A disappointing number of developers have applied for a 421a extension — a seemingly crucial step for owners of stalled multifamily projects in New York City.
One city official called the application volume “maybe under my expectations,” Crain’s reported.
“I haven’t seen a huge interest in the extension,” said attorney Martin Heistein, whose department at law firm Belkin Burden Goldman handles such inquiries.
A source with knowledge of application filings told The Real Deal that only 315 applications have come in, and called the total “a joke.”
That’s a big problem for developers with 421a sites gathering dust. Absent an extension, they need to wrap work by 2026 to qualify for the property tax break, which apartment projects typically need to pencil out.
It’s also a worry for a city in the throes of a housing crisis. After 421a expired in June 2022, project filings fell off a cliff.
Now the clock is ticking. The application deadline for 421a extensions is Sept. 12, and sites eligible for the program cannot get Gov. Kathy Hochul’s replacement, 485x. It’s 421a or bust.
So, why aren’t they grasping the lifeline?
“The developers are not aware of it,” said Eli Guttman of Metropolitan Realty Exemptions, which specializes in 421a advisory.
Some owners, Guttman said, don’t know an extension is possible. MRE has reached out to all of its clients and found many were none the wiser.
“Simple as that,” he said.
Among developers who knew applications had opened but hadn’t applied for an extension, tax consultants cited confusion.
The state’s 421a program gives multifamily projects a tax break if they make enough units permanently affordable. The version of the program that expired in 2022, also known as Affordable New York, provided three options for developers.
Option C was by far their favorite. It required developers to charge rents affordable to households earning 130 percent of the area median income at 30 percent of units.
Tenant advocates and many elected officials criticized the affordability tier, asking, “affordable for whom?” Hochul, in her housing deal, did not include Option C in her extension program.
But she did offer those developers a safety net. They could submit a letter of intent, or LOI, and apply for an extension under Options A or B, which require deeper affordability.
Owners who file for an extension under Option B, which requires 20 percent of units be affordable at 130 percent of the AMI and 10 percent at 70 percent of AMI, wouldn’t be stuck with those affordability tiers.
“It clearly says in the LOI it’s non-binding,” Guttman said.
That means developers who finish construction by the 2026 deadline could qualify for the higher rents of Option C, and switch to A or B if they finish later.
“We have to remind clients you’re not locking yourself in,” said Isaac Katz, who heads 421a consultant City5 Consulting. “HPD has made it clear: You basically have a safe haven.”
Of course, the confusion isn’t ubiquitous. Brett Gottlieb, a partner at Herrick who specializes in tax incentives, said all of his clients had completed the extension and drafted “contingency plans” in case they did not qualify for higher rents under Option C.
The attorney pegged low application volume to good old-fashioned procrastination.
“My expectation is there will be a late surge of submissions right up until the deadline,” Gottlieb said.
With just two weeks to go until that deadline, the hope among consultants and city housing officials is developers don’t wait so long they chance missing the window entirely.
“It’s always better to have Option B than a building with no abatement,” Guttman said.
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