United States: Conforming The 421-a And MIH Programs

Many of our clients have asked us how they can avail themselves of the state's revamped 421-a tax exemption program — the Affordable New York Housing Program1 — on a project that is also subject to the city's Mandatory Inclusionary Housing program (MIH). MIH was adopted in 2016, before the 421-a program was reinstated by the state legislature, but it was assumed that 421-a or a similar tax-exemption program for affordable housing would eventually be enacted.2 However, some of the requirements of the two programs do not squarely align. In particular, developers attempting to use both programs in the same project may find it challenging to coordinate the income levels dictated by the respective programs.

Both MIH and 421-a offer a menu of affordability options. In order to use both programs on a single project, a developer will need to comply with both sets of income limits, in addition to the income limits of any other financing used for the project. The income limits of MIH are primarily expressed as a weighted average, and any combination of income levels in up to three income bands is permitted (below a maximum level), so long as the weighted average is achieved.3 In contrast, 421-a does not allow the flexibility provided by the weighted-average requirement, but instead prescribes specific percentages within specific income bands. The income categories of the 421-a program and the MIH categories that most closely match the 421-a categories are summarized below.

421-a Options

MIH Options

Option A

  • 25% of units affordable, including:
    • not less than 10% of units at 40% of Area Median
      Income (AMI)
    • not less than an additional 10% of units at 60% of AMI
    • not less than an additional 5% of units at 130% of AMI

Option E

  • 25% of units affordable, including:
    • not less than 10% of units at 40% of AMI
    • not less than an additional 10% of units at 60% of AMI
    • not less than an additional 5% of units at 120% of AMI

Option 1

  • 25% of floor area affordable, including:
    • not less than 10% of floor area at 40% of AMI
      weighted average of 60% of AMI
    • no income band may exceed 130% of AMI
    • no more than three income bands

Option B / F

  • 30% of units affordable, including:
    • not less than 10% of units at 70% of AMI
    • not less than an additional 20% of units at 130% of AMI

Option 2

  • 30% of floor area affordable, including:
    • weighted average of 80% of AMI
    • no income band may exceed 130% of AMI
    • no more than three income bands

no corresponding option

Option 3 ("Deep Affordability Option")

  • 20% of floor area affordable:
    • weighted average of 40% of AMI
    • no income band may exceed 130% of AMI
    • no more than three income bands

Option C / G

  • 30% of units affordable at 130% of AMI

Option 4 ("Workforce Option")*

  • 30% of floor area affordable, including:
    • weighted average of 115% of AMI
    • no less than 5% of floor area at 70% of AMI
    • no less than 5% of floor area at 90% of AMI
    • no income band may exceed 135% of AMI
    • no more than four income bands

* not available in Manhattan Community Districts 1-8

Option D

  • Applicable to homeownership projects outside of Manhattan
    with no more than 35 units.
  • All units must have an average assessed value not to exceed
    $65,000 upon the first assessment following the completion date.

no corresponding option

Comparing these income limits, it becomes apparent that a solution that maximizes the tenant income under 421-a would not comply with the weighted-average requirements under MIH. The following examples illustrate this problem. Assuming a developer would attempt to maximize the tenant income in each band permitted by 421-a, the corresponding weighted averages would be as follows.

421-a Option A
weighted average:
(0.4)(40%) + (0.4)(60%) + (0.2)(130%) = 66%

Exceeds the 60% AMI weighted average permitted
under MIH Option 1

421-a Option E
weighted average:
(0.4)(40%) + (0.4)(60%) + (0.2)(120%) = 64%

Exceeds the 60% AMI weighted average permitted
under MIH Option 1

421-a Option B / F
weighted average:
(1/3)(70%) + (2/3)(130%) = 110%

Exceeds the 80% AMI weighted average permitted
under MIH Option 2

Complies with the 115% weighted average permitted under MIH Option 4. The 5% at 70% AMI and 5% at 90% AMI income brackets would be met by the 10% at 70% AMI.

421-a Option C / G
weighted average:
(1.0)(130%) = 130%

Exceeds the 115% AMI weighted average permitted under MIH Option 4, and does not include the 70% AMI and 90% AMI income brackets.

Accordingly, a developer would need to lower the tenant income level in one or more income band, below the maximum permitted 421-a income level, in order to comply with the MIH weighted averages.

Public Subsidies

MIH and 421-a also differ in their regulations regarding the use of other forms of public subsidies in an affordable development.

For Option 1 under MIH, there are no restrictions on the use of additional public subsidies. But under 421-a Option A and Option E, no public subsidies are permitted, except for tax-exempt bonds and 4 percent Low-Income Housing Tax Credits. Thus, a developer seeking to use 421-a Option A or Option E or may need to forgo subsidies that would otherwise be available under MIH Option 1 (e.g., grants, loans, below-market property dispositions).

For Option 2 under MIH and also Option B and Option F under 421-a, there are no restrictions on the use of additional public subsidies. However, as illustrated above, the income levels of 421-a Option B and Option F would significantly exceed the weighted-average income permitted under MIH Option 2. If a developer instead tried to pair 421-a Option B or Option F with MIH Option 4 – the "Workforce" option, available outside of Manhattan, which more closely matches the income levels of these 421-a options – the developer would not be permitted to use additional public subsidies.

This compatibility issue would not be a concern in using MIH Option 4 with either 421-a Option C or Option G. In each case, no additional public assistance is permitted.

Off-Site

The 421-a program also does not allow one of the primary areas of flexibility allowed by MIH: the ability to locate affordable units off-site. MIH permits the "generating site" to be located on a different zoning lot from the "compensated zoning lot," provided that the generating site is located with the same community district or within ½ mile, and provided that the affordable housing percentages are increased by five percentage points in such cases (e.g., from 25 percent to 30 percent, or from 30 percent to 35 percent).5 However, this off-site option is not permitted under 421-a. The 421-a program does allow the affordable units to be in a separate building, which is also permitted by MIH, but the affordable and market-rate building must be located on the same zoning lot.

MIH Uncertainties During ULURP

Another consideration for developers in planning an affordable project is the political nature of the MIH process, which creates uncertainty as to what affordability options will be approved. MIH areas are established through the adoption of a zoning text amendment, which is approved through a public review process similar to the city's Uniform Land Use Review Procedure (ULURP).6 The text amendment may apply the MIH requirements to a single site, or to all the properties within a designated area. The City Planning Commission and City Council will choose the applicable MIH option as part of the land use approval. Developers may be asked to agree to affordability or income levels through the political process that do not correspond to the MIH or 421-a standards, since community boards sometimes request a higher percentage of affordable units and/or lower income levels than prescribed by MIH.

****

Each of these considerations indicates the need for careful planning in developing a project that will take advantage of both MIH and 421-a. In addition, it should be noted that there are many other requirements of the 421-a and MIH programs that must be coordinated in any affordable housing project, such as unit size, bedroom mix, and unit distribution requirements. Please contact the lawyers in the Land Use team at Kramer Levin to discuss the details of your project.

Footnotes

1 NY Real Property Tax Law § 421-a(16), adopted by Chapter 20 of the Laws of 2015 and amended by Chapter 59 of the Laws of 2017.

2 See City Planning Commission Report N 160051 ZRY, February 3, 2016 / Cal. No. 2, at 40 ("While there have been temporary lapses in the 421-a program in the past, availability of this or a similar benefit has long been an important factor in supporting the construction of affordable rental housing in New York City, and both the Mayor and Governor have publicly recognized the need for such a tax program"); see also "Market and Financial Study: NYC Mandatory Inclusionary Housing," September 2015 (the financial feasibility study that supported the MIH program), at 10, 42 (assuming the availability of 421-a in its financial model).

3 For MIH Option 4, four income bands are permitted.

4 This comparison assumes that the unit-based measurement of 421-a can be compared directly to the floor-area-based measurement of MIH, which may not always be the case.

5 See Zoning Resolution §§ 23-154(d)(5), 23-96(a).

6 The process for approving zoning text amendments pursuant to Sections 200 or 201 of the City Charter is substantially similar to ULURP, and the text amendments necessary for MIH are generally approved at the same time as other actions, such as rezonings, that are subject to ULURP.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Related Topics
 
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions