Long-form · ~2,200 words · Authored by Anna Martynova, Director of Incentives
For eight years, 421-a(16) was the financial engine of rental multifamily development in New York City. Its lapse in June 2022, and the two-year legislative gap that followed, froze much of the rental pipeline. 485-x — formally the Affordable Neighborhoods for New Yorkers Tax Incentive, or ANNY — is the framework that replaced it. If you are modeling a ground-up rental deal in New York City today, 485-x is your default tax abatement. This guide walks through the statute, the rules, and the workflow as it functions in 2026.
What 485-x is, in one paragraph
485-x is a state real property tax exemption codified at NYS RPTL §485-x and implemented by HPD rules at 28 RCNY Chapter 63. It was enacted in the FY25 state budget on April 20, 2024, and HPD’s final rules took effect January 15, 2025. Eligible projects must commence construction after June 15, 2022 and on or before June 15, 2034, and must complete construction by June 15, 2038. The program grants a full construction-period exemption plus a post-construction exemption ranging from 10 to 40 years, depending on project size and location. In exchange, developers commit to affordability, rent stabilization, and — for larger projects — construction wage requirements.
The four Affordability Options
485-x is not a single product. There are four distinct options, and the one that applies to your project is determined by unit count, location, and tenure. Picking the wrong option at feasibility can cost years of benefit or disqualify the deal entirely.
Option A — Large and Very Large Rental. Large Rental projects have 100 to 149 units and are available citywide. They require 25% of units affordable at a weighted average of 80% AMI, using no more than three income bands with the highest capped at 100% AMI. The benefit is a 100% exemption for up to three years of construction plus 35 years post-construction. Very Large Rental projects have 150 or more units and are located in Zone A or Zone B (see below). They require 25% affordability at a weighted average of 60% AMI — a materially deeper affordability obligation than the Large Rental tier — and receive 40 years of post-construction benefit, with up to five years of construction-period benefit in Zone A and three years in Zone B. Projects with 150 or more units located outside Zones A and B follow the Large Rental terms.
Option B — Modest Rental. Available citywide for projects with 6 to 99 units. Requires 20% affordability at a weighted average of 80% AMI. The benefit structure runs 35 years, but the exemption steps down: 100% for the first 25 years, then the affordability percentage (typically 20%) for the final 10 years. Crucially, Option B carries no construction wage requirement, making it the most common path for mid-sized outer-borough projects.
Option C — Small Rental. For projects of 6 to 10 units outside Manhattan, with a zoning lot containing no more than 12,500 square feet of residential floor area. Option C requires no income-restricted units — instead, at least 50% of units must be permanently rent-stabilized at market rents. The benefit is a 10-year exemption at 100% plus three years of construction-period benefit. No construction wage requirement.
Option D — Homeownership. Available for condominium or cooperative projects of 6 or more units, located outside Manhattan. Every unit must have an average assessed value of no more than $89 per square foot at first assessment following completion, and each owner must commit in writing to maintain the unit as a primary residence for at least five years. The benefit runs 20 years — 14 years at 100% exemption, then six years at 25%.
Zone A and Zone B, exactly
The Zone A / Zone B distinction controls whether a 150+ unit rental project qualifies as Very Large under Option A. These zones are defined by Neighborhood Tabulation Area (NTA) — not Community District, not Census Tract. Getting this wrong in feasibility is a common error.
Zone A. Manhattan south of 96th Street. Brooklyn NTAs 0101 (Greenpoint), 0102 (Williamsburg), 0103 (South Williamsburg), and 0104 (East Williamsburg). Queens NTA 0201 (Long Island City–Hunters Point).
Zone B. Brooklyn NTAs 0201, 0202, 0203, 0204, 0601, 0602, and 0801 — Fort Greene, Clinton Hill, Carroll Gardens, Cobble Hill, Gowanus, Red Hook, Park Slope, Prospect Heights, DUMBO, and Brooklyn Heights. Queens NTAs 0102 and 0105 — the Queensbridge/Ravenswood/Astoria and Hallets Point corridors.
Rent stabilization — this is the big one
Under 421-a, affordable units were rent-stabilized during the benefit period, and most market units in 421-a(16) buildings were stabilized as well, subject to a rent threshold. Under 485-x, the rules are different and, for developers, materially better on the market side.
Affordable units under 485-x are permanently rent-stabilized. Not for 35 or 40 years — permanently. RPTL §485-x(8)(c) provides that affordable housing units remain fully subject to rent stabilization both during and subsequent to the restriction period. Initial rents are set at the AMI band minus three percentage points. Rent Guidelines Board orders apply at renewal.
Market-rate units under 485-x are not rent-stabilized. This is the clean break from 421-a(16) and is worth underscoring: your market pro forma is unregulated.
Construction wage requirements
Wage requirements apply only to the largest projects. Option B (6–99 units), Option C, and Option D have no construction wage obligation.
Large Rental (100+ units, citywide). The greater of $40 per hour wages and supplements or the rate required under Labor Law §§220 or 220-b. Indexed upward by 2.5% each July 1 starting in 2025 — so projects commencing construction in 2026 should model materially above $40.
Very Large Rental in Zone A. The lesser of $72.45 per hour or 65% of the greatest prevailing wage in each classification. Same 2.5% annual index.
Very Large Rental in Zone B. The lesser of $63 per hour or 60% of the greatest prevailing wage. Same 2.5% annual index.
Exemptions: projects covered by a Project Labor Agreement are exempt from the construction-wage minimum. Contractors operating under a collective bargaining agreement or jobsite agreement that expressly waives the provisions are also exempt.
Procedural trap: owners must notify HPD and the NYC Comptroller at least three months before construction commencement. Beginning construction before filing this notice disqualifies the project from 485-x entirely. Failing to file after construction begins carries a $5,000-per-day fine.
MWBE participation — the 25% goal
485-x introduced a requirement that had no analog under 421-a: reasonable efforts to direct at least 25% of applicable costs to contracts with certified Minority- and Women-owned Business Enterprises. Applicable costs include design, engineering, construction, and construction management — but not land, financing, taxes, or permit fees.
The reasonable-efforts standard is the release valve. If you hit 25%, you file an affidavit documenting each MWBE contract. If you do not, you file the same affidavit and document your outreach: timely requests for assistance from NYC Department of Small Business Services, advertising in MWBE media, pre-bid meetings, responses to MWBE inquiries. There is no automatic penalty for missing the 25% target if reasonable efforts are documented. There is serious exposure for submitting a false affidavit.
Application workflow
485-x is a four-step HPD process. Miss a deadline and benefits are delayed or reduced.
1. Application Registration (Notice of Intent to Apply). Filed within six months of commencement for projects commencing on or after April 20, 2024. Pre-enactment projects had a December 14, 2024 deadline. Late registration penalties are 25% to 50% of the filing fee.
2. Workbook and Affidavits (Options A and B only). HPD’s 485-x Units Workbook, most recently updated April 30, 2025, sets out unit designations, income bands, and initial rents. Filing windows depend on project size — Modest Rental projects of 10 units or fewer can file from six months before to two months after completion; Large and Very Large projects have a twelve-month pre-completion window.
3. Notice of Intent to Begin Marketing. After workbook approval, the owner executes a Marketing Monitoring Contract with an HPD-approved marketing monitor, and affordable units are listed on Housing Connect. This is the handoff to the lease-up workstream.
4. Application for Certificate of Eligibility. Filed between completion and one year after. Includes the MWBE Affidavit, a draft Restrictive Declaration, architect or engineer certifications, prevailing wage compliance certifications, and the 12% non-residential cap certification. Filing fees run from $3,000 per unit for projects of 6 to 10 units to $5,000 per unit for projects of 100 or more.
The 12% non-residential cap
485-x is a residential tax incentive. If the total floor area devoted to commercial, community facility, or accessory uses (excluding parking up to 23 feet above curb level) exceeds 12% of the building, the exemption is proportionally reduced. The reduction is applied first to non-residential lots and then to the residential exemption itself. Mixed-use projects should run this analysis at feasibility, not at Certificate of Eligibility.
What else to watch
A few design and compliance points that routinely surface on 485-x projects:
- No poor doors. Affordable units must share common entrances and common areas with market-rate units on the same site.
- Bedroom mix. Affordable unit bedroom distribution must be proportional to market-rate, or satisfy the 50%-two-bedroom, 25%-studio-cap safe harbor.
- Replacement ratio. If the site contained dwelling units within three years before commencement, new construction must include at least one affordable unit for each demolished unit — one restricted unit each, for Small Rental projects.
- No transient rentals. Short-term rentals, corporate tenants, and partnership tenants are prohibited in 485-x buildings.
- No condo conversion of restricted units. Restricted units cannot be sold as condos or co-ops during the restriction period.
- No concurrent benefits. With narrow ICAP and Article XI carve-outs, 485-x cannot be combined with other property tax abatements or exemptions.
What the program is producing so far
One year into implementation, HPD reported 118 buildings registered under 485-x, accounting for roughly 2,600 homes and 540 income-restricted units. The pipeline has been heavily weighted toward outer-borough Option B projects — small and modest rental — rather than the headline-generating Very Large projects in Zone A. That is consistent with what construction wage requirements and 60% AMI targeting do to Zone A feasibility, and it is worth keeping in mind when evaluating sites.
Our take
485-x is a more complex instrument than 421-a, with more variants and more compliance surface. It is also a more durable one. Permanent affordability and permanent rent stabilization of affordable units mean the regulatory commitments you make at commencement will be with your asset long after the exemption period ends. Feasibility analyses that treat 485-x as “the new 421-a” miss the point. The affordability options diverge sharply, the wage rules are non-linear, and the MWBE requirement is an active workstream — not a box to check at Certificate of Eligibility.
Working on a 485-x feasibility or pre-filing? Regtime Builder models incentive stacks across all four affordability options and manages the HPD workflow from Application Registration through Certificate of
