In the dynamic landscape of New York City real estate, understanding the intricacies of Inclusionary Housing (IH) and the new 485x tax abatement is essential for developers. These programs are designed to balance development with affordability, ensuring that new projects contribute to the city's housing needs. Here, we dive into the details of Mandatory Inclusionary Housing (MIH), Voluntary Inclusionary Housing (VIH), and their application within the 485x tax abatement framework

Mandatory Inclusionary Housing (MIH)

Established in 2016, MIH is a key policy requiring developers to include affordable housing in new residential developments. The specifics are:

    Affordability Requirements: Depending on the area and project, developers must allocate 25-30% of the residential floor area to affordable units. These units must be available to residents earning 60-80% of the Area Median Income (AMI).
  • For instance, 25% at 60% AMI ($46,620/year for a family of three) or 30% at 80% AMI ($62,150/year for a family of three).
  • Additional Options:
    • Deep Affordability Option: 20% of the floor area for residents earning 40% AMI ($31,080/year for a family of three).
    • Workforce Option: 30% of the floor area for residents earning 115% AMI ($89,355/year for a family of three), with no units for incomes above 135% AMI ($104,895/year for a family of three).

These requirements aim to ensure permanent affordability and are subject to a public land-use review process, ensuring community involvement and transparency.

Voluntary Inclusionary Housing (VIH)

First introduced in 1987 and expanded in 2005, VIH offers developers incentives to include affordable units in their projects.

    In R10 Districts: Developers can increase their Floor Area Ratio (FAR) from 10.0 to 12.0 by providing permanently affordable units for residents earning at or below 80% AMI.
  • Each square foot of affordable housing can generate 1.25-3.5 sq. ft. of additional floor area, depending on factors like public funding involvement and project type (new development, rehabilitation, or preservation).
    In Inclusionary Housing Designated Areas (IHDAs): The affordable floor area can be transferred to other projects within the same district or within half a mile into an adjacent district, allowing for flexible development planning.

The VIH program includes strict guidelines on unit distribution and bedroom mix, ensuring affordable units are spread throughout the building and proportionate to market-rate units.

The 485x Tax Abatement

The 485x tax abatement is a significant tool for developers, offering tax incentives for projects that include affordable housing.

  • Requirements: Typically, 25% of units must be rented at 60-80% of AMI. For smaller projects (6-99 units), this requirement is reduced to 20% at 80% AMI.
  • Integration with VIH: The FAR bonus provided by VIH makes the additional FAR slightly less valuable but still beneficial for developers. The 485x abatement can be applied in both VIH and MIH sites, promoting the inclusion of affordable units across various projects.

Conclusion

For developers in New York City, leveraging MIH, VIH, and the 485x tax abatement can provide significant benefits while contributing to the city's affordable housing goals. Understanding these programs' requirements and opportunities is crucial for maximizing project value and community impact.

Stay tuned for more updates and detailed analyses on how these programs evolve and their implications for the real estate market. For personalized advice and opportunities in development sites, feel free to contact our team.