New York City’s residential construction pipeline is finally showing signs of renewed life, thanks in part to the state’s launch of the Affordable Neighborhoods for New Yorkers (ANNY) tax incentive program — the long-awaited replacement for the expired 421‑a exemption.
ANNY, enacted under Real Property Tax Law §485‑x, provides a property tax benefit for new rental construction projects that meet affordability and wage criteria. It’s a move the industry has been watching closely, especially developers trying to balance rising construction costs with long-term financial viability.
A Jumpstart for Residential Projects
According to City & State New York, permit filings for new housing construction in NYC rose 43% year-over-year in the second quarter of 2025, reversing what had been a sharp post-421‑a slump. The total number of permits — 424 — included a notable number of filings for 99-unit buildings, which fall just below the prevailing wage requirement threshold under the ANNY framework.
This trend highlights how developers are shaping projects to strategically align with the new incentive’s parameters. Under ANNY, projects with more than 99 units or those located in designated wage zones must pay construction workers at prevailing wage rates, a factor influencing design, phasing, and budgeting.
Key Changes Under ANNY
As outlined by law firm Nixon Peabody, the ANNY program introduces several important features:
- Deeper affordability requirements: At least 20–25% of units must be set aside for households earning no more than 60–80% of area median income (AMI), depending on the building’s size.
- Flexible unit count: Unlike 421‑a, ANNY allows buildings of any size to qualify — but cost controls make 99 units a practical ceiling for many developers.
- Prevailing wage mandates: For larger projects or those in certain areas, wage requirements can significantly impact total project cost.
- Up to 40 years of tax benefits: For qualified projects, ANNY offers extended exemptions that can improve long-term return on investment.
What This Means for HVAC Planning
With new filings trending toward mid-rise structures and budget-sensitive builds, systems that offer value engineering without compromising comfort will be more critical than ever. For manufacturers and engineers in the HVAC space, ANNY represents both a challenge and an opportunity.
“Developers aren’t just looking at first cost anymore,” said Tom Glass, Sales and Marketing Director at Ice Air. “With ANNY, they’re calculating labor premiums, long-term property tax offsets, and energy efficiency standards all at once. The right HVAC system has to satisfy all of those variables.”
Wages
Developers and owners must also commit to construction wage standards for certain projects, including a citywide elevated minimum wage/benefit requirement for projects over 100 units. In 2025, the Minimum Hourly Wage/Benefit for projects with 100+ units citywide was $36.50. Yearly increases occur, jumping to $40.00 per hour for the next two years (2026-2027) and will continue to rise incrementally.
Designing for an Evolving Market
For HVAC planners, mechanical contractors, and engineers involved in ANNY-eligible projects, several design implications stand out:
- Efficiency and service life: With 35–40 years of tax benefit on the line, specifying long-life HVAC solutions makes both financial and operational sense.
- System flexibility: Projects capped at 99 units may still demand diverse layouts and load calculations — modular HVAC solutions with a small footprint will be in high demand.
- Noise and comfort factors: Affordable housing standards are rising, and so are tenant expectations. Quiet operation and temperature control remain essential.
Your Takeaway
ANNY is more than just a new tax break — it’s a blueprint for the next generation of multifamily housing in New York City. Developers, owners, and MEP professionals should take note of how quickly the landscape is evolving, and how HVAC design is being pulled into conversations much earlier in the planning cycle.
Ice Air continues to work with developers and engineers across the city to support efficient, code-compliant systems tailored to the new affordability and wage environment. For mid-rise residential projects navigating ANNY, Ice Air’s experience in modular, high-efficiency equipment is helping customers turn policy into performance.