A prominent agency lender provided Fannie Mae conventional financing in the aggregate amount of $21 million to a renowned New York developer secured by two newly constructed projects located in Harlem’s historic neighborhood. The properties currently receive an exemption from real property taxation pursuant to Subdivision 16 of the Real Property Tax Law §421a(16) and Chapter 51 of Title 28 of Rules of the City of New York known as the Affordable Housing New York Program, administered by the City of New York acting by and through its Department of Housing Preservation and Development (HPD). For the duration of the 35-year period tax exemption the owners must allocate at least 30% of the total units at each project to affordable housing.

In general, the 421-a(16) tax incentive program provides a tax exemption to projects within the 5 New York boroughs that commenced construction between Jan. 1, 2016 – June 15, 2022 and are completed on or before June 15, 2026. There are various options available to eligible owners under the 421-a(16) program in exchange for allocating certain units in a project to affordable housing during the affordability restriction period, typically consisting of 35 to 40 years.

To comply with Fannie Mae underwriting guidelines, the Romer Debbas Agency Lending and Affordable Housing legal team thoroughly analyzed the 421-a(16) tax exemption program, the HPD guidelines, the affordability restrictions set forth in the required Declaration of Restrictive Covenants recorded against both properties as well as the set aside requirements to ensure compliance with Fannie Mae guidelines.

Carmen I. Pagan, Esq., Partner and Head of our Agency Lending & Affordable Housing practices, led the transaction which closed on July 31, 2024, and was assisted by Senior Associate, Catherine Azevedo, Esq., Associate Darian Salazar, Esq., and other members of the Agency Lending & Affordable Housing group.