New York State’s 2025 Budget Advances Affordable Housing Goals
In April, New York State Governor Kathy Hochul announced a landmark budget agreement heralded as a giant step for affordable housing. New York’s FY 2025 Enacted Budget includes several key policy changes that could create thousands of affordable housing units across the state.
“It maintains crucial capital funding levels and delivers new first-time initiatives to increase the housing supply,” said New York State Association for Affordable Housing CEO and President Jolie Milstein. “It also removes barriers to affordable housing production by addressing insurance discrimination, lifting limiting zoning requirements in New York City, and furthering needed tax incentives in exchange for providing tenants with long-term affordability.”
485-x Tax Incentive
Enacted on April 20, 2024, the NYS budget created the new 485-x tax incentive, a 10-year program that builds upon the success of the 421-a incentive program. Over the last decade, 421-a, also known as Affordable New York, produced more than two-thirds of all newly constructed multifamily housing in New York City. The newly-created 485-x tax incentive, which is similar to the former program, aims to create new affordable rental housing and homeownership opportunities in a city where rents are growing faster than wages. Although 485-x is a step in the right direction, its tiered system of restrictions has stricter requirements for larger affordable housing projects that could result in less housing.
421-a Extension
Simultaneously, the deadline for completing projects currently vested in the now-expired 421-a program was extended to 2031. This tax exemption, which expired in June 2022, entices developers to set aside affordable housing in their buildings. 421-a’s extension ensures that thousands of units currently in the program can be built.
Residential Density Restrictions
The New York State budget lifted a long-maligned housing density limitation, known as the 12 FAR (Floor Area Ratio) Cap, for the first time since the 1960s. This change, designed to encourage construction, applies to new residential development not located within a New York City historic district.
Tax Incentives for Localities
Localities outside New York City gained the authority to adopt incentives for both mixed-income and 100% affordable housing to support the development of accessory dwelling units (ADUs) across the state. New York State’s 2025 budget also includes a provision that adds an opt-in tax incentive program for mixed-income and 100% affordable new construction or conversion multifamily rental projects.
Government Action
In addition to tax incentives, Governor Hochul announced new funding for affordable housing development, including the creation of a $500 million capital fund to build up to 15,000 units of housing located on state land and another $600 million in capital funding to support additional development throughout the state.
The Outlook
New York State has been making progress with its housing affordability goals over the last several years. Its 2023 budget included a five-year, $25 billion plan to create and preserve 100,000 affordable homes throughout the state. Since then, more than 40,000 homes have been built, with many more on the way after this landmark budget agreement.
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