485-x Tax Abatement: Eligibility, Affordability, and Penalties

New York’s 485-x tax abatement, formally the Affordable Neighborhoods for New Yorkers (ANNY) program, gives developers a 100% property tax exemption on new residential construction for 20 to 40 years, tied to affordability set-asides, construction and building-service wage floors, and MWBE contracting goals. Enacted in the state’s FY2025 budget as the successor to the expired 421-a program, it applies to rental buildings, cooperatives, and condominiums with at least six units, and almost every obligation scales with project size.¹

How Long the Exemption Lasts

The benefit runs during construction and for a set restriction period afterward. The length, and whether it stays at 100% the whole way, depends on your tier.

Very Large Rental (150+ Units)

Forty-year benefit. A full 100% exemption applies during the construction period and across the entire 40-year restriction period that follows.² Zone A projects get an extended construction period of up to five years instead of the standard three, useful for phased developments.

Large Rental (100+ Units)

Thirty-five-year benefit at 100% throughout, covering both the construction period (up to three years) and the full 35-year restriction period.²

Modest Rental (6–99 Units)

Thirty-five years, but with a step-down at the back. You get 100% during construction and for the first 25 years of the restriction period. In years 26 through 35, the exemption drops to the project’s affordability percentage, meaning the share of units set aside as affordable.² A building with 20% affordable units sees its exemption fall to roughly 20% for that final decade.

Homeownership

Twenty-year benefit: 100% for the first 14 years, then 25% for six years. No exemption applies to any portion of a unit’s square footage where the assessed value exceeds $89 per square foot on the first assessment after completion.² In higher-value neighborhoods, that cap can wipe out the benefit on the portion above the threshold.

Basic Eligibility: Dates, Units, Zones

Construction must commence after June 15, 2022, and on or before June 15, 2034, with all work completed by June 15, 2038.¹ The building must be a multiple dwelling or homeownership project with at least six residential units. Hotels are excluded.

Projects fall into one of four categories, and category drives everything downstream:

Modest Rental: 6 to 99 units, all rental.
Large Rental: 100 or more units, all rental.
Very Large Rental: 150 or more units, all rental, in Zone A or Zone B.
Homeownership: at least six units as co-op or condo.

Zone A covers tax lots entirely south of 96th Street in Manhattan plus specific neighborhood tabulation areas in Brooklyn and Queens, including parts of downtown Brooklyn and Long Island City. Zone B covers additional Brooklyn and Queens neighborhoods, including areas in Williamsburg and Greenpoint.¹ Projects outside both zones still qualify but face lower wage thresholds.

Affordability You Have to Provide

Set-asides and income targets shift meaningfully at the 100- and 150-unit breakpoints:

Very Large Rental (150+): 25% of units affordable at an average of 60% Area Median Income.
Large Rental (100+): 25% of units affordable at an average of 80% AMI.
Modest Rental (6–99): 20% of units affordable at an average of 80% AMI.

Every affordable rental unit is permanently rent-stabilized. The statute makes this explicit: restricted units remain fully subject to rent stabilization both during and after the benefit period.² Once a unit is designated as restricted, it stays restricted even after the 35- or 40-year exemption runs out.¹

Homeownership works differently. Rather than income-restricted set-asides, 100% of the units must have an average assessed value per square foot at or below $89 on the first post-completion assessment. Each unit owner must agree in writing to keep the property as a primary residence for at least five years from acquisition.² Failure to maintain primary residency can trigger revocation of the building’s benefits.

Construction Wages, Building Service Wages, and MWBE

Wage requirements are tiered and escalate sharply at 100 and 150 units. All construction on sites with at least 100 units must comply with New York Labor Law Sections 220 and 220-b, with a floor of $40 per hour that increases 2.5% annually. For very large projects of 150 or more units, the minimums rise based on zone:¹

Zone A (150+ units): the lesser of $72.45 per hour (increasing 2.5% annually) or 65% of the greatest prevailing rate of wages and supplements within a classification.
Zone B (150+ units): the lesser of $63.00 per hour (increasing 2.5% annually) or 60% of the greatest prevailing rate of wages and supplements within a classification.

Building service employees, meaning maintenance staff, doormen, and security, must receive prevailing wages for the entire benefit period, enforced by the New York City Comptroller.¹ That is an operational cost across decades, not just a construction-phase line.

Developers must also make reasonable efforts to spend at least 25% of total applicable project costs on contracts with certified Minority and Women-Owned Business Enterprises. HPD’s implementing rules sit under Chapter 63 of Title 28 of the Rules of the City of New York.¹ The standard is reasonable efforts rather than strict attainment, but weak documentation of good-faith outreach is a common audit finding.

How to Apply and What It Costs

Two filings sit at either end of the project.

Before construction, the developer submits a registration notice to HPD. The statute requires at least three months’ advance notice before construction begins. Miss it and you face fines up to $5,000 per day and possible forfeiture of the benefit entirely.² If construction starts before the notice goes in, the project loses eligibility.

After completion, the developer files the full application for a certificate of eligibility within one year of the completion date. The project architect or professional engineer of record must certify both the date construction lawfully began and the date of the first temporary or permanent certificate of occupancy.³ A recorded restrictive declaration must be executed by all parties in interest before HPD will approve the application.

Filing fees are per dwelling unit:

6 to 11 units: $3,000 per unit.
12 to 99 units: $4,000 per unit.
100 or more units: $5,000 per unit.

Fees paid at the workbook submission stage are credited against the final application fee.³ On a 200-unit project, that is $1 million in application fees before you factor anything else in.

What Happens If You Slip

Enforcement is aggressive and varies by which requirement gets broken.

On construction wage violations, the city’s fiscal officer can pursue back wages, liquidated damages up to three times the owed amount for willful violations, and reasonable attorney’s fees.² Three wage violations within a five-year window authorize the fiscal officer to recapture all previously granted tax benefits and terminate future ones. After a second violation, the developer gets formal notice that the next infraction can trigger full recapture.

On affordability, HPD can revoke ANNY benefits outright for failure to create, maintain, or properly occupy restricted units.² Losing a 100% exemption partway through a 35-year period is a solvency-level event on a large rental.

Building service wage violations run on their own track, with the Comptroller authorized to impose back pay, treble damages, and attorney’s fees.¹ The compliance obligations under 485-x are long, specific, and enforced by more than one agency, and every one of them outlives construction.

1
NYC Housing Preservation & Development. 485-x Affordable Neighborhoods for New Yorkers
2
New York State Senate. New York Real Property Tax Law 485-X
3
NYC Housing Preservation & Development. Affordable Neighborhoods for New Yorkers Application