A Washington Heights landlord facing property taxes that once ate up as much as 28 percent of gross revenue agreed to freeze rents for elderly tenants and register apartments as rent-stabilized at legal rents twice their current level — all in exchange for a shot at New York City's Article XI tax exemption. The owner first applied for the program in 2022 for several distressed buildings in the neighborhood. Now, with unaffordable mortgages coming due and only six months to a year to find an exit, that landlord still doesn't have an answer.
Article XI is a decades-old tax-break program for rental buildings, created to preserve low rents at properties with expiring affordability agreements, according to The Real Deal. The exemption can wipe out a building's property taxes for 40 years and replace them with a lower payment in lieu of taxes, capped at 10 percent of gross revenue and rising gradually to 17 percent — a dramatic drop for the Washington Heights buildings, which previously paid property taxes equal to 26 to 28 percent of gross revenue. But the program is awarded almost never to unsubsidized rent-stabilized buildings rendered insolvent by rising costs and regulatory changes, the outlet reports, making it far more of a long shot than a guaranteed rescue.
The math behind why so many owners are desperate enough to try traces back to 2019, when the state's Housing Stability and Tenant Protection Act sharply curtailed how landlords could raise rents to pay for capital repairs. Under Article 11 of the state's Private Housing Finance Law, enacted back in 1966, the New York City Council holds the authority to grant these exemptions for up to 40 years, according to the New York State Assembly. Before the 2019 law, landlords could recoup capital investment costs through permanent rent surcharges — a mechanism Katten Muchin Rosenman LLP says largely evaporated once the tenant protection law took effect, driving many outer-borough rent-regulated buildings into negative operating income.
A Bottleneck by Design
The numbers behind the bottleneck are stark. In the fall 2025 application round, HPD received more than 75 applications but had capacity for only one to three projects, per the seed reporting. David Shamshovich, a partner at Belkin Burden Goldman who specializes in Article XI applications, told the outlet that his firm had five applications deemed complete by HPD in October, and it took nine months before even one of those five was selected. In a cycle that drew 96 applications, HPD approved just one or two, according to the landlord's lawyer.
HPD itself has acknowledged the crunch. The agency deferred every Article XI application in November 2025 until February 2026, citing project capacity as the reason, according to a report from Belkin Burden Goldman that same month. The firm's analysis notes that Article XI approvals are limited in part because the tax break costs the city money and because project managers are simply overwhelmed. HPD did approve 94 Article XI applications from July through December, and the agency says it received funding as of July 1 to hire more project managers — a step it plans to take to improve the process going forward.
The Paperwork Gauntlet
Even landlords who make it through the initial cull face a grinding review. HPD's term sheet for the program runs 13 pages, and applicants must submit a violation clearance plan and a physical needs assessment before anything moves forward. The Washington Heights landlord said HPD requested additional information from the application every six months, stretching the process out for years. Daniel Bernstein, a partner at Rosenberg & Estis who helps landlords apply for Article XI, said HPD essentially has to decide whether a given property deserves the subsidy at all — a judgment call that can take months to render.
The financial commitment required just to apply is steep. An Article XI application can cost six figures in consulting and legal fees, per the seed reporting, with no guarantee of approval. Buildings that do get approved must transfer title to a Housing Development Fund Corporation run by a nonprofit, entering what amounts to a 40-year regulatory relationship. The program also requires that at least 15 percent of tenants come from homeless shelters, and it can stretch the timeline for filling a vacant apartment from roughly 30 days to several months or longer.
Waiting It Out in Woodhaven
Not every applicant gives up. A landlord in Woodhaven, Queens, spent nearly two years applying for Article XI before finally approving a tenant this past February. That owner now hopes to move the tenant in by next month. For a program this slow, that kind of incremental progress counts as a win — though it underscores just how long the process can take even when it eventually works.
Back in Washington Heights, the outlook is far less certain. Facing 18 percent interest on unpaid water bills and mortgages issued at 65 percent loan-to-value, the owner said flatly that Article XI is not going to save the distressed buildings — even as the owner plans to apply again. The comment reflects a broader tension documented by Belkin Burden Goldman: Article XI offers genuine long-term tax relief, but its administrative capacity constraints and stringent regulatory burdens mean it functions as a narrow, long-shot remedy rather than a systemic fix.
A System Under Wider Strain
The pressure on Washington Heights and Woodhaven landlords fits into a larger citywide pattern. The Rent Guidelines Board's 2025 Income and Expense Study found that 9.3 percent of surveyed buildings with at least one rent-stabilized unit operated with negative net operating income in 2023, meaning operating expenses outstripped revenue entirely. Pre-1974 rent-stabilized buildings outside Core Manhattan — which make up roughly 65 percent of the surveyed rent-stabilized stock — saw a 2 percent decline in inflation-adjusted net operating income even as citywide figures rose, according to analysis published by Housing New York.
Meanwhile, the Rent Guidelines Board's Order #57, adopted last June, capped allowable rent increases at 3 percent for one-year leases and 4.5 percent for two-year leases through September 2026 — adjustments landlords argue fail to keep pace with rising property taxes, insurance, and utility costs. A May report from the city's Independent Budget Office similarly flagged widespread physical and financial distress across aging outer-borough regulated properties facing compounding maintenance costs. Hoodline has previously reported on how this distress has pushed lawmakers toward Article XI as a potential rescue tool, and on HPD's separate technical assistance program for financially struggling HDFC cooperatives.
New York also expanded Article XI's role beyond rescuing distressed buildings when it launched the Mixed Income Market Initiative in January 2024, pairing the tax exemption with municipal capital subsidies for mixed-income construction and preservation, according to Duane Morris LLP. That program emerged as a municipal alternative after the state's 421-a tax incentive lapsed in 2022. For landlords like the ones in Washington Heights, though, the more pressing question remains whether an already overwhelmed agency can move fast enough to matter before their buildings run out of road.
