- New York’s Article XI tax abatement — which can eliminate a building’s property taxes for 40 years in exchange for a lower PILOT payment — is almost never awarded to unsubsidized rent-stabilized buildings pushed into insolvency by the 2019 rent freeze and rising costs, according to The Real Deal.
- One law firm had five Article XI applications deemed complete by HPD in October, and nine months later just one had been approved, while HPD acknowledged deferring an entire application round in November, citing project capacity.
- With HPD receiving new funding in this year’s city budget to hire additional project managers, the bottleneck may ease, but attorneys say Article XI functions less like a conventional exemption and more like a 40-year regulatory relationship few distressed owners can complete.
Rent-stabilized owners seeking New York’s Article XI tax break are finding the program almost impossible to land, according to The Real Deal. The abatement can wipe out a building’s property taxes for 40 years in exchange for a much lower payment in lieu of taxes, but it was designed to preserve affordability at properties with expiring subsidies — not to rescue buildings made insolvent by the city’s 2019 rent freeze and rising taxes, insurance and utility costs. For most applicants, the odds are long: one law firm had five applications deemed complete by the Department of Housing Preservation and Development in October, and nine months later, only one had been approved.
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Rare Success, Rarer Repeats
The program’s selectivity is by design, according to Rosenberg & Estis partner Daniel Bernstein, who helps landlords apply. From HPD’s perspective, he said, “the property has to deserve subsidy.” The agency has to “decide you’re worthy.”
One Washington Heights landlord’s family secured Article XI before the pandemic. The building’s federal subsidy was expiring, so the program capped property taxes at 10% of gross revenue. That figure could rise to 17%, down from 26% to 28%.
The same family reapplied in 2022 for other distressed Washington Heights buildings. They then faced three years of stalled project managers and unanswered requests before giving up.
“That cycle had 96 applications and they approved one or two,” the owner said.
HPD says it approved 94 Article XI applications from July through December. However, an email exchange shared with The Real Deal shows the agency deferred every pending application in November until February. HPD cited limited project capacity.
What It Takes to Land an Article XI Tax Break
HPD’s term sheet for the program runs 13 single-spaced pages. It can require a violation clearance plan, a physical needs assessment and a transfer of the building to a nonprofit-run HDFC.
Applicants must also reserve at least 15% of units for tenants coming from homeless shelters. The share can be higher, with final terms negotiated during the approval process.
One Woodhaven landlord who secured the benefit said the application took nearly two years. Consulting and legal fees also cost six figures.
“This isn’t a conventional tax exemption you apply for and receive,” said Belkin Burden Goldman partner David Shamshovich, who specializes in the program. “It’s a 40-year regulatory relationship.”
Zooming Out
The bottleneck reflects a broader squeeze on New York’s rent-stabilized housing stock. Owners already face a deeper financial squeeze from frozen rents and rising operating costs.
The city is also seeing related distress. A surge in vacate orders is displacing thousands of tenants from buildings that owners can no longer maintain.
Why It Matters
For rent-stabilized owners facing unaffordable mortgages, Article XI is often described as their best remaining option. Yet HPD approved only one or two applications out of 96 in the most recent cycle cited in the report.
The process also creates costs after approval. Landlords interviewed by The Real Deal say a 30-day apartment rental can stretch into months because of the program’s oversight requirements.
One owner approved a prospective tenant in February but was still waiting to move them into the unit by August. Another participant said requests for required financial reports went unanswered. They eventually resorted to certified mail.
What’s Next
HPD received funding in the city budget that began July 1 to hire more project managers. The agency says it also plans to streamline the process.
The changes could unclog a pipeline that currently approves only a handful of the dozens of applications received each cycle. Attorneys and landlords are watching to see whether the incoming Mamdani administration follows through on reported plans to improve the program.
For now, most applicants remain skeptical. One owner described their chances of approval as “a far-fetched dream.”
