ALBANY-As part of legislation intended to provide property tax relief to homeowners in New York City, the New York State Legislature on Monday enacted the most fundamental overhaul to the J-51 tax abatement program in nearly two decades. The focal point of the J-51 reform is to increase the city’s stock of affordable housing. The measure now goes to Gov. Andrew Cuomo for his signature.
The J-51 overhaul is aimed at reviving a state program that expired at the end of 2011. Under the new proposal, tax benefits will no longer be available to developers that are converting commercial buildings to residential use unless those conversions receive “substantial governmental assistance,” according to a release. In other words, eligibility means participating in programs aimed at preserving or creating affordable housing.
Under existing J-51 law, only cooperative and condominium units with an assessed value of less than $40,000 are eligible for J-51 benefits, meaning that the program already is aimed at homeowners with moderately valued units. The new measure will further limit any benefits to co-ops and condos valued between $30,000 and $40,000 to units receiving substantial governmental assistance.
The intent is reduce the cost of the J-51 program to New York City. As a result, the city can increase the Certified Reasonable Cost schedule of allowable reimbursable expenses to provide greater incentives for landlords to use the J-51 program; this in turn will increase the number of units subject to rent regulation.
The bill also encourages the inclusion of affordable housing in some new luxury construction now under way in Manhattan. Five projects in Midtown and Lower Manhattan are grandfathered into the 421-a tax abatement and exemption program. Otherwise, the receipt of 421-a benefits would trigger a requirement that the developers also build affordable units.
In a statement, Mayor Michael Bloomberg says the legislation will “help incentivize residential building owners to make improvements on their properties—fixing essential, building-wide systems and improving the long-term stability of buildings. It will also allow for more streamlined administration of the program, which will provide for quicker application approval times and greater transparency. That’s great news for New York City’s tenants: it means they will have access to safe, affordable and decent housing for years to come.”
In addition, the legislation expands New York City’s Loft Law by increasing the ability of loft tenants and landlords to register their units and to transition the units to building-code compliance and rent-regulated status. It lowers the threshold for Loft Law protection from the current 500 square feet to 400 square feet. The current threshold prevents a substantial number of more affordable lofts from registering, the release states.
In addition, the proposal reduces the percentage of rent increases a landlord may impose when reaching various points in the process. This provision is intended to acknowledge that the initial rents for lofts now entering the system are significantly higher than they were when the original Loft Law was enacted in 1982.