The city’s Department of Housing Preservation and Development this week approved a rule change that bars developers receiving 421a from generating off-site inclusionary housing.
Now, developers receiving 421a will need to keep density bonuses generated through the inclusionary housing program onsite. A major reason for the change is that HPD didn’t want condo developers — most of whom are not eligible for 421a — to scoop up these inclusionary air rights. The hope is that condo projects will seek zoning bonuses by creating affordable housing onsite.
In July, HPD approved another rule change involving the tax break. The rule exempts 421a-receiving projects constructed on or before Dec. 31, 2015, that already have a preliminary certificate of eligibility from having to submit a final certificate of eligibility. Under the old version of the tax exemption, developers were required to submit the preliminary certificate before construction was completed and then needed to file the final certificate before tenants moved into the building. Last year, city and state officials cracked down on 421a recipients who had failed to apply for their final certificate.
The new 421a, approved in April, does away with the preliminary certificate of eligibility. Developers now apply for the tax break once the project is completed.
It’s a change that simplifies the amount of paperwork required to receive 421a, but that was bemoaned by some in the real estate industry who argued that the change created uncertainty for developers and lenders as to whether or not they’d receive the tax break.