RPTL 467-M: New Property Tax Incentive Aims to Assist with Residential Conversion of Obsolete and Vacant NYC Commercial Properties

It’s no secret that the biggest thorn in Gov. Hochul’s side is New York’s undeniable housing crisis. As one of the least affordable states in the country, New York has seen college graduates and retirees migrate to areas with a lower cost of living. New York City alone has lost 6%, or over 500,000 residents since April of 2020.

The Governor’s 2025 budget includes affordable housing programs and property tax incentives for NYC landlords, including a revival of the heralded (and sorely missed) RPTL 421-a abatement program (now known as RPTL 485-x), an increase to the floor area ratio “FAR” cap, and the establishment of a new tax incentive program for the conversion of obsolete NYC commercial buildings to apartments, codified as “RPTL 467-M Affordable Housing From Commercial Conversions Tax Incentive Benefits (“AHCC”).

An earlier Tax Tracker highlighted the difficulties that the NYC office market has faced since the pandemic, including astronomical vacancy rates in signature office buildings. Landlords have been unable to secure approval for economically feasible plans to convert obsolete offices to residential apartments, resulting in owners defaulting on their loans.

The Governor’s new AHCC program offers owners of commercial properties up to a 90% property tax exemption that could last as long as 35 years as an incentive to convert their buildings to a residential use. The new law provides a list of qualifications required to secure the exemption, including:

a) applicants are not limited to office buildings – the subject property must be “non-residential” but it cannot be a hotel;

b) plans for the conversion of the building must result in the creation of at least 6 units, 25%+ of the units must be set aside as affordable, at a rate of 80% of the average median income (“AMI”), and 5% of the units must be set aside at the rate of 40% of AMI; and,

c) the early bird gets the worm – landlords who secure permits prior to June 2026 will qualify for the 35-year abatement, but if a permit is secured after June 2028 the abatement will only last 25 years.

A property owner interested in applying for the AHCC or RPTL 485-x abatements, should speak with an attorney who specializes in New York’s Real Property Tax Law.