Reprinted with permission from the October 23, 2026, edition of the New York Law Journal. © 2026 ALM Media Properties, LLC. Further duplication without permission is prohibited. All rights reserved.
New York State Senate Bill S9571 has passed both houses of the legislature and was returned to the Senate on June 1, where it remains pending delivery to Governor Kathy Hochul. The bill offers an encouraging outlook for stakeholders in the state’s low-income housing sector. If signed into law, the amended legislation would permit multiple successive transfers of New York State low-income housing tax credits, a significant change from the existing regulation.
Background: The SLIHTC Program and New York’s Housing Supply Crisis
The SLIHTC program, administered by the New York State Homes and Community Renewal, was enacted to supplement the federal Low-Income Housing Tax Credit and to channel private investment into the development and rehabilitation of affordable rental housing across New York.
Like its federal counterpart, the SLIHTC awards credits to qualified low-income housing projects; those credits are then monetized through syndication to investors, whose equity contributions reduce the debt a project must carry and, in turn, the rents charged to service that debt. For more than a decade, the program has been one of the state’s principal tools for financing income-restricted housing.
The program has never been more important. New York continues to confront an urgent shortage of affordable housing with demand far outstripping supply not only in New York City and its surrounding suburbs but increasingly in upstate markets as well.
Rising construction costs, elevated interest rates, a seemingly insurmountable insurance market and constrained public budgets have made it harder to close the financing gap on affordable projects, and a growing share of the state’s existing affordable units are approaching the end of their original compliance and affordability periods. Against that backdrop, any measure that improves the efficiency with which tax-credit equity can be raised and recycled carries outsized significance.
Under the current law, a taxpayer who owns one or more interests in a low-income housing building may transfer their SLIHTCs to a third party, who may then claim the benefit of those credits. However, existing law prohibits the transferee from subsequently conveying the transferred credits to another party, effectively limiting the SLIHTCs to a single transfer.
The single-transfer restriction has practical consequences. Because a transferee that acquires SLIHTCs cannot resell or transfer them, the pool of prospective purchasers narrows to investors with sufficient New York tax liability to use the credits they acquire and a willingness to hold the credits for the duration of the benefit period.
If a transferee’s circumstances later change—whether because of a shift in tax position, a corporate reorganization or a need for liquidity—it has no mechanism under current law to reallocate the credits to a party better positioned to use them. The result has been lower demand, downward pressure on prices and in some cases credits that go underutilized despite a robust need for the housing they were meant to support.
The proposed legislation would allow a transferee to transfer credits to another person or entity, subject to Homes and Community Renewal approval and documentation. Importantly, any such SLIHTC transfer would not affect the underlying housing project’s eligibility for SLIHTC program benefits.
How a SLIHTC Transfer Transaction Would Work
Mechanically, the amended framework preserves the existing first-tier transfer and permits additional transfers thereafter. As under current law, a taxpayer that owns an interest in one or more eligible low-income buildings may first transfer all or a portion of its SLIHTCs to a transferee, which may claim the transferred credits against its New York tax liability, provided the applicable requirements are satisfied.
The new legislation would remove that restriction, allowing the transferee to transfer all or a portion of the transferred credits to another person or entity, which could in turn further transfer those credits. In this way, the legislation would permit a single stream of credits to pass through multiple successive holders, subject to HCR approval, applicable rules and documentation requirements.
HCR would approve and document each transfer in that chain. The legislation requires each successive transfer to receive agency approval, comply with agency-promulgated rules and be properly documented. Although the bill does not prescribe the specific procedures HCR would use to review and document downstream transfers, these requirements would enable the agency to oversee successive transfers and maintain appropriate records of the credits’ disposition.
Critically, the legislation provides that a permitted transfer may not affect the underlying housing project’s eligibility for SLIHTC program benefits. Thus, while ownership of the credits could change through successive transfers, the underlying project’s eligibility for program benefits would not be affected merely by those transfers.
For practitioners, this structure would likely mean that transfer documentation, assignment agreements, representations concerning the credits and the parties, and HCR approval submissions are recurring features of SLIHTC transactions rather than a one-time event at the initial transfer.
Parties may need to account for the possibility of downstream transfers when negotiating credit-purchase agreements, allocating compliance and recapture risk, and drafting the representations and indemnities that accompany a SLIHTC sale. The precise documentation and approval requirements for successive transfers, however, would depend in part on the rules HCR promulgates to implement the amended statute.
Amendments to the current law intend to address the following topics:
Preservation and financing support. By allowing SLIHTCs to change hands multiple times, the amended legislation aims to strengthen the long-term preservation of low-income housing projects and expand available financing options.
In particular, the ability to move credits among successive holders gives owners and their partners a tool to recapitalize aging projects, refinance existing debt, and fund the rehabilitation needed to keep properties in service as they approach the end of their initial affordability periods. Rather than allowing credits to sit idle when an original investor’s appetite wanes, the amended law would let those credits be redeployed to support the continued operation and preservation of the housing they were awarded to finance.
A secondary credit market. The bill would back the development of a secondary market for SLIHTCs, attracting an additional class of buyers and improving overall market liquidity, further helping address stagnation in credit transactions.
A functioning secondary market would allow credits to be priced and repriced over time, giving holders an exit and new entrants a point of entry that does not depend on participating in an original syndication. Gradually, greater liquidity should translate into more competitive pricing for developers and a more resilient market that is less prone to the stagnation a closed, single-transfer system tends to produce.
Broader market participation. Increased flexibility would open the market to a broader array of investors, allowing credits to reach those best suited to optimize their use.
Investors who lack the appetite or tax capacity to commit to a full multiyear credit position at the outset of a project may nonetheless be willing to acquire credits on a secondary basis, and holders who need to divest for their own reasons would gain a counterparty. By widening the universe of potential participants, the amended law aims to match credits with the parties best able to use them efficiently.
Reduced reliance on public funding. Developers would gain an alternative avenue to address financing gaps through private channels, easing existing constraints and creating more direct and accessible sources to project financing.
To the extent private capital can be mobilized more freely through a liquid transfer market, the state’s scarce public subsidy can be stretched further and directed to the projects and populations that need it most, reducing the pressure on public budgets that has long constrained the pace of affordable-housing production.
Why the Bill Matters Beyond Its Technical Function
It’s easy to read S9571 as a narrow, technical amendment to the rules governing who may claim a tax credit. Its significance, however, is broader. By converting the SLIHTC from a largely static, single-transfer instrument into a more freely transferable one, the bill addresses a structural constraint that has limited the program’s effectiveness as a financing tool.
Liquidity is not an abstraction in this context—it determines how much equity a developer can raise, how quickly a project can close, and whether the housing gets built and preserved at all. In a state where the affordable-housing shortage is measured in hundreds of thousands of units, incremental improvements in the efficiency of the financing system have real consequences for the pace at which affordable housing is delivered.
The bill also aligns New York with a broader trend among states that have made their housing tax credits more transferable to attract capital and stabilize pricing. For owners, investors and lenders, a deeper and more liquid SLIHTC market will certainly change how affordable-housing transactions are structured and financed. It may make New York credits more attractive relative to other investment opportunities competing for the same capital.
What Practitioners Should Watch for in the Interim
Until Governor Hochul signs the bill, S9571 remains proposed legislation, and its practical effect will depend heavily on how it is implemented. Several questions bear watching.
First is the shape of HCR’s approval and documentation process: The agency’s guidance, forms and processing timelines will determine how burdensome successive transfers are in practice and whether the anticipated liquidity benefits actually materialize. Practitioners should monitor for implementing regulations or program guidance and be prepared to comment where the opportunity arises.
Second, parties currently negotiating credit transactions should consider how a future right to transfer might be addressed in existing documentation—whether to build in flexibility for downstream transfers, how to allocate the costs and risks of obtaining HCR approval, and how to handle representations regarding a transferee’s tax status and eligibility.
Third, practitioners should consider how the bill's applicability will affect existing credit arrangements. The bill expressly applies to SLIHTCs allocated before, on or after its effective date—including credits associated with projects already placed in service, under construction or in predevelopment—provided that transfers occurring on or after the effective date comply with the amended transfer requirements. It is anticipated that additional guidance will assist developers and investors in determining process and next steps once the bill is signed into law.
Finally, practitioners should watch the interplay between the amended state regime and federal tax considerations, including the tax treatment of a credit sale in the hands of successive holders.