The Real Estate Roundtable with IPRG
IPRG Partners and guests discuss various topics on New York City Real Estate and the broader Real Estate Market.
The Real Estate Roundtable with IPRG
Decoding the NYC 485-x Tax Program with Tyng Patka
Unlock the secrets behind New York City’s latest tax abatement program, 485-x, as we sit down with the eminent Tyng Patka, chair of the NYC Real Estate Tax and Incentives Group at Adler & Stachenfeld LLP. Tyng demystifies the complexities of the program, which serves as a pivotal instrument for fostering new multifamily housing developments across the city's five boroughs. Her insights into the strategic utilization of these tax incentives are a treasure trove for developers eyeing to maximize their projects' potential.
This episode is an essential listen for anyone looking to navigate the dynamic real estate waters of New York City with confidence and foresight.
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This is Steve Reynolds with IPRG. In recent news, NYC has recently adopted a new tax abatement program known as the 485X. We invited Ting Paka, partnered Adler Stachenfeld and chair of the NYC Real Estate Tax and Incentives Group, to discuss everything you need to know. You can also find an overview on our website at IPRGcom. Enjoy the presentation.
Speaker 2:Hi everyone. I'm Ting Patka. I am an attorney, a partner at a law firm, adler Stachenfeld. Adler Stachenfeld is located we have one office in Midtown Manhattan, at Madison and 55th. I am chair of our New York City real estate tax and incentives group. So I specialize in representing New York City owners and developers on property tax matters, whether it's tax certiorari, which is challenging property taxes, or representing developers in tax incentives such as 421A, 485x, icap, ida. I represent nonprofits in getting their not-for-profit tax exemption. I also represent developers on inclusionary housing. So VIH and MIH if these acronyms are triggering anything for you. And finally, I've also developed a niche in specializing in local law in 97 and see-pays financing. So I'm a woman that wears a lot of very niche-y hats and the theme is that I focus mainly on New York City. But my firm in general we're a real estate law firm. We're the pure plain real estate. So all my law firm does is real estate. We're about 40, 50 attorneys and we handle all facets of real estate. So all my law firm does is real estate. We're about 40, 50 attorneys and we handle all facets of real estate transactions, whether it's buy, sell, finance. We've already sent borrowers, lenders, we have bankruptcy, litigation, leasing All of our practice areas are focused on real estate. So I am our resident property tax expert, so to speak, and I'm here today.
Speaker 2:Zach was kind enough to invite me to speak to you guys about the new 485X, which is the 421A replacement, and, if we have time, I also can speak about 467M, which is the commercial conversion if you guys are interested about, if you have any questions on that as well. And before I get started, like I said earlier, I encourage interruptions. Please, you know like, do not feel like it's being rude. I hate lecturing. I personally actually hate slides. I'd rather just be talking, but I understand that you know to provide some structure to this presentation, that you know slides are kind of a necessary evil, so feel free to interrupt.
Speaker 2:So a quick history of 421A, because I understand that some of you 45X might actually be the first time you're encountering a property tax exemption. So before I even get to this, 421a, also now known as 485X, it is a property tax exemption primarily geared towards new construction of multifamily in New York City. I say primarily new construction because it is applicable to existing structures that want to convert to residential or, if you're a smaller property, you want to build a bigger property, but primarily it's used as a ground-up development property tax exemption for multifamily. Any questions about 421A? And also, to start, it's important to understand what the exemption actually is. It's not a full property tax exemption, meaning it's not like your property tax bill is $0 for the term of the benefit. The 421A, now known as 45X. I'm going to use those interchangeably. The property tax benefit come in, you can sit down.
Speaker 2:The benefit measures exempts any increase resulting from construction. So as a matter of strategy, it's important to see what the developer is starting with when they're starting construction, because the premise is the assumption that a developer is starting with vacant land. Vacant land property taxes are very low. So during the lifetime of the benefit you'll hear oh, it's 100% for the first 25 years and then it phases out. What that actually means is that any increase from the base is 100% exempt and then it phases out. So if your base is vacant land, you're always going to be paying what's called a mini tax. So the mini tax is measured as what the assessment was before you started construction. So again, the assumption is you're starting with vacant land as a new development, so vacant land taxes are pretty cheap. They're only a couple thousand dollars. That's all you're going to be paying for most of the lifetime of the benefit. However, sometimes developers will purchase a decrepit old building and then they want to knock it down and then they build new construction. Then their strategy regarding the timing because if you do that all in the same year, your mini tax, your base, is going to be really high because for the lifetime of the benefit, you're going to be paying on that old, vacant building that you just purchased.
Speaker 2:So that's just a matter of background. Any questions? Okay, all right. So the history of 421A. So I've been practicing law for about 15 years when I first started my career out in Long Island. I grew up there in Franklin Square, I went to Hofstra Law and I started my career at Jasmine Schlesinger, a law firm in Garden City, and that's where I started doing tax cert and then I came into the city around 2011. And then, by then, 421a 1 to 15 was what was in effect. The reason why it's called 421A 1 to15 is it's pursuant to real property tax law, section 421A, and then, in parentheses, subdivision 1-15 is the program. This is the program that expired in 2015. So we're talking almost 10 years ago, but it's still around.
Speaker 2:If you hear people referring it to as an 80-20 project, that's what it was frequently referred to as, because this program eventually evolved into one where if you were located in the GEA the geographic exclusion area, which is the more desirable areas in the city then you would be required to provide affordable housing 20% of affordable housing. So that's where the 80-20 came from. But then there was the ability to kind of buy yourself out of having to provide affordable housing, where, instead of providing affordable housing, someone else did it and they generated what's called 421A negotiable certificates. And then, as a developer, if you were in the GEA and you had to satisfy this 80-20 requirement instead of actually providing affordable housing, you can purchase what was called 421A certificates and that would represent the required affordable housing that your project requires. So why am I teaching you about a program that expired almost 10 years ago? Because today, first of all, there's still a 420-1A negotiable certificate market. I currently have two contracts, so there's still projects under this program that are still closing out their 420-1A applications and need certificates. So there is still very much a market, very niche market, but there's a market.
Speaker 2:Second of all, there's also now these programs in a 421A15,. They're starting to phase out and I'm sure some of you have encountered buyers who are looking at these buildings with the phase out of 421As. That's something I can help you guys out with, because the common question is what are my property taxes going to look like during the phase out? What are they going to look like after the complete expiration? And so that's why 421A-15 is relevant, still Right. So a very, very general rule of thumb. Again, it's very dependent on geography. You know the whole bunch of X factors. Twenty five percent, yeah, like I wouldn't go any lower than 25 percent. I also wouldn't go 25 percent if it's like a, if it's like a more desirable neighborhood, you know, like a Brooklyn Heights or Williamsburg right now. A Brooklyn Heights or a Williamsburg right now, you know, I would say maybe closer to 28 to 30 percent to be conservative and safe. You know which is very high for a 15 to 20 year old building, but that's what I'm seeing.
Speaker 1:This expires, though. Do they remain rent stabilized or have gone?
Speaker 2:So the market, so all the units are rent stabilized and as long as the tenants had in their leases these 421A riders.
Speaker 1:So they don't have those.
Speaker 2:No, they are no. If you have the riders, the tenant in place at the time of the expiration remains rent stabilized. That unit remains rent stabilized until that tenant that was in place vacates. And once that tenant vacates it goes to market rate. If you don't have those riders, it remains rent stabilized. So it's important for a purchaser of an expiring 420A building to do their due diligence to confirm that those riders exist.
Speaker 1:Wow, let's say you're five years out from the expiration and there's no riders currently. Can you give riders during lease renewals?
Speaker 2:That's the belief right now. You know like, because we haven't we haven't really yet encountered many of these expiring 421As Like now is the time when they're starting to crop up. So so there is. You know, like that's the best you could do Right Is to provide these, these lease riders, asap. So that's what I've been advising clients who have had missing riders is that give them to your tenants immediately, especially a new tenant that's coming in. You know, make sure you have riders in place at the time of expiration at the very least, and then it's probably going to be, you know, maybe tested in the courts at some point, but I'm not aware of any such test case yet. Yeah, yeah, right, because it hasn't been tested yet.
Speaker 2:No, it's always stabilized, right? Yeah, that's, that's the. That's our reading of the law, you know. But, like I said, it hasn't really needed to be tested yet. So it's better safe than sorry, and then just give riders immediately.
Speaker 1:They have riders and the abatement expires. You can't get that. 10 and L, they're stable.
Speaker 2:They're stable, right, you can't get that tenant out, they're stabilized. They're stabilized until they vacate, so, all right, moving on. So this is probably the program you're more familiar with if you were around over the last couple of years. This is the one that expired in 4-2016 because, again, it's under pursuant to that law. Under that section, this expired in June 15th of 22. That was the last date that you had to get a piling into the ground.
Speaker 2:This is commonly referred to as 70-30 because of option C, which was very popular to out-of-borough developers. It wasn't available to Manhattan developers, but it was available in the other boroughs, and what it was was that, for the very first time, 421a had an on-site affordable requirement, meaning that you were no longer able to pay and get your way out of it with negotiable certificates. Now, if you wanted the 421A benefit, you had to provide affordable housing in the project that you wanted a 421A on. So it converted a lot of market rate developers into de facto affordable developers. You know, because, like all these developers had to get up to speed on the affordable lingo. You know what does AMI mean. You know. Now you have to deal with the affordable housing lottery. So it created a whole new cottage industry and, like I said, it eliminated the existence of GAs, the ability to have 420 million certificates, the buyer way out of affordable housing and, yeah, that's that.
Speaker 2:Any questions? At its peak back in, I want to say 15 or 16, I think the highest deal I did was $55,000 a certificate. A couple of months ago I did a deal that was $4,000 a certificate and it was actually. It's a very small world and, like I said, it's very niche. I actually handled the seller's purchase of those very certificates, so I knew how much they were losing on. Yeah, they came back to me like I represented the new buyer and I represented them when they bought it, like 10 years ago. I mean, I represented the seller that sold it to them. Yeah, and now, now today, the latest is around $15,000 a certificate. So it's a really niche-y market. Any other questions?
Speaker 1:Yeah, for those who don't know what a rider is. Do you know how to write all that?
Speaker 2:Yeah, it's like a one-page rider. It advises the tenant FYI, this building, this unit is subject to 429 benefits. That's why you're rent stabilized. So upon the expiration of the benefit in your VACR that you're no longer rent stabilized. Yeah, yeah, all right. So on to 485X. We're still in the history part of my discussion. So 485X it's not completely brand new to us of those who have been following the journey.
Speaker 2:Because when 428 expired in 22, governor Hochul then, six months later, introduced 485X in her governor's budget, in her executive budget. However, it was not popular. You know. She took it off the table back in 23 because she read the political tea leaves and saw that there was no political appetite to get it passed so fast forward. She did it again in 24. Tight to get it passed so fast forward. She did it again in 24. And now you know it was successful this time because construction permits dried up. Labor also saw that their job pipeline was drying up. So there was a lot more pain that could be leveraged to persuade naysayers to finally agree to pass something. So it was approved in the budget. It was very weird timing. It was approved on Saturday April 20th. That was, you know, during Shabbos, right before Passover, right before New York City spring break. So it was actually really good for me because I was able to have some free time, you know, because it was expected to be a quiet week due to Passover and spring break, so I had the time to digest the 45X I think in the future it will be referred to as 75, 25 or 80, 20, depending on which flavor you choose Because as we get into it, you'll see that that there's different options you can choose from.
Speaker 2:See that there's different options you can choose from, and it varies between providing 20% affordable housing versus 25% affordable housing. All right, so now we're getting into the nitty gritty. How do you become eligible for 485X? First, you have to be an eligible multiple dwelling, which means that you have to have at least six rental units. So or not, I'm sorry, not rental units, just six units in general. So if you're building something that's four or five units, it's not going to be eligible. It has to have at least six units. It has to sit on an eligible site. An eligible site is defined as one of two things either a tax lot with a single eligible multiple dwelling on it so that's a very easy concept to grasp or you have a zoning lot that could contain you know, a zoning lot usually might contain more than one tax lot, so you're going to have more than one building, but it's all in the same application.
Speaker 2:So when you submit it, it's treated as all one project and it's viewed as a single project, even if it's divided up between more than one building and the commencement date. So in order to be eligible for 485X, you needed to have started construction after June 15th of 22. So all those projects that rushed to get into the ground on or before June 15th 22, right now, by default they're ineligible for 485X because, by very definition, they started before June 15th and 485X you have to start after. This is like a weird quirk because in the expired 421A that was passed in April 2017, and it had a retroactive opt-in where it allowed those that rushed to get into the ground under the expired program, it said if you get into the ground by the expiration date of the previous program, we'll let you opt-in to 421A-16. So the developer can pick and choose, but here there is no such opt-in provision. So clients who have started construction before you know to get grandfathered into 421A, they're not eligible for 485X and they've been.
Speaker 2:I've been receiving calls well, how do I get eligible for 485X? I was like you, depending on where you are, you know if you're already get eligible 45X? I was like, depending on where you are, if you've already started your superstructure. I told them I was like, well, maybe you can convert Worst case scenario, you tear everything down and start over. But yeah, so commencement after June 15th of 22. You have to complete by. You have to commence by 34. So that was the. So we have a 10-year period for this program, so yeah, the commencement date kind of policed, but it just goes back to Good question.
Speaker 2:Yeah, good question. So commencement is not pulling a permit. Commencement under this program you have to, actually you have to begin actual work. You have to pour foundation, because the wording of it is the like you start construction on foundation or initial footings in good faith and it has to be the lawful commencement. So lawful meaning pursuant to a permit, and in good faith meaning that whatever you pour into the ground has to be incorporated into your project. So it's not like so when developers are trying to rush against the ground by June 15th of 22,. It was a lot more relevant. It was a lot more relevant. You know what is the legal definition for commencement. Because it's not like you could just pour something into the ground and then rip it up a few weeks later and then build what you were actually planning on building. You need to pour something that was going to be in good faith part of your project and I think there was actually litigation regarding this for the previous program, because the commencement definition has never changed and you know this is our third. This is the third round that I that's been in my professional lifetime. The commencement definition has never changed and I recall it was actually litigated and the court determined, you know, like that the developer was found to have ripped up whatever they put into the ground like a few months later and therefore it disqualified that as a commencement date and therefore they were found to be too late.
Speaker 2:Yes, yeah, so that is one way. That is one way we have advised clients, you know, like since 2008. Like since 2008. More commonly, an architect will provide, like a sworn affidavit, or you know pictures, you bring in a construction monitor. You know a construction monitor will be there to certify this is what was happening. Belts and suspenders, if you really, if you're working with a very conservative developer and they're willing to pay for it, get a survey on that date of the actual piling in the ground, because a survey certifies the status of a property on the date of the survey. So there's a variety of ways, but it's all belts and suspenders, because the HPD application that's submitted is an affidavit signed and sworn by the architect. So also, it's whatever date the architect feels comfortable with certifying to.
Speaker 2:Of course, hpd will verify it based on DOB records. You know they'll look to see, like I had one project where the permit was pulled months before actual construction commenced, um and h like, so we weren't worried but we were still well, you know, we're well within the date. But hpd noticed it was. You know, it's unusual to pull a permit and then not commence immediately. Um, and hpd, when they were reviewing my application, like they flagged it with just like. Hey, you know, like is date, is their commencement date correct? Because we noticed it's months after the permit date that was issued on DOB and I said yes, you know, for whatever reasons there was a delay in the commencement construction. So HPD does cross-reference against DOB records. So what I've told clients is you know, like just it doesn't hurt to have time-stamped pictures. You know, because you never, you can't go back and you know, unless someone has a time machine, you know you can't recreate these sorts of real-time records. So it's better to be safe than sorry. In the event, for whatever reason, hpd does come back and question the veracity of your commencement date. You want to be sure that you have backup. But in my experience, typically, like you know, if it doesn't smell fishy, hpd accepts what the architect affidavit states as far as the commencement date and let's see.
Speaker 2:So the completion deadline, completion is defined as the first TCO or final CO if there's no TCO. So the first CO covering all residential areas. So that was important when 420 was expiring because the completion date before the budget passed was June 15th of 2026. Do you guys know where I'm going with that? So, as you may have potentially noticed, so deal volume dried up in the last two years with construction loans. I don't know if you guys do capital markets, but eventually there came a point where because of the original June 15, 26 completion deadline and all these projects are rushing to the ground by 22, they only had two years to complete construction. So if you're completing a project, if you have a project, that you have to fit your project within that 24-month completion period. And lenders, as time passed, lenders started getting more and more skittish and reluctant to make construction loans because, based upon the size and scope of the project, they were like there's no way you're going to be able to obtain a TCO on all residential areas by June 15th of 26. So that's where the completion definition is most relevant when you're coming up against the expiration of the program. But here it's not going to expire until June 15th of 2038. So plenty of time before we need to worry about that. And FYI, that 26 completion deadline.
Speaker 2:The same budget that passed 485X also extended the completion deadline of 421A. Extended the completion deadline of 421A so instead of June 15th of 2026, now it's June 15th of 2031. So that's provided a huge lifeline for a lot of projects that formerly were shelved because they couldn't get construction financing. Now, you know, pencils are back up. I've had several clients tell me, you know, like, yeah, we shelved this project but now that there's a completion deadline, now the completion deadline has been extended, like we're back out in the markets shopping for financing. And that also helped with trying to sell development sites right, development sites that have a single piling, that were vested in the 421A. A lot of them have sat vacant and quiet because they couldn't find construction financing or the potential buyer, you know, can't, doesn't have enough time to complete the project.
Speaker 2:So it does. It's a much needed shot in the arm for the industry and will spur, you know, like, immediate activity. Because 45X, like we're still a ways, we're still, I'd say still probably close to a year away before any application, before it actually gets up and running right, because now that there's a new program, people are only starting to wrap their arms around it, figuring out what the underwriting looks like penciling things out, looking at sites again, so it's going to take a while for out, you know, like looking at sites again, so it's going to take a while for 45X to ramp up. So 45X itself is not going to be creating any housing units anytime soon, but the extension of the 4-21A completion deadline to 2031, that will produce that will have a more immediate effect on housing production in New York City.
Speaker 2:Oh and finally, the final bullet point what's different for the very first time in 45X, as opposed to previous programs, is that the affordable units are permanently affordable and rent stabilized. So under the expired 421A, affordable units were rent stabilized until the benefit expired and then when that tenant vacated it was out of rent stabilization. Here you're giving away the affordable units forever. However, the quid pro quo is that now the market rate units are not rent stabilized at all, as opposed to under the previous program. By default, market rate units were rent stabilized, except only if the first rent of that market rate unit exceeded the high rent deregulation threshold, which currently, in 2024, is a couple of dollars above $3,000. That threshold is a difficult threshold to meet in the outer borough, lower income, lower rent neighborhoods, for example, if you have a project in the Bronx, you try renting out a studio for $3,000. You're not getting that, so you know that your market rates. If you can't get $3,000 on your first rent, it's going to be rent stabilized for the entire term of the benefit, which is 35 years, for the entire term of the benefit, which is 35 years.
Speaker 2:That is a strategy that's been very popular and been employed for a really long time all throughout all of the previous versions of this. However, I am advising against it. Now there's a lot less appetite because of pending litigation brought by tenant advocacy groups arguing that the you know, arguing that the, that the rent concessions are wrongfully gaming the system and therefore the first rent should be count. You know it should be the net effective rent rather than the gross. So, to be on the safe side, I've been dissuading clients from using that as a strategy, even though it has been popular and known by HPD and DHCR and accepted by them for decades. But there's pending litigation. So, yeah, what do you mean? What program?
Speaker 1:Like Section 8. Section 8. Augmented duty cuts that pays above that $3,000 threshold?
Speaker 2:Well, those are, but are they paying it for market rate units? Or my understanding is that those are usually used for affordable housing? Yeah, you're right, right, so tenants, yeah, so like, yeah, there's. I don't have clients, but I know of the people who have clients that have done the 100 percent affordable projects in the out of boroughs because, because they can do 100, they could do 100 percent affordable at 130 AMI. But then city FAPs or Section 8 will then pay the delta between 8, you know. So it's a very lucrative project for the developer to be able to collect 130 AMI rents in an 80 AMI neighborhood. Okay, all right.
Speaker 2:So the next couple of slides are the various options, which is also all to be seen on this sheet, and I like having this sheet because it's easier to see and compare all in one shot. But for presentation purposes I divided each option up per slide. I divided each option up per slide so we'll start with the largest projects and then work our way down. So here the very large rental projects, also known as option A. The very large rental projects are 150 units or more in zone A and zone B. So to advise a client on what when they're asking about numbers and underwriting. There's two questions to ask when is your project located? How many units are you planning on building? Because the location of a project and the size of the project will determine which of these buckets to fit. You know which of these exemption options to fit the project into, or you know it's a chicken or the egg, where the client then, you know, wants to know like, okay, like if I'm 149 units, then I'm not in this bucket anymore, I'm in another one. So it's important to know where the project is located. How many units. If you're 150 or more and you're located in zones A or B, I'll show you a map really quickly.
Speaker 2:Then you have this option, which is 25%, an average of 60 AMI up to three income bands, no more than 100 AMI. It's a five-year construction period. So, different AMIs yeah, you can choose. You can choose. You go as low as 20, 30, 40. But you know, because it's an average, if you want to maximize, because the maximum AMI level you can offer is 100, but if you do 100, you have to average 60, then you also have to then add 40 in order to be averaging 60.
Speaker 2:And who comes up with the AMI and how frequently is the other stuff used. The AMI is determined by HUD and it's region-specific. In New York City the five boroughs are one whole region, so the New York City AMIs are applicable to all five boroughs. Amis are updated on an annual basis and AMIs Exactly yes, yes, right. So an 80 AMI? Right. So an 80 AMI? Yeah, so an 80 AMI affordable unit in Williamsburg has a far different feel and impact on the project's bottom line than 80 AMI in the Bronx. Right, because sometimes you may not even get 80, you know 80 AMI in the Bronx could be market rate, whereas it's still very much below market in Williamsburg.
Speaker 2:And AMI is relevant in two aspects. Ami determines the maximum income of a household in a specific unit type. You know. So if you're a single person who's looking to go into a studio, there's a particular like your income can be no higher than whatever AMI level you're looking at. You know, as opposed to a two bedroom, which presumably is a two person household, then then you know there's a, there's a higher income threshold and then that's what determines who is eligible for what unit type. Because when you go to apply for affordable housing in the lottery, if you get selected, the developer has an agent that will. Due diligence, the income level of prospective tenants, and AMI also determines the amount of rent that a unit can ask for on a landlord side, and these are all predetermined. There's charts you can refer to. Have you ever had any?
Speaker 1:litigation in relation to that, like as far as like the developer not giving out units to people that make too much money.
Speaker 2:I am not aware of many developers not following the affordable requirements, but there are certainly enforcement mechanisms, new enforcement mechanisms in place. Jumping ahead, it's like one of the very last slides is that the budget also created a new 428 audit program for existing projects. They already have 420 benefits since 2015. So, if you have a project since 2015, now HPD is given statutory authority to check up to 25% of properties a year whether or not you're following affordability requirements and rent stabilization requirements. No, the income. So in order so to place an affordable tenant into a unit, it only matters at initial lease up. So the affordable tenant, I think so right. Or you know, like Right, because if you win the lottery while you're living there, you can't get kicked out, because the HSTPA 2019 eliminated high-income deregulation. But also little-known fact, you know there's a lot of 130 AMI. There's a lot of 130 AMI units out there and 130 AMI is a lot of money. It's a six figure salary. So a lot of people, like in professions, in white collar professions that are first starting out you know they're starting out making 90, 100, you know 110, they're like eligible for affordable housing. Yeah, right, Like I've told you know a lot of like my staffers. I was like why don't you apply for, why don't you apply for, a lottery? Oh, like you know, like I don't make, you know, like I make too much. I'm like, no, you don't Not for affordable housing, yeah, you know. So I'm going to jump ahead. I'm going to come back to construction period and benefit year, but I want to talk about the zone A and zone B. So why does that matter? If you're 150 units or more and in zone A and zone B, you have to pay construction, construction wages. That's a, that's a huge deal. That, that, that was the. That was the whole, that was the whole fight of why 421A didn't get renewed until now. And so, if you're in zone A and zone B, you have to pay higher construction wages. And let's see. So zone A and zone B are defined in the law.
Speaker 2:If you're in zone A, there's a map here, I'll show you. If you're in zone A, it's and I'll and I'll. There's a map here, I'll show you. If you're in zone A, which is Manhattan, and what is that? Brooklyn? No, yeah.
Speaker 2:If you're so zone A, and you're in Long Island, city, hunters Point, green Point, williamsburg, you know South, like, you know like the, the nice areas you're, you're you're going to have to pay construction labors the lesser of $72.45 an hour or 65% of prevailing wage Prevailing wages you can find that out in the New York City Comptroller's Office. They have a schedule when you Google it and so that makes the project very expensive to build, which is going to have an effect of reducing land prices, because a piece of land that has a 421A project is going to be worth a lot more than a piece of land with the same piece of land for a 485X project if you're building the same exact project. Same piece of land for a 485X project if you're building the same exact project, because if you're building a 200 unit apartment building in Williamsburg under 421A, you don't have to pay construction wages. If you're building 200 units in Williamsburg under 485X, you have to pay $72.45 to your construction workers. So you know.
Speaker 1:This is only for buildings that 150. Right, so you know, this is only for buildings that 150, right?
Speaker 2:So if you're trying to avoid it, and if you're in Zone A and Zone B, you're trying to avoid it, build a 149-unit building and people are starting to get creative, right? Exactly, that's the inevitable follow-up question, right? And so if you're in Zone B, it's a little cheaper it's $63, or 60% prevailing wage, but still more expensive than if you were to use a non-union shop. A non-union shop, and the law defines zone A and zone B by neighborhood tabulation areas that city planning comes out with. At the very end of these slides I have a link to a map where, if you type in the address, it will tell you which tabulation area you're in, so you can tell a client with specificity whether or not they're in zone A and zone B. If they are like, which one they are.
Speaker 2:I have no idea, but I know that under the old program it was 300 units that was the threshold and in community boards one or two in Queens and Brooklyn, so a similar geography and people were bellyaching about $45 an hour.
Speaker 2:That was the required minimum back then. So you know it depends on the trade, yeah, right, yeah, like some of the more valuable trades, you were probably paying this already, but some of like the less skilled trades now, like they're going to have a windfall. Yeah so, but going back, it's a 40-year benefit, which is a really good benefit. All 40 years you get that 100% exemption. So you're only paying mini tax. You're only you know let's assume that you started out vacant lands You're only paying a couple thousand dollars a year in property taxes. For 40 years you get a five-year construction period. So in addition to the actual benefit term, you get the exemption during construction and for the very first time we see a five-year construction period. The norm has been three years and then, for the very first time, there's no mini tax during the construction period. So we're talking zero0 in property taxes that you have to pay during construction. But there's an asterisk to that because you still, in reality,
