HPD recently announced that application materials are now available online for projects to submit for the newly reformed J-51 program, now named J-51 R. In announcing the availability of application materials for the updated program, outgoing First Deputy Mayor of New York City Maria Torres-Springer said, “A fundamental strategy in tackling the housing crisis is housing preservation, and J-51 is a critical tool in our toolbox for making safe, affordable, and high-quality building upgrades. The renewed J-51 R meets the moment by supporting building owners to make investment in new and sustainable building systems, all while keeping homes affordable for existing tenants.”

The J-51 tax abatement allows eligible owners to offset 70 percent of their capital improvement costs against their NYC property tax bill, with benefits spread over time. The maximum annual benefit caps at 8.3 percent of the improvement costs, meaning a building receiving a $120,000 tax credit could see around $10,000 in annual tax reductions over 12 years.

Since 2009, the J-51 tax relief program has resulted in the rehabilitation of more than 3,200 buildings. According to HPD, the newly reformed J-51 R program builds on this by providing a property tax abatement that helps finance essential repairs with an updated schedule of costs; supporting rent-regulated buildings in making long-term investments; helping owners comply with sustainability mandates, including Local Law 97; and preventing owners from passing costs onto tenants through major capital improvement (MCI) increases.

HPD’s opening of application materials starts a three-month window for applicable owners with projects that completed construction on or before Dec. 30, 2024. We’ll go over some details of the program including eligibility, the application process, and important deadlines.

Eligibility and Eligible Improvements

For rental buildings to qualify for J-51 R benefits, they must be classified as Class A multiple dwellings, with all units designated as rental housing. To meet eligibility, at least half of the rental units must be rent-regulated with rents below 80 percent of the area median income (AMI). Alternatively, eligibility is also extended to other regulated buildings operated as Mitchell-Lamas or owned by redevelopment companies.

Under the updated program, eligible construction includes major capital repairs such as roof replacements, façade repairs, and structural stabilization; heating, plumbing, and electrical system upgrades; or energy efficiency improvements that lower operating costs for tenants and owners. HPD has emphasized the fact that the updated J-51 program will help owners meet the city’s climate goals. Owners will now be able to use J-51 for energy-efficient upgrades that support compliance with Local Law 97, helping to both reduce carbon emissions and lower energy costs. Such improvements can include air sealing, high-performance windows, and insulation upgrades, modernized heating systems, heat pumps, and energy-efficient hot water heaters, and upgraded electrical capacity to support energy-efficient appliances and electrification. According to HPD, the eligible alterations or improvements:

• Are specifically identified on a certified reasonable cost schedule;
• Meet the minimum scope of work threshold of $1,500 per dwelling unit;
• Have a completion date that is after June 29, 2022, and prior to June 30, 2026, and that is not more than 30 months after their commencement date; and
• Are not attributable to any increased cubic content in such eligible building.

With respect to the reasonable cost schedule, HPD says it will propose a rule to publish the Certified Reasonable Cost Schedule for the J-51R program on HPD’s website. HPD has provided a tentative Certified Reasonable Cost Schedule at www.nyc.gov/assets/hpd/downloads/pdfs/services/J51-reform-crc.pdf for purposes of interim guidance to assist properties in applying for J-51 R program benefits, but it's subject to change and won't become effective until HPD adopts applicable rules.

Tenant Protection, Stronger Oversight

J-51 R program updates also include enhanced tenant protections and stronger oversight to ensure compliance with rent stabilization laws. For example, any rental units receiving J-51 benefits must remain under rent stabilization for the entire duration of the program’s restriction period. And owners may not apply for MCI rent increases for work covered under J-51.

HPD has expanded enforcement mechanisms to prevent misuse of the program and protect tenants. Not only would the agency be able to revoke the benefit from noncompliant building owners, as was the case in the past, but they would also be able to impose fines, extend the mandatory rent stabilization period, or even require the building to add additional rent-stabilized affordable units.

Application Materials, Next Steps

Application materials and required documentation information are now available on the HPD website at www.nyc.gov/site/hpd/services-and-information/tax-incentives-J-51-reform.page. Owners who completed eligible construction projects before Dec. 30, 2024, must apply by April 30, 2025. And for projects completed after Dec. 30, 2024, applications must be submitted within four months of completion.

HPD says it is in the process of drafting rules governing the administration of J-51 R, with draft rules expected to be published in the first quarter of 2025. A public hearing will follow, allowing for feedback from property owners, tenants, and other stakeholders. HPD won't approve applications until the final rules are effective.