Assessor Manuals, Exemption Administration: RPTL Section 421-pp

Assessor Manuals

Exemption Administration Manual, Part 2, Section 4.07 - RPTL Section 421-pp: Newly constructed or converted fully income restricted rental multiple dwellings 

Exemption code(s)

4428_

Year originally enacted:

2024

Related statutes:

RPTL §§ 421-p (rental multiple dwellings)

Summary:

Where allowed by local option, rental multiple dwellings constructed or converted in a benefit area as designated by local law that are fully-income restricted – meaning that all but one or two of the units in the structure meet affordability criteria adopted by the municipality – are exempt from taxation and special ad valorem levies (but not special assessments).

Eligible dwellings are wholly exempt while under construction, subject to a maximum of three years. The property shall then be exempt for an additional period of 30 years. Taxes shall be paid during the exemption period in an amount determined by local law. However, that amount shall be no greater than 10% of the shelter rent of the eligible rental multiple dwelling.

After a city, town, or village has initially adopted a local law to authorize this exemption, any other municipal corporation in which the designated benefit area is located may likewise authorize the exemption by local law or, in the case of a school district, by resolution.

This exemption is not available in New York City.

Property receiving this exemption may not simultaneously receive any other property tax exemption.

Eligibility requirements

Ownership requirements:

None.

Property location requirements:

The property must be located in a designated benefit area as set forth by local law. The exemption is not available in New York City.

Property use requirements:

For purposes of this exemption, a rental multiple dwelling is a structure, other than a hotel, consisting of 10 or more dwelling units, where all but one or two of the units are rented for residential purposes. Upon initial rental and upon each subsequent rental following a vacancy during the restriction or extended restriction period, all but one or two of the units, must be affordable and restricted to occupancy by individuals or families whose household income falls within the specified range of the area median income weighted average.

Tenants in an income restricted dwelling unit shall have the right to lease renewals at the income restricted level until the tenants permanently vacate the dwelling unit.

If there are one or two residential units that are not income restricted, they must be occupied rent-free by superintendents, caretakers, managers or other employees who are employed to serve the premises. If no units are provided to employees, all units in the building must be income restricted.

Any new construction must take place on:

• vacant land,
• predominately vacant or underutilized land,
• land improved with a non-conforming use,
• land containing one or more substandard or structurally unsound dwellings, or
• a dwelling that has been certified as unsanitary by the local health agency. 

This requirement does not apply to any new conversions.

If a newly constructed property is used partially as a rental multiple dwelling and partially for commercial or other purposes, the portion of the property that is used as a rental multiple dwelling may be eligible for this exemption. For a property that is partially used as a rental multiple dwelling to qualify, the portion used as a rental multiple dwelling must represent at least 50% of the square footage of the entire property, and all other requirements must be meet. 

Income requirements:

Upon initial rental and upon each subsequent rental following a vacancy during the restriction or extended restriction period as applicable, all but one or two of the units, must be affordable and restricted to occupancy by individuals or families whose household income falls within the specified range of the area median income weighted average as allowed by local law.

Individuals’ and families’ household income must not exceed a weighted average of no less than 60% of the area median income and no more than 80% of the area median income, adjusted for family size, at the time that the households initially occupy such dwelling units.

Furthermore, all of the income restricted units upon initial rental and upon each subsequent rental following a vacancy during the restriction or extended restriction period, as applicable, must be affordable to and restricted to occupancy by individuals or families whose household income does not exceed 100% of the area median income, adjusted for family size, at the time that such households initially occupy such dwelling units.  

Certification by state or local government:

Any recipient of the exemption, or its designee, shall certify its compliance with the requirements of this exemption under penalty of perjury, at such time or times and in such manner as the city, town or village may prescribe by local law.

Each city, town, or village may establish procedures as it deems necessary for monitoring and enforcing compliance of an eligible building with the requirements of this exemption.

Required construction start date or other time requirement:

The construction or conversion must have begun on or after the effective date of the local law, ordinance, or resolution which created the benefit area. 

Local option

Each city (except for New York City), town, or village may by local law, provide for the exemption of fully income restricted rental multiple dwellings constructed or converted in a benefit area designated in the local law from taxation and special ad valorem levies (but not special assessments).

Each city, town, or village must designate in their local law a benefit area to which the exemption applies.

Subsequent to the adoption of a local law allowing for the exemption by a city, town, or village, any other municipal corporation in which the designated benefit area is located may likewise allow the exemption by local law, or in the case of a school district, a resolution.

The local law authorizing the exemption may provide for the area median income weighted average within the amounts set forth in law, which is to be used to restrict occupancy to all but one or two of the units in the rental multiple dwelling.

By local option, each municipality offering this exemption shall determine the amount of taxes to be paid during the exemption period. However, that amount shall be no greater than 10% of the shelter rent of the eligible rental multiple dwelling.

Any recipient of the exemption, or its designee, shall certify its compliance with the requirements of this exemption under penalty of perjury, at such time or times and in such manner as the city, town or village may prescribe by local law.

Each city, town, or village may establish procedures as it deems necessary for monitoring and enforcing compliance of an eligible building with the requirements of this exemption.

Limitation on exemption

*If allowed by local option.

**See Calculation of exemption below.

Payments in lieu of taxes

None.

Calculation of exemption

Eligible property is wholly exempt from taxation while under construction, subject to a maximum of three years. The property shall then be exempt for an additional period of 30 years. Taxes shall be paid during the exemption period in an amount determined by the local law. However, that amount shall be no greater than 10% of the shelter rent of the eligible rental multiple dwelling.

The property may not receive any other exemption at the same time as it is receiving this exemption.

General municipal and school district taxes:

Yes, eligible property may be exempt from general municipal and school district taxes if the exemption is allowed by local option.

Special ad valorem levies and special assessments:

Yes, eligible property may be exempt from special ad valorem levies if the exemption is allowed by local option. No exemption is allowed for special assessments.

Coding of exemption on assessment roll

4428_

Assessment roll section(s):

Taxable (RPS Section 1).

Filing requirements 

Form RP-421-pp, Application for Real Property Tax Exemption for Newly Converted or Constructed Fully Income Restricted Rental Multiple Dwellings

RP-421-pp-I, Instructions for Form RP-421-pp

Reporting requirements (assessor)

None.

Similar exemptions

421-p (rental multiple dwellings)

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