Data Analysis: What 421-a Extension Requests Tell Us about the Future of Multifamily Housing Development in NYC

Projects relying on the 421-a completion extension in tandem with Mandatory Inclusionary Housing (MIH) are expected to deliver both more housing and deeper affordability to several neighborhoods across the city, according to a recent data analysis by the NYU Furman Center. However, if completed, the proposed projects would continue a long-standing trend where a limited number of community districts produce housing at relatively high rates, underscoring the need for policies that promote equitable development in a broader range of neighborhoods.

The Furman Center analyzed data released in October by New York City’s Department of Housing Preservation and Development (HPD) on approximately 650 buildings under construction. These 421-a-eligible projects capitalized on a 2024 amendment to New York State law, which extended the construction completion deadline to help them stay on schedule and remain financially feasible. To qualify, developers had until September 12, 2024, to submit a Letter of Intent to HPD. The submissions analyzed by the Furman Center represent just over 68,000 new units, with 29 percent (19,811 units) income-restricted to households earning from 40 to 130 percent of the Area Median Income (AMI).

Our analysis identified four key takeaways: 

The combination of Mandatory Inclusionary Housing and 421-a drives development and deeper affordability.

• MIH areas citywide account for 63 percent of all low-income units (those targeted to households earning up to 40 or 60 percent AMI) proposed under the extension. 
• About a quarter (24%) of all expected units are in MIH areas, despite MIH lots making up less than 1 percent of all residentially zoned lots across the five boroughs.

Rezoned Gowanus is expected to produce the most low-income units under the extension.

• Over one third (36%) of proposed low-income units are in Gowanus. Due to Gowanus’ recent rezoning and MIH designation, these low-income units are expected to be built using MIH and 421-a, without additional government subsidies.

Option B is the new Option C. 

• 421-a exemption options C and G were eliminated under the extension. With Option B now the dominant choice, 25 percent of all income-restricted units target households earning up to 70 percent AMI. 
• Even without options C and G, other options still allow developers to create some income-restricted units at the middle-income tier, or 130 percent AMI. As a result, over half (53%) of the proposed income-restricted units target households earning up to 130 percent AMI. 

Uneven development patterns continue. 

• Just ten community districts (17%) contain over half of the new units planned under the extension. Many of these community districts are higher-rent and whiter than the city overall, and only one falls within the lowest quartile for population density.

Explore the properties that requested the extension in our interactive map

While our findings focus on the 421-a completion extension, it is only one of many policies that will shape multifamily housing development over the next few years. This analysis does not encompass, for example, upcoming 485-x developments, condominiums, office-to-residential conversions, or government-subsidized projects relying on subsidies beyond property tax benefits, all of which will contribute to additional multifamily housing construction. These components of the future multifamily housing pipeline merit further exploration in their own right. We also do not address the impact of zoning reforms and other changes to land use policies under the recently adopted City of Yes for Housing Opportunity plan. Our findings nonetheless highlight key insights with regard to geography and affordability that policymakers should consider when implementing these initiatives. 

A Legislative Extension

With the expiration of the 421-a tax incentive in June 2022, Governor Hochul and HPD created various ways for developers to extend the original construction deadline. Governor Hochul created the first pathway due to concerns from developers of 421-a-eligible properties in Gowanus, who warned that they may be unable to complete construction by 2026 due to delays associated with the neighborhood’s rezoning and environmental remediation. Other developers that rushed to submit last-minute applications for the exemption in 2022 also struggled to meet the original construction deadline due to rising interest rates. 

In response, the City and State created a broader extension, so as to ensure 421-a-eligible projects would meet the deadline and remain financially feasible. In April 2024, the New York State Legislature amended the law to extend the construction completion date by five years, to June 15, 2031. For projects seeking to leverage the extension, HPD issued new guidance that eliminated “Option C” (and its equivalent, “Option G”) from the original 421-a (16) program, both of which allowed developers to restrict 30 percent of units to households earning up to 130 percent of the AMI. These options had been fiercely criticized by advocates, who argued that rents at 130 percent AMI were often similar to market rents, and therefore did not meet the needs of low-income households. Nonetheless, these options will remain available to projects that complete prior to the original June 15, 2026 deadline.

Data Methodology

The table below provides an overview of the 651 projects that submitted a Letter of Intent to HPD. These projects represent 68,002 units, of which 29 percent (19,811 units) are income-restricted. 

To estimate the count of income-restricted units under the program, we calculated the minimum number of units required at each income band, based on the highest AMI allowed under the band.¹ While our estimates reflect only the units required under 421-a, developers designated an additional 2,865 units as affordable in the data. ²  Developers may go beyond minimum program requirements for several reasons, including: participation in city programs requiring additional set-asides; classification of units as affordable due to low market rents; and reporting errors.³ Due to limited information on these units, we exclude them from our analysis.

MIH and Option A Under 421-a (16)

Under the extension, 24 percent of the proposed units (16,468 of 68,002 units) are located in MIH areas, despite MIH lots making up less than 1 percent of all residentially-zoned lots across the five boroughs.⁴  Under 421-a, Option A aligns most closely with the requirements of Option 1 under MIH (see table 2). While the programs were designed to be compatible with one another, the limited options of MIH essentially require developers to provide deeper affordability under Option A to comply with both programs.⁵   

Program Requirements: MIH Option 1 vs. 421-A Option A

While a relatively small number of total projects (107 of 651 properties) intend to leverage Option A, these projects nonetheless account for the most units targeted to households earning up to 40 or 60 percent AMI (a maximum income of $62,150 and $93,180 for a family of four, respectively) under the extension.

MIH requirements account for a majority of proposed low-income units. In fact, if completed, 63 percent (2,700 of 4,318 units) of the units targeted to households earning up to 40 and 60 percent AMI would be created through a combination of MIH and 421-a.

Of all proposed low-income units, 36 percent (1,562 of 4,318 units) would be built in Gowanus alone, a likely result of the neighborhood’s upzoning and its MIH designation in 2021. Not surprisingly, all projects requesting an extension in the Gowanus MIH area intend to leverage Option A.

These findings in Gowanus suggest the interplay between 421-a and MIH creates both a greater number of homes and deeper affordability. While other neighborhoods also combine these tools, the scale of their application is particularly notable in Gowanus. The number of income-restricted units in the neighborhood also reflects the potential for this combination of programs to promote inclusive development in high opportunity areas. Gowanus is located in a community district with the city’s second-highest median household income ($156,437) and fourth-highest median gross rent ($2,632), as of 2022. Units restricted to deeper affordability levels may provide lower-income households with greater access to transit, high-performing schools, and economic opportunities.

Option B Under 421-a (16)

Option C (and its equivalent, Option G) previously allowed developers to provide all income-restricted units at the middle-income tier, or 130 percent AMI..⁶  With these options no longer available to applicants, the vast majority of properties that requested an extension (517 of 651 properties) intend to leverage Option B, which requires that 30 percent of units be income-restricted – with 10 percent restricted to households earning up to 70 percent AMI, and 20 percent restricted to those with incomes up to 130 percent AMI. With Option B now the dominant choice, 25 percent of income-restricted units (4,865 of 19,811 units) are expected to target households earning up to 70 percent AMI.

The remaining options under the extension, including Option B, still allow developers to specify a smaller share of income-restricted units at 130 percent AMI. While properties choosing Option B would, if realized, create 62 percent of income-restricted units (12,123 of 19,811 units) under the extension, two thirds of these units target households earning up to 130 percent AMI (a maximum income of $201,890 for a family of four). As a result, 53 percent of all the proposed income-restricted units (10,452 of 19,811 units) target households earning up to 130 percent AMI.

Geography of the 421-a Extension

We also analyzed the geographic distribution of proposed projects under the 421-a completion extension in order to understand which neighborhoods would, and which would not, add new housing under the 421-a extension. Just ten community districts (17%) contain over half of the new units planned under the extension.⁷  Proposed units would primarily be built in community districts with disproportionately high housing production rates. Many of these community districts are also higher-rent and whiter than the city overall, and only one falls within the lowest quartile for population density. Units targeted to 130 percent AMI in these neighborhoods may ultimately lease at market rent, underscoring concerns that the program has failed to provide sufficient public benefit for low-income households.

On a per capita basis, Gowanus leads the way under the extension. If the proposed projects are completed, this community district would produce 66 units per 1,000 residents, compared to a median neighborhood production rate of six units per 1,000 residents.

While these projects are concentrated in wealthier, whiter, and higher-density areas, they represent only one segment of New York’s multifamily housing pipeline. In neighborhoods like East New York, 421-a projects are typically less financially feasible due to lower market rents. As a result, developers in these neighborhoods may opt for programs that provide deeper or more direct subsidies. In other neighborhoods, factors other than rent may also constrict the applicability of a program like 421-a. The availability of land and zoning restrictions have historically limited development even in wealthier, higher-density neighborhoods like SoHo. In these cases, developers may instead pursue other forms of development, such as office-to-residential conversions, or otherwise await more favorable market conditions. Nonetheless, the high production rate in Gowanus suggests that neighborhood rezonings and similar interventions can help overcome these geographic differences and ultimately provide more housing in more neighborhoods.

Conclusion

Our analysis highlights a number of key takeaways with regard to the geography and affordability of new development under the 421-a completion extension. Perhaps most notably: projects relying on the 421-a completion extension in tandem with MIH are expected to deliver both more housing and deeper affordability to several neighborhoods across the city, especially Gowanus. With MIH requirements mandating deeper affordability requirements on new projects, nearly two thirds of all low-income units proposed under the extension are in MIH areas. While over half of the proposed income-restricted units would serve households earning up to 130 percent AMI, developers are also slated to supply more units targeting households earning up to 70 percent AMI than the program created in recent history. However, with most units slated for a small number of predominantly high-rent, high-income, and high-density neighborhoods, projects under the extension appear to conform to existing patterns of uneven development. 

A number of state and local laws enacted in 2024 –– including the City of Yes for Housing Opportunity, incentives for office-to-residential conversions, and the 485-x program –– are now operational, and intend to unlock more housing development opportunities across the city. In addition, starting in October 2026, the City of New York will have to establish housing production targets for each community district in order to fulfill the requirements of the Fair Housing Framework (Local Law 167 of 2023). Neighborhood rezonings, including those underway in Midtown South and the East Bronx, are also poised to create additional opportunities for housing development. Monitoring the impact of these newly enacted policies, including how development patterns shift, will be critical in order to identify and respond to emerging challenges related to the geography and affordability of new housing development.

Appendix

Footnotes

[1] We estimate the number of income-restricted units at the property level by multiplying the number of total units by the percent of income-restricted units required at each AMI level. In cases when this calculation yields a fraction of a unit, we round up to the nearest whole unit.

[2] Developers also reported 479 units in deficit of program requirements, likely due to reporting errors.

[3] We also rely on the most recent submission in our data, as some developers submitted multiple extension requests for the same project.

[4] MIH applies to areas that have been rezoned to accommodate new housing development.

[5] When a neighborhood undergoes a rezoning, its City Councilmember customarily decides the MIH options that will be available to developers. Option 1 is currently the most commonly available option. With Option 3 now allowed as a standalone option under the City of Yes for Housing Opportunity, its deeper affordability requirements may make it the dominant choice moving forward.

[6] The latest iteration of the 421-a program initially provided eligible projects with seven pathways to receive benefits. These pathways varied depending on eligibility factors, such as property size, location, and the depth of affordability. See Table 5 in the Appendix for more information.

[7] In descending order: Park Slope-Carroll Gardens (BK06), Fort Greene/Brooklyn Heights (BK02), Greenpoint/Williamsburg (BK01), Astoria (QN01), Jamaica/Hollis (QN12), Woodside/Sunnyside (QN02), Mott Haven/Melrose (BX01), Lower East Side/Chinatown (MN03), Bedford Stuyvesant (BK03), East Harlem (MN11).