Developers are close to securing tax breaks for multifamily housing and office conversions, thanks to new guidance from the Department of Housing Preservation and Development (HPD). The guidelines outline rules for two programs: 485x, replacing 421a, and 467m, incentivizing office-to-residential conversions.

An essential rule under 485x requires 25% of contract costs to go to minority- and women-owned businesses (MWBE), though the process is unclear, especially for projects between 421a’s expiration and 485x’s launch.

Real estate attorneys note there’s still ambiguity about how developers can meet this threshold. HPD will have significant discretion in determining whether developers made a “reasonable effort,” which could lead to issues down the line if projects fall short after completion.

Affordability targets have also shifted, with rents for affordable units based on 77% of area median income (AMI), slightly lower than the previous 80%. Developers await further details on penalties for non-compliance, which could be substantial.

(source: therealdeal.com, picture: Laurenz Heymann)