Last week’s big splash in New York City commercial real estate was Albany’s imminent passing of a law that to replace 421a.  It is a tax incentive, currently called Affordable New York, intended to provide a shot of adrenaline to a development market that is less than fully motivated to build anything but high-end apartments.

The news derived from Cuomo’s recent rounds of budget negotiations and dropped into the news cycle  while a good portion of the market was observing Passover and the other portion was about to observe Good Friday and Easter.

So in the category of what you missed while you were away, let’s recap the news and discuss what’s clear and what’s uncertain:

From our sources, here’s what is clear:

1. Extended tax abatements: while 421a abatements typically sunset in 15 years or 25 years, Affordable New York (“aNY”) will offer a 35-year option
2. Condo projects: aNY  abatements will apply to condo projects only in outer-boroughs of no more than 35 units.  aNY will apply only to projects where the average assessed value of a condo unit is less than $65,000.
3. Wages: Rental projects, while having no limit in size or location, may have a minimum wage requirement.  Construction wages must average not less than $60 for Manhattan projects and not less than $45 for projects in the markets fronting on the East River in Brooklyn and Queens.

At this point, however, there are more uncertainties with aNY than there are certainties.  As the aNY bill becomes law and is put into practice, developers will need to have answers to the following five questions:

1. Qualifying Assessments: aNY will apply only to non-Manhattan projects of not more than 35 units and with average per-unit tax assessment values of less than $65,000.  How will that assessment be calculated?  Based on construction costs? Or based on comparable recent sales?    Clearly construction costs are knowable in advance, calculable and auditable.    Recent sales are none of these.
2. Qualifying Assessments: For projects where units are not sold off immediately, will the state-mandated assessments be required prior to each marketing effort?
3. Average Wages: For rental projects where developers must pay regulated average wages for their construction labor, how and when will that audit take place? Most likely audits will be done after the project is complete.  This audit is foreign territory for many developers who do not track precisely the wages for line workers.
4. NY City’s Authority: The aNY law may or may not allow New York City to tweek provisions in the law.  Clearly the Mayor would like to have significant control over aNY in order to fulfill his promises to build and preserve affordable units in the City.
5. The trigger for the 35-year abatement: The aNY law grew out of a policy designed to motivate the construction of affordable housing.  It’s not clear from our sources what will trigger to the extended 35-year abatement and what portion of the units will need to be affordable in order to qualify for the 35 years.  Likewise, we don’t yet know if there is a different unit-mix of affordability.

The news out of Albany is undeniably good; it will be some time before these five questions are resolved and we can learn exactly how good.