?15 HPD #11 SHERIF SOLIMAN THE CITY OF NEW YORK Hay]! 10007 Director . OFFICE OF THE MAYOR. ?w ?r I SW 0? State Legislative Affairs (212] 7833330 119 Washington Avenue Albany, New York 12210 (513) 447-5200 MEMORANDUM IN SUPPORT LEGISLATIVE REFERENCE TITLE AN ACT to amend the private housing finance law, in relation to the issuance of notes and bonds by the New York city housing development corporation, and to amend the administrative code of the city of New York? in relation to imposing a tax on Conveyances or transfers of residential real property for one million seven hundred fifty thousand dollars or more (Part and to amend section 421?a-of the real property tax law? in relation to tax exemption for multiple dwellings (Part B) . SUMMARY or PROVISIONS Part A Section one sets forth the legislative ?ndings for the bill. Section We amends section 655 of the Private Housing Finance Law to authorize the New York City Housing Development Corporation to issue notes and bonds secured by the revenue stream that will be generated by the tax imposed by subdivision of section 1151102 of the Administrative Code of the City of New York. Section three amends section 11-2102 of the Administrative Code of the City of New York by adding new subdivisions g, h, and i. These subdivisions impose an additional tax on conveyances or transfers of residential real property or economic interests in such property when the consideration for such conveyances or transfers is greater than $1.75 million. The rate of tax for these conveyances or transfers would be 1% where the consideration is greater than $1.75 million and not over $5 million and 1.5% of the portion of the consideration over $5 million plus 5350:0000 where the consideration is over $5 million. Subdivision i provides that the revenue collected pursuant to this additional tax shall be used for the development of affordable housing. - Sections four and five of the bill amend section 11~2104 of the Administrative Code to specify that this tax should be paid by the grantee and that the revenue collected by the Department of Finance pursuant to this additional tax shall be deposited in a separate account within the City?s general for the development of - affordable housing. Section sis. of this bill provides that the bill takes effect 90 days after enactment. -IPartB Section one adds two new subdivisions to section 421?a of the Real Property Tax Law Notwithstanding the provisions of any other subdivision of section 421-a or of any general, special or local law to the contrary, new subdivision 16 would, in a city having a population of one million or more, set new 421?a eligibility requirements and benefit periods for multiple dwellings that commence construction er December 31, 2015 and on or before and that complete construction on or before SET DATE PLUS FOUR Such multiple dwellings would be required to contain at least six dwelling units created through new construction or eligible conversion that are operated as rentals. Such multiple dwellings would need to provide affordable housing through one of three affordability-options, in order to be eligible for thirty- fivc years of exemption from real property taxation, other than assessments for local improvements. Such multiple dwellings would receive a 100% exemption from real property taxation during the construction period for a maximum of three years, a 100% exemption from real property taxation for the first 25 years following I completion, and, for the final 10 years of the exemption period, an exemption from real property taxation equal to the percentage of affordable units included in such multiple dwelling. Such multiple dwellings would continue to pay taxes on the asSesSed value of the land and improvements during the tax year prior to commencement of construction, and all assessments for local improvements. The 421-a benefit would be reduced by the aggregate ?oor area of commercial, community facility and accessory use space, other than parking which is located not more than 23 feet above the curb level, ih'excess of 12% of the'aggregate floor area- - The three affordability options available'to proj ts seeking the 421?a benefit would be: not less than 10% of dwelling units affordable to thoseat or below A: of area median income not less than an additional 10% at or below 60% of. AMI and not additional ,5%_pt 'or below 130% of AMI, ""ivith no assistance other than tax exempt bond proceeds and 4% not less than at or I below. 70% of AMI and additional'1'20l%'at or below 130% ofAlVl'l; and (cjfiiOt less than 30% at I of belch? 130% of AMI, with no governmental assistance These affordability requirements ~Would applya-f throughout the 421-a benefit period at both initialrental and upon vacancy. Such affordable unitscould not be rented 'on a temporary, transient or short-term basis, nor converted to cooperative or condominium ownership. Tenantsabelow such maximum AMIs would be expressly allowed to occupy such affordable units. All rental dwelling units would have to be accessed through the same street entrances and lobbies, and no such entrance or lobby could serve some rental dwelling units to the exclusion of others. The affordable dwelling units in all of the three affordability options would remain rent stabilized until the first vacancy following the expiration of the 421na benefits, even if such benefits are revoked. Unless preempted by other governmental requirements, such affordable units would be required to have a unit mix proportional to the market rate units, or at least 50% of the affordable units would be required to have two or more bedrooms and no more than 25% of the affordable units could have less than one bedroom. J. . tee-cl: and.settlementtit-dealissunits", provided? mu the"- . . .. I.. unbiased-'1' :=harassieraawio' .. ish'd-i .- ?hoisted- ta .Eq [1 C13. scream 3 .. . .. . f1 astronomerld. ?ll? Applications would have to be ?led within one year after completion, and the department of housing preservation and development would be authorized to require a filing fee of $3,000 per dwelling unit unless lesser fees are authorized pursuant to rule for govemmentallyuassisted projects. The department of housing preservation and development also could require by rule that applications be ?led electronically. A city having a population of one million or more would be authorized to enact a local law to restrict, limit or condition the eligibility for or scope or amount of 421-a bene?ts in any manner, but such local law could not - take effect until one year after the date of enactment. The provisions of New York City Administrative Code sections 11-245 and 11-2451 or of any other local law enacted before the effective date of subdivision 16 would not restrict, limit or condition the eligibility for or the scope or amount of 421-a bene?ts authorized by subdivision 16. Finally, a rental project that commences construction prior to December 31, 2015 that has not received dill?a benefits before subdivision 16 becomes effective may opt to receive 421-a bene?ts pursuant to Subdivision 16. Notwithstanding the provisions of any other subdivision of section 421-a or of any general, special or local law to the contrary,- new subdivision 17 would, in a city having a population of one million or more, provide an extended 421-a bene?t option to projects that commenced construction prior to July 1, 2008, and received a 20- year or 25?year tan: exemption under section 42.1-a prior to the effective date of this act by making at least 20% of the units affordable to families of low and moderate income, provided that all residential tax lots operate as rental housing. For an additional 15 years of extended bene?t in the case of a 20?year bene?t property or for an additional '10 years in the case of a 25?year benefit property, not less than 20% of the dwelling units would have to be affordable to those with household incomes at or below an average of 80% of AMl,with not less than an additional 5% at or below 130% of AMI. These affordability requirements would apply throughout the extended bene?t period at both initial rental and upon vacancy. In exchange for extended affordability, projects would receive a 50% exemption from real property taxation, other than assessments for local improvements, for this extended bene?t period. Such projects would continue to pay the same real property taxes they were paying I during their 20?year or 25?year benefit period on the assessed value of land and improvements during the tax year preceding the commencement of conStruction of such projects. Any extended bene?t would be reduced by the,percentage of aggregate floor area occupied by commercial, community facility, parking and accessory use space exceeding 12% of the aggregate ?oor area. A restrictive declaration executed by all parties in interest would be recorded against the real property. Affordable units could not be rented on a. temporary, transient or short?tenet basis, nor converted to cooperative or condominium ownership. ?Tenants below maximum AlV?s would be allowed to occupy such affordable units. Affordable units would remain rent stabilized during the extended bene?t period, even if the extended bene?t is . terminated or revoked. Furthermore, tenants in occupancy. after the extended bene?t period could remain as rent stabilized tenants for the duration of their occupancy. - tar-(blall be the retainerinterviewees are a . Applications for this extended bene?t would be required to be filed on or before the later of December 31, 2016, or 13 months a?er the 20?year or 25?year benefit period expires. A filing fee of $3000 per dwelling unit would be required in connection with any application. The departinent of housing preservation and development also would be authorized to require by rule that applications he ?led electronically. A city having a-population of one million or more would be authorized to enact a local law to restrict, limit or condition the eligibility for or scope or amount of the extended benefit in any manner, but such local law could not take effect until one year a?er the date of enactment. The provisions of New York City Administrative Code sections 11245 and 11-2451 or of any other local law enacted before the effective date of subdivision 17 would not restrict, limit or condition the eligibility for or the scope or amount of the extended benefit authorized by subdivision 17. Sections two and three of the bill amend RPTL sections and respectively, to provide that the existing 421-a tax exemption program would continue to apply to new multiple dwellings that commence construction on or before December 31, 2015, provided that such multiple dwellings receive their first temporary or permanent certificates of occupancy covering all residential areas on or before December 31, 2019. Solely for these purposes, and notwithstanding any local law to the contrary, ?commenCe? would be de?ned as the date upon which excavation and construction of initial footings and foundations lawfully begins in good faith or, for an eligible conversion, the date upon which the actual construction of the conversion, alteration or improvement of the pro?existing building or structure lawfully begins in good faith. Section four of the bill amends subdivision 2 of RPTL section 421?a by adding a new paragraph authorizing the? local housing agency to permit voluntary termination of benefits under the existing 421~a program in connection with a new tax exemption pursuant to either RPTL Section 420-c or the Private Housing Finance Law. Sections five and six of the bill amend subdivision 3 of RPTL section 42l?a by authorizing the local housing agency to promulgate rules requiring that applications be filed electronically. Sections seven and eight of the bill amend subdivision 6 of RPTL section 421-a to provide that the current requirements for 421-a tax benefits in the Greenpoint?Williamsburg Waterfront Exclusion Area would continue - to apply to buildings where the real property containing such building was identified in a covered project agreement executed and recorded on or before December 31, 2015, and such agreement was not thereafter amended to include additional real property; at least one building in such coVered project that meets the Greenpoint?Williamshurg Waterfront Exclusion Area affordability requirements commences construction or before December 31, 2015, and all of the buildings in such covered project that receiVe benefits pursuant to completed construction on or before June 15, 2025. Section nine of the bill amends subdivision 6 of RPTL section 421-a to provide that covered projects entirely located within the Greenpoint?Williamsburg Waterfront Exclusion Area are exempt from the assessed valuation cap. u'l'd be overfl'd; bee uggtli gut, I . -.a'nd . - 1 1220.037,; toureceivelprev g: 11'? HI Hunt. Huh-m. .. I "arm-regard-tea ?ea ef?cients 1.0.1 the local Section eleven of the bill provides for effective dates. REASONS FOR SUPPORT Part A . The current state mansion tart is imposed on real estate conveyances or transfers of one million dollars or more. This tan is a ?at 1% tear. imposed on any such conveyance, such that a $1 million condominium purchaser would pay the same rate as a $30 million condominium purchaser. The proposed legislative amendment would impose an additional City tax on conveyances or transfers of residential real property or economic interests in such property where the consideration for such conveyances or transfers is greater than $1.75 million. The tax rate for this additional tax would be 1% where the consideration -I is greater than $1.75 million and not over $5 million, and 1.5% where the consideration is over $5 million. This graduated tax will help to ensure that the purchasers of the most expensive properties in the City will pay more than the purchasers of more modest homes. The revenue generated by this additional tax would be dedicated to affordable housing development. It is projected that it will yield approximately $1.8 to $2 billion over the next ten years, which would help to fund Housing New York, the Mayo?s fiveuborough, ten-year plan to finance the preservation and construction of 200,000 affordable housing units- That plan is absolutely. critical to address the urgent need for affordable housing. New York City is experiencing an extreme shortage of affordable housing. The City?s diversity, competitiveness, and economic strength are imperiled by the fact that more and more people struggle to live I here. Housing New York lays out a blueprint for preserving and constructing 200,000 units of affordable housing to help address that shortage, but achieving the goals of Housing New York will require signi?cant commitments of City capital- The mayor has committed $3-2 billion towards the plan, but at least $1.9 billion more is needed to fully fund the 200,000 units. This tart would fill that critical need. .PartB RPTL section 42l?a has provided tax benefits for the construction of new residential buildings in New York City since 1971. Benefits are available for up to a maximum of 25 years, depending upon the location of the multiple dwellings and the inclusion of affordable housing units. Since 1985, the program has been responsible for generating affordable housing units in all five boroughs. . anew send n6. tile . .. . .. .- -- . .i . o. I Innis" lei hillelilsexsnirt emergenteshsiate .echir-gffve .l I. - - r. i nets. i .. .. The 421na program must be retooled to adequately address the extreme shortage of affordable housing in New York City. Reform of the program is lrey to Mayor de Blasio?s Housing New York goal of preserving and constructing 200,000 units of affordable housing over the next ten years. Under the proposed legislation, affordability requirements will no longer be limited to a specific geographic area but, instead, will be a City? wide prerequisite to receiving any 42l-a benefits. The bill, instead of applying one affordability requirement to . every building, provides developers with three options, and limits additional subsidies to certain options. Only dwelling units operated as rentals will be eligible for benefits, and all rental dwelling units must be accessed through the same street entrances and lobbies. Each eligible project will get the same 35 years of benefits, except that the last 10 years of such benefits will be based upon each project?s specific percentage of affordable units. Rather than a bifurcated application process in which applicants must file one application for construction period benefits and another application for final bene?ts, applicants will ?le a single application within one year - after completion, and construction period benefits will be applied retroactively. The site eligibility requirement, which drains signi?cant time and resources with no real effect on eligibility, will be eliminated. However, any dwelling unit that was on the site three years prior to commencement of construction or conversion and was thereafter demolished, removed or reconfigured, must be replaced with an affordable dwelling unit. While these new requirements will be mandated for projects that commence construction a?er December 31, 2015, other projects that have not received 421?a benefits prior to the effective date of the act may opt to receive their 42'l?a benefits pursuant to new program requirements. The proposed legislation contains another signi?cant tool for preserving affordable housing in New York City. It provides a new extended affordability option available to multiple dwellings already receiving 20 or 25-year bene?ts under the existing 42l-a program, provided that all residential tax lots in such multiple dwellings are operated as rental housing. Prussia Exclusion areamark-meeting:desire: iare'exenpt cap?r Accordingly, the Mayor urges the earliest possible favorable consideration of this proposal by the Legislature. Respectfully submitted, SHERIF SDLIMAN Director AC: 5/20/ 15