On May 10, 2016, Mayor Bill de Blasio signed into law an extension of the "J-51" program, which provides property tax exemption and abatement benefits to eligible residential rehabilitation projects and certain conversions from nonresidential to residential use. The J-51 program can provide owners and developers of residential properties with significant property tax savings and can be combined with certain other economic incentive programs. For example, the rehabilitation of a residential building containing affordable housing and the conversion of a nonresidential building to residential use containing affordable housing may both qualify as projects for J-51 benefits and for additional residential development rights under the voluntary Inclusionary Housing program or the new Mandatory Inclusionary Housing program. Under the new law, J-51 projects must complete construction by June 30, 2019.
J-51 is not a substitute for the currently expired 421-a program, as it primarily applies to major capital improvements and certain conversion projects, not new construction projects. Under J-51, eligible conversions to residential use must involve substantial governmental assistance pursuant to a program for the production of affordable housing. By contrast, 421-a was historically available to and used widely by new construction projects.
As of this week, it has been widely reported that the Real Estate Board of New York (REBNY) and the Building & Construction Trades Council of Greater New York (Construction Trades) have been discussing with Governor Andrew Cuomo the possibility of an extension of or replacement for the 421-a property tax exemption program for new construction residential projects. With the New York State legislative session scheduled to end in June, the question remains whether REBNY and the Construction Trades can reach an agreement on construction wage requirements under 421-a that will produce legislative results. Absent 421-a's extension or replacement with another, substantially similar as-of-right property tax exemption program, many commentators, including Mayor de Blasio, have indicated that the uncertainties surrounding property taxes, potential construction wage requirements, and other issues will continue to stall development of mixed-income rental projects.
In the meantime, residential condominium projects, 100% affordable new construction residential projects (with different property tax exemption programs, such as 420-c or Article XI, and with significant government assistance), repositioning existing residential projects, and nonresidential development projects (often utilizing the ICAP property tax abatement program and certain other incentives) are expected to proceed.