Medium-form · ~1,000 words · Authored by the Regtime compliance team
485-x introduced a participation requirement with no direct analog under 421-a: the obligation to make reasonable efforts to direct at least 25% of applicable costs to contracts with certified Minority- and Women-owned Business Enterprises. For developers accustomed to 421-a, this is new compliance surface and deserves early attention.
The statutory requirement
RPTL §485-x(4) requires that eligible sites, over the course of design and construction, make reasonable efforts to spend at least 25% of total applicable costs on contracts with MWBEs. The requirement applies to all 485-x projects regardless of option — Small Rental, Modest Rental, Large Rental, Very Large Rental, and Homeownership all carry the MWBE obligation.
What counts as ‘applicable costs’
Applicable costs capture design and construction spend over which the applicant had the ability to hire or influence the hiring of a firm. This includes:
- Architecture, engineering, surveying, and environmental testing.
- Construction, installation, and construction management services.
- Specialty trades including structural, mechanical, electrical, plumbing, and finishes.
Applicable costs explicitly exclude:
- Land acquisition costs.
- Financing, interest, and loan-related costs.
- Taxes and permit fees.
- Marketing costs.
- Unrelated legal expenses.
- Utility hookup charges.
The ‘reasonable efforts’ standard
The 25% target is a goal, not a bright-line requirement. HPD’s final rules at 28 RCNY §63-01 establish a reasonable-efforts standard that operates as the release valve. The applicant must:
- Make a timely request for assistance from the NYC Department of Small Business Services.
- Document how DSBS assistance was acted upon.
- Explain why the 25% goal was not met, if applicable.
HPD considers additional factors in evaluating reasonable efforts:
- Advertising in general-circulation media, small business media, and MWBE-focused publications.
- Timely notification to MWBEs of contracting opportunities.
- Thorough and timely responses to MWBE inquiries.
- Scope re-substitution — restructuring contract scopes to create opportunities MWBEs can compete for.
- Pre-bid or pre-proposal meetings with MWBEs.
DSBS and certification
MWBEs counted toward the 25% goal must be certified through NYC DSBS (under Title 66 Chapter 11) or through NYS Empire State Development’s Division of Minority and Women’s Business Development. The DSBS Online Directory contains more than 10,000 certified firms. DSBS can be reached at mwbe@sbs.nyc.gov for assistance letters and outreach support.
The NYC MWBE certification program was established by Local Law 129 of 2005 and updated by Local Law 1 of 2013. For 485-x purposes, certification must be current at the time of contract execution.
The MWBE Affidavit
The MWBE compliance document is the RPTL 485-x Application – MWBE Affidavit for Participation Goal. It is filed with the Application for Certificate of Eligibility, which occurs post-completion (within one year). The affidavit splits into two paths:
- Goal met: the applicant lists each MWBE used, with the MWBE’s EIN, contract amount, and commodity code.
- Goal not met: the applicant completes the Reasonable Efforts page, documenting DSBS outreach, advertising, MWBE notifications, scope adjustments, and explanations.
The affidavit must be signed under penalty of perjury. False statements expose the affiant to revocation proceedings under HPD Chapter 39 rules and, for architects and engineers certifying project elements, professional misconduct exposure under New York Education Law §6509.
Audits and enforcement
HPD may request documentation of MWBE certification at any time during or after the benefit period. Marketing Monitors submit quarterly rent rolls that include compliance data, and HPD audits a sample. There is no per-se violation for missing the 25% target if reasonable efforts are documented. There is substantial exposure for:
- Submitting a false affidavit.
- Failing to maintain DSBS certification records.
- Engaging uncertified firms while representing them as MWBE-certified.
- Architect or engineer certification of compliance where documentation does not support it.
Filing fees for the Certificate of Eligibility range from $3,000 per unit (6–10 unit projects) to $5,000 per unit (100+ units). Fee waivers are available for 100% affordable projects with substantial government subsidies.
What there is no waiver for
There is no express waiver of the 25% goal. The reasonable-efforts standard is the only safety valve. A developer who does not document DSBS outreach and cannot explain why the goal was not met does not have a waiver option — the affidavit will not satisfy HPD’s rules, and the Certificate of Eligibility can be delayed or denied.
What this changes from 421-a
421-a contained no MWBE requirement. 485-x extends HPD’s MWBE Build-Up framework — previously applicable principally to subsidized affordable housing projects — into the private tax-incentive space. For developers new to MWBE compliance, the workflow is:
- DSBS outreach at project kickoff, not at Certificate of Eligibility.
- MWBE participation tracking during design and construction, integrated with the project budget.
- Quarterly internal reviews to identify scope rebalancing opportunities.
- Affidavit preparation timed with Certificate of Eligibility, supported by a complete documentary record.
Treated as a box to check at the end, MWBE compliance becomes a real risk. Treated as an active workstream from kickoff, it is manageable.
Regtime’s compliance team runs MWBE tracking on active 485-x projects, coordinates DSBS outreach, and prepares MWBE Affidavits for the Certificate of Eligibility filing.
