The quick read: 467-m changes the financing of a New York office-to-residential conversion by shrinking the property tax line a lender underwrites. HPD's benefit schedule exempts 100% of property tax for up to three years of construction, then 90% for tax lots entirely south of 96th Street in Manhattan and 65% elsewhere for most of a 25- to 35-year term, in exchange for at least 25% affordable units that stay rent stabilized permanently. The permit date sets the term: the 35-year tier closed after June 30, 2026, so a project permitted now underwrites a 30-year benefit with a June 30, 2028 cutoff.
What does 467-m require before a conversion qualifies?
467-m requires an eligible conversion of a non-residential building, other than a hotel or other class B multiple dwelling, into rental housing with six or more units, at least 25% of them affordable, a commencement date after December 31, 2022 and on or before June 30, 2031, and completion by December 31, 2039, according to HPD.
HPD's income rules are at least 5% at 40% of Area Median Income (AMI), a weighted average no higher than 80% of AMI, no more than three bands and none above 100%. The affordable units are permanently rent stabilized, share entrances with market units, and either mirror the market unit mix or put at least 50% in two or more bedrooms and no more than 25% below one bedroom. Building service employees receive the prevailing wage unless the building has fewer than thirty units or substantial government affordable-housing assistance.
Two physical rules shape the collateral. HPD's FAQ says at least 50% of the completed floor area must come from the pre-existing building, and non-residential space keeps the benefit only up to 12% of total floor area. The NYC Comptroller's fiscal note adds that ineligible area above 12% cuts the exemption by the same percentage and that developers are expected to split the building into condominium units, so confirm early which unit the lender takes as collateral.
The Comptroller found studios make up 49% of the units at 55 Broad Street, 72% at 25 Water Street and 84% at 5 Times Square, and concluded the two-bedroom alternative is not used as a practical matter, so the restricted rent roll follows a studio-heavy market mix. The wider capital stack is covered in how to finance an office to residential conversion.
Affordable units (HPD): at least 25% of dwelling units
Weighted average income limit (HPD): no more than 80% of AMI
Commencement window (HPD): after December 31, 2022 through June 30, 2031
Completion deadline (HPD): December 31, 2039
How long and how deep is the exemption for each start date?
The exemption lasts up to three years at 100% during construction and then 35, 30 or 25 years after construction, depending on whether the permit was issued by June 30, 2026, by June 30, 2028 or by June 30, 2031, with full-benefit years at 90% south of 96th Street in Manhattan and 65% elsewhere, per HPD's benefit schedule.
Table: 467-m benefit schedule by commencement date (HPD; MPDA means a tax lot entirely south of 96th Street in Manhattan)
| Term | Phase 1 | Phase 2 | Phase 3 |
|---|---|---|---|
| Term Permit window | Phase 1 Through June 30, 2026 | Phase 2 July 1, 2026 to June 30, 2028 | Phase 3 July 1, 2028 to June 30, 2031 |
| Term Construction period | Phase 1 Up to 3 years at 100% | Phase 2 Up to 3 years at 100% | Phase 3 Up to 3 years at 100% |
| Term Post-construction term | Phase 1 35 years | Phase 2 30 years | Phase 3 25 years |
| Term Full-benefit years | Phase 1 1 to 30 | Phase 2 1 to 25 | Phase 3 1 to 20 |
| Term Full benefit, MPDA and elsewhere | Phase 1 90% and 65% | Phase 2 90% and 65% | Phase 3 90% and 65% |
| Term Five-year phase-out, MPDA | Phase 1 80% to 40% | Phase 2 80% to 40% | Phase 3 80% to 40% |
| Term Five-year phase-out, elsewhere | Phase 1 50% to 10% | Phase 2 50% to 10% | Phase 3 50% to 10% |
| Term Status on October 26, 2026 | Phase 1 Closed | Phase 2 Open | Phase 3 Opens July 1, 2028 |
HPD's schedule starts the construction benefit on the later of the commencement date or three years before completion, so a four-year build carries one year of construction-period tax that 467-m never covers. With Phase 1 closed, a permit issued today earns 25 full-benefit years; Phase 3 offers the same rates for five fewer.
Construction-period exemption (HPD schedule): 100% for up to 3 years
Phase 2 commencement deadline (HPD schedule): June 30, 2028
How does the exemption change the NOI a lender sizes the loan on?
The exemption raises the net operating income (NOI) a lender sizes on because it removes most of the property tax line, and in the NYC Comptroller's stylized Manhattan model NOI rises from $40 to $49 per gross square foot with 467-m, even though income-restricted rents cut gross income from $75 to $64.
The Comptroller's fiscal note, dated July 17, 2025, assumes unabated property taxes equal 28% of gross income: $21 per gross square foot on a market-rate conversion against $2 on a 467-m building on the MPDA schedule. Its other inputs are a $500 per gross square foot conversion cost including financing, market rent of $105 per rentable square foot against $42 for restricted units, 5% vacancy on market units and $14 of operating expenses before tax. The $19 tax reduction exceeds the rent loss by a little more than $8.
For its fiscal estimate covering Manhattan south of 59th Street (Table 6), the Comptroller computes tax as Department of Finance (DOF) market value times 45% times the tax rate, using FY 2025 rates of 10.762% for office and 12.5% for residential. DOF lists tax year 2026 rates of 12.439% for Class 2 and 10.848% for Class 4, and a converted rental moves from the office class to the higher residential rate.
Illustrative example (our arithmetic on the Comptroller's per-square-foot inputs, not a quote or a lender offer): a 200,000 gross square foot conversion with static rents and taxes, full tax on the 467-m building at the Comptroller's 28% of gross income ($17.92 per square foot), and a hypothetical 8% debt yield as the sizing test. The Comptroller's Table 5 shows $49 because it works from unrounded inputs; its $14 of operating expenses is $18 per rentable square foot at a 75% rentable-to-gross ratio, or $13.50.
Table: NOI and loan size with and without 467-m (illustrative)
| Line, per gross sq ft | Market-rate conversion | 467-m, MPDA, full benefit | 467-m, MPDA, last phase-out year | 467-m after the exemption ends |
|---|---|---|---|---|
| Line, per gross sq ft Gross income | Market-rate conversion $75.00 | 467-m, MPDA, full benefit $64.00 | 467-m, MPDA, last phase-out year $64.00 | 467-m after the exemption ends $64.00 |
| Line, per gross sq ft Operating expenses before tax | Market-rate conversion $14.00 | 467-m, MPDA, full benefit $14.00 | 467-m, MPDA, last phase-out year $14.00 | 467-m after the exemption ends $14.00 |
| Line, per gross sq ft Exemption | Market-rate conversion None | 467-m, MPDA, full benefit 90% | 467-m, MPDA, last phase-out year 40% | 467-m after the exemption ends None |
| Line, per gross sq ft Property tax | Market-rate conversion $21.00 | 467-m, MPDA, full benefit $1.79 | 467-m, MPDA, last phase-out year $10.75 | 467-m after the exemption ends $17.92 |
| Line, per gross sq ft NOI | Market-rate conversion $40.00 | 467-m, MPDA, full benefit $48.21 | 467-m, MPDA, last phase-out year $39.25 | 467-m after the exemption ends $32.08 |
| Line, per gross sq ft NOI on 200,000 sq ft | Market-rate conversion $8.00 million | 467-m, MPDA, full benefit $9.64 million | 467-m, MPDA, last phase-out year $7.85 million | 467-m after the exemption ends $6.42 million |
| Line, per gross sq ft Loan at a hypothetical 8% debt yield | Market-rate conversion $100.0 million | 467-m, MPDA, full benefit $120.5 million | 467-m, MPDA, last phase-out year $98.1 million | 467-m after the exemption ends $80.2 million |
In full-benefit years 467-m, net of the restricted rents, adds about $20.5 million of proceeds against the market-rate conversion here; the exemption on its own is worth about $40.3 million against the same building once the exemption ends. By the last phase-out year NOI is below the market-rate building's, and after expiry it is $7.92 per square foot lower, because the restricted rents stay while the tax returns in full. That falling tail is the subject of how an expiring tax abatement affects multifamily financing.
Ask each lender which tax figure it underwrites at completion, at its takeout test and at maturity, and put the answer in the term sheet. The Federal Reserve's October 14, 2026 Beige Book says New York City rents remained near historic highs while Manhattan office leasing ran brisk, with bidding wars for top-tier space; the Comptroller's July 2025 fiscal note found leasing gains concentrated in 5-star buildings, about 10% of office space.
How does a permanent or agency takeout lender count the exemption?
A takeout lender counts the exemption under its own rules, and Fannie Mae's Multifamily Selling and Servicing Guide, effective September 28, 2026, is one published example: it requires fully assessed taxes for any tax abatement expiring within 36 months after origination, and requires any abatement to be in effect at closing and to survive foreclosure.
The guide's definition of Tax Abatement includes any exemption and any PILOT, so 467-m falls inside it. Outside California, Section 203.01, item 17(b), underwrites taxes at the greater of actual future tax bills for a full calendar year or the prior year's taxes times 103%, and requires written assessor documentation that the abatement is in effect at closing and will stay with a later owner after foreclosure. If the abatement is shorter than the loan term, or begins phasing out or expires within 5 years after maturity, the lender must consider a bifurcated loan, an amortization schedule that accommodates the loss, or clear justification in the refinance analysis.
On a Phase 2 MPDA building the phase-out begins in post-construction year 26. A 10-year loan closed at stabilization matures with about 14 to 15 full-benefit years left and does not trip the five-year test; a 10-year refinance closed after about year 11 does. That is our arithmetic for one agency program; other lenders apply their own policies.
The in-effect test meets HPD's timetable. HPD's FAQ says the application is filed no earlier than the Completion Date, the first certificate of occupancy covering all residential areas, and no later than one year after it; an eligible property can then expect the exemption to be applied for the following tax year, per HPD's FAQ. Size the construction loan's extensions, or a bridge, to carry the building from that certificate through HPD's review and the next tax roll, and have counsel confirm how the exemption and the recorded restrictive declaration bind a successor owner.
Abatement expiring within 36 months of origination (Fannie Mae Guide, Section 203.01, item 17(b)): underwrite fully assessed taxes
Application window (HPD FAQ): from the Completion Date to one year after it
What property tax does the construction budget carry before the exemption reaches the tax bill?
The project pays its property tax bills in full through the build, because HPD's FAQ says a property must pay all tax bills it receives before the benefits are implemented, and construction-period benefits are applied retroactively only after HPD issues a certificate of eligibility. That tax belongs in the construction budget, whether the loan or the sponsor's equity funds it.
HPD's FAQ also says the owner files the application no earlier than the Completion Date, so the retroactive construction-period benefit is a receivable that arrives only after completion. HPD's FAQ adds three more items: outstanding tax liability bars eligibility unless the property is in an active payment plan; no other exemption or abatement, including ICAP, can run alongside 467-m; and the application fee is $3,000 per dwelling unit, 25% with the Workbook and 75% with the application, which comes to $900,000 for a 300-unit conversion by our arithmetic.
If the loan funds the tax carry and floats over the Secured Overnight Financing Rate (SOFR), the interest on that carry moves with the index, so model it at the rate in the term sheet. The 10-year Treasury par yield was 5.12% on October 20, 2026, per the U.S. Treasury, and the Beige Book says credit standards for commercial mortgages in the New York District tightened slightly.
10-year Treasury par yield, October 20, 2026 (U.S. Treasury): 5.12%
Application fee (HPD FAQ): $3,000 per dwelling unit
What happens if the project misses a 467-m phase deadline?
Missing a phase deadline moves the building to a shorter schedule rather than ending eligibility, up to the program's last cutoffs: a permit issued on July 1, 2028 instead of June 30, 2028 loses five full-benefit years, and a permit after June 30, 2031 or a completion after December 31, 2039 falls outside 467-m entirely.
The date that counts is the initial issuance of a qualifying Department of Buildings permit for alterations that require a new certificate of occupancy: an ALT-CO, Alteration CO or Alteration Type 1 general construction job, per HPD's commencement bulletin. HPD's FAQ says an amended permit keeps its initial date, and one eligible multiple dwelling cannot have more than one type of post-construction benefit period, so the project definition in the Workbook fixes the tier.
On the illustrative building, Phase 3 in the MPDA gives up 4.5 years of full tax against Phase 2 (25.5 exemption-years against 21.0), about $16.1 million at $3.58 million a year before discounting, by our arithmetic on HPD's schedule. Put the permit date, certificate of occupancy and application filing, due within a year of completion, into the loan's milestones.
Timing can also help: the Comptroller says 25 Water Street sold in December 2022, secured a $536 million construction loan that month, started construction in 2023 and qualified for 467-m retroactively, under a program enacted in May 2024.
Program last commencement date (HPD): June 30, 2031
Full-tax years given up, Phase 2 to Phase 3, MPDA (our arithmetic on HPD's schedule): 4.5
How do you get a 467-m conversion loan placed with lenders?
You get a 467-m conversion loan placed by putting one complete package in front of construction and takeout lenders at the same time, covering the permit date that fixes the tier, the MPDA status, the affordable unit schedule, the construction tax carry and a takeout model through the phase-out, so lenders compete on proceeds and terms instead of tax assumptions.
Our pick, a brokerage (YieldStack publishes this guide): YieldStack is an AI-native commercial mortgage brokerage that arranges financing for commercial real estate investors. Software matches the deal against 20,000+ loan programs and compares the options; human brokers structure the deal, negotiate on the borrower's side and carry it toward closing. The median first offer arrives in under an hour, from an institutional lender. It costs Zero upfront to submit a deal and review offers; YieldStack's broker fee is 0.50–1.00% of the loan amount and is paid only at closing. Every credit decision is made by the lender; YieldStack arranges the introductions and negotiates on the borrower's side, and no loan, rate, or closing is guaranteed.
Going direct: a sponsor can call lenders one at a time, but each builds its own tax line and takeout test, and quotes compare only when every lender sizes the same numbers. Program details are on the conversion loans page.
The package that gets comparable quotes carries:
- The Department of Buildings permit, its job type and its issuance date
- The tax lot and whether it sits entirely south of 96th Street
- The draft HPD Workbook: affordable units, AMI bands and unit mix
- Floor area by use against the 12% non-residential limit
- A construction budget with full taxes through completion, plus a takeout model through the phase-out
When the package is ready, send the 467-m conversion for lender review.
The bottom line
467-m changes conversion financing in three places: it lifts NOI with an exemption of 90% south of 96th Street or 65% elsewhere, it makes the construction budget carry full taxes until HPD certifies the building, and it hands the takeout lender a schedule that ends while the rent limits do not. With Phase 1 closed, the permit date decides between a 30-year and 25-year benefit.