefits pursuant to new program requirements.
The proposed legislation contains another significant tool for preserv-
ing affordable housing in New York City. It provides a new extended
affordability option available to multiple dwellings already receiving
20 or 25-year benefits under the existing 421-a program, provided that
all residential tax lots in such multiple dwellings are operated as
rental housing.
Finally, amendments to the existing 421-a program impose a completion
deadline for projects to be exempt from the new requirements. Such
amendments also include technical fixes to the existing statutory
scheme, such as providing an enforcement mechanism for the prevailing
wage requirements for building service employees and ensuring that
projects in the Greenpoint-Williamsburg Waterfront Exclusion Area that
meet the onsite affordability requirements are exempt from the assessed
valuation cap.
Accordingly, the Mayor urges the earliest possible favorable consider-
ation of this proposal by the Legislature.
