485-x explained: NYC's new tax break for building rentals, and what it requires.
421-a ran out in 2022. 485-x picked up where it left off. Here is what a new rental building has to include to get the break, by size.
485-x (Affordable Neighborhoods for New Yorkers) is the New York State property tax break for new NYC rental buildings that followed 421-a. It requires 20% to 25% of units to be permanently affordable, plus construction wage rules for projects of 100+ units.
- →6 to 99 units: 20% affordable at an average of 80% AMI, 35-year benefit.
- →100+ units: 25% affordable at an average of 80% AMI, 35-year benefit, $40/hr minimum construction wage.
- →150+ units in Zones A and B: 25% at an average of 60% AMI, 40-year benefit.
For decades, the biggest tax break for building rentals in New York had a number for a name.
421-a.
It covered projects that started construction by June 15, 2022. After that date, there was nothing to replace it for almost two years.
On April 20, 2024, New York State adopted the replacement: 485-x, officially called Affordable Neighborhoods for New Yorkers. HPD adopted the rules to run it on December 16, 2024.
Here is what it gives, what it asks for, and how it changes by building size.
What is 485-x?
It is a property tax exemption for new rental buildings and homeownership projects with 6 or more units, and for conversions (except hotels).
To qualify, a project has to:
- Start construction after June 15, 2022 and on or before June 15, 2034.
- Finish on or before June 15, 2038.
- Register with HPD no later than 6 months after construction starts.
In exchange for the tax break, the building has to include affordable units. And those units stay affordable permanently.
What does 485-x require, by project size?
There are four options. The size and location of the project decides which one fits.
- Modest rentals (6 to 99 units). 20% of units must be affordable at an average of 80% of Area Median Income. 35-year benefit, plus up to 3 years during construction.
- Large rentals (100+ units). 25% of units must be affordable at an average of 80% of AMI. 35-year benefit, plus up to 3 years during construction.
- Very large rentals (150+ units in Zones A and B). 25% of units must be affordable at an average of 60% of AMI. 40-year benefit, plus up to 5 years during construction in Zone A or 3 years in Zone B.
- Small rentals (6 to 10 units). At least half of the units must be rent stabilized. 10-year benefit, plus up to 3 years during construction. Not available in Manhattan, and not on zoning lots that allow more than 12,500 square feet of residential floor area.
For the affordable options, there can be no more than three income bands, and the highest band is capped at 100% of AMI.
There is also a homeownership option for projects of 6+ units outside Manhattan, with a 20-year benefit, an assessed value cap of $89 per square foot, and owners who agree to live there for at least the first 5 years.
Zone A is Manhattan below 96th Street plus a handful of specific neighborhood areas in Brooklyn and Queens. Zone B is a separate set of neighborhood areas in Brooklyn and Queens. HPD lists them by City Planning code.
What are the wage requirements?
Construction wages depend on size:
- Under 100 units. HPD lists no construction wage floor.
- 100+ units. A minimum of $40 an hour, rising 2.5% a year.
- 150+ units in Zone A. The lesser of $72.45 an hour (rising 2.5% a year) or 65% of the prevailing wage for that job.
- 150+ units in Zone B. The lesser of $63 an hour (rising 2.5% a year) or 60% of the prevailing wage.
Sites with Project Labor Agreements are exempt from these construction wage rules.
Then there are building service workers, the people who run the building after it opens. In buildings with 30 or more units, they must get the prevailing wage for the whole benefit period. The exception is a building where every unit is affordable and at least half are at or below 90% of AMI.
How is 485-x different from 421-a?
The biggest change is time.
Under 421-a, most rental projects had to keep their affordability requirements for 35 years, and 40 for projects with the enhanced benefit. Under 485-x, the affordable units are permanently affordable and permanently rent stabilized.
Here is how I see it.
421-a rented affordability.
485-x buys it.
The trade is a stricter deal for developers, especially on bigger projects, where the wage rules kick in.
Is 421-a completely gone?
Not quite. On April 20, 2024, the state extended the 421-a completion deadline from June 15, 2026 to June 15, 2031, for projects that submitted a Letter of Intent by September 12, 2024 and picked certain affordability options. As of October 17, 2026, that is still the deadline HPD lists. That is why you will still see new buildings opening under 421-a.
What does this mean for renters?
A modest 485-x rental sets aside 20% of its apartments as affordable. Large ones set aside 25%. Even the small-building option requires half the units to be rent stabilized.
Those apartments do not age out. That matters, because the city’s last housing survey found a net rental vacancy rate of just 1.41% in 2023.
What does this mean for owners and developers?
- Pick your option early. HPD says the option must be selected in your first submission.
- Register on time. 6 months from the start of construction. HPD can charge a penalty of up to 100% of the application fee for filing late.
- Price the unit count. Crossing 100 units, or 150 in Zones A and B, changes both the affordability depth and the wage floor.
- Watch 2034. Construction has to start by June 15, 2034.
The tax break is real. So is the bill that comes with it. Know both before you buy the land.
“Permanent affordability is the real headline of 485-x.”
Frequently asked questions
What replaced 421-a in NYC?
485-x, officially Affordable Neighborhoods for New Yorkers. New York State adopted it on April 20, 2024. It covers projects that start construction after June 15, 2022, the last start date under the 421-a program.
How much affordable housing does 485-x require?
It depends on size. Rentals with 6 to 99 units need 20% of units affordable at an average of 80% of AMI. Rentals with 100+ units need 25% at an average of 80%. Rentals with 150+ units in Zones A and B need 25% at an average of 60%.
What are the wage requirements under 485-x?
Projects with 100+ units must pay construction workers a minimum of $40 an hour, rising 2.5% a year. Projects with 150+ units pay more: the lesser of $72.45 an hour or 65% of prevailing wage in Zone A, and the lesser of $63 an hour or 60% of prevailing wage in Zone B. Buildings with 30+ units also owe building service workers the prevailing wage, with exceptions.
Are 485-x affordable units permanent?
Yes. HPD says all affordable housing units under 485-x are permanently affordable and permanently rent stabilized.
Einhorn, Gabe. “485-x explained: NYC's new tax break for building rentals, and what it requires.” Nessoo Report, Nessoo (nessoo.com), Oct 17, 2026.
Co-founder of Nessoo, the verify-first rental marketplace in New York. He writes every Nessoo Report. nessoo.com
Sources
- NYC Department of Housing Preservation and Development, 485-x: Affordable Neighborhoods for New Yorkers (adoption date, options, affordability, wages, deadlines), accessed October 17, 2026
- NYC Department of Housing Preservation and Development, 421-a (program dates, compliance periods, extended completion deadline), accessed October 17, 2026
- NYC Department of Housing Preservation and Development, 2023 NYC Housing and Vacancy Survey testimony (1.41% net rental vacancy rate)
- New York Real Property Tax Law Section 485-x and HPD rules, Chapter 63 of Title 28 of the Rules of the City of New York (linked from the HPD 485-x page)