Drafted legislation addresses tax abatements, J-51 program

The 2012 regularly scheduled State Legislative session ended on June 21. I wanted to update you on three important issues to our industry that were negotiated in the last week of the session.

The State Senate and State Assembly drafted, but did not vote, upon a piece of legislation that contained the extension of the coop/condo abatement and J-51 program and a technical amendment for 421a. The Real Estate Board of New York has been advised that the Legislature is expected to return later this year in a special session to take up these issues.

REBNY expects that after the special session, the coop/condo abatement, with very few changes for primary residents, will continue and the J-51 program will be extended.

Here is a brief explanation of these items as contained in the final version of the legislation:

Coop/Condo Abatement

Enacted in 1996 as a temporary measure, the coop/condo abatement provides partial property tax relief to owners or tenant-shareholders of class two condominiums or cooperatives to reduce their disparity in property taxation with residential real property in class one (single-family homeowners).

In the final version of the bill, that we expect will be taken up in a special session, it will allow for all primary residents to keep at least their current 17½ percent coop/condo abatement. Some primary residents will see their benefits increase based on the city's assessed value for the unit as described in the chart below. The coop/condo abatement extension for primary residents would be three years.

As seen in the below chart, the assessed value (AV) for eligibility for the 25 percent abatement has been increased to $50,000. In fiscal year 2012, the 25 percent abatement amount declines by 2.5 percent for every $5,000 increase in assessed value. For units with an assessed value greater than $60,000, the abatement is 17.5 percent. In fiscal years 2013 and 2014, the abatement percentage will increase for units assessed of $60,000 or less as described below.

Average AV:

$50,000 or less

$50,000-$55,000

$55,000-$60,000

Greater than $60,000

FY2012

25%

22.5%

20%

17.5%

FY2013

26.5%

23.8%

21.2%

17.5%

FY2014

28.1%

25.2%

22.5%

17.5%

For non-primary residential coops/condos where the unit received an abatement in FY2011 the abatement will phase out according to the schedule below.

Average AV:

$15,000 or less

Greater than $15,000

FY2012

12.5%

8.75%

FY2013

6.25%

4.375%

FY2014

0%

0%

J-51

The J-51 program which provides a tax benefit for the renovation of existing multifamily housing would be extended three years under the legislation. However, the program would be amended to eliminate benefits for the conversion of commercial space to residential use.  The amendments would also limit the eligibility of condominium and cooperative buildings where the average assessed value per unit is less than $30,000.

Projects that receive "substantial government assistance," which is defined to include city, state, or federal loans or grants, are not subject to this cap. Likewise, conversion projects receiving substantial government assistance would be eligible for J-51 benefits.

J-51 was created in the 1950s when NYC had a substantial inventory of Old Law tenements which did not have central heating, central hot water, or, in some cases, indoor plumb­ing. When the City required the installation of these improvements, many owners could not pay for the costs of the improvements from their existing rent rolls, which were limited by the rent control system. J-51 helped fill that financing gap then.  It deserves to be renewed now as owners of our aging housing inventory must renovate their buildings to meet the new energy standards and heating system requirements imposed by local law.

421a

REBNY supports the amendments to 421a which would encourage new residential development in high density districts in Midtown and Downtown Manhattan.  When changes were made to the program in 2007, the legislature and local elected officials accidentally omitted the renewal of benefits to these FAR 15 districts which had been in place since 1993.  This amendment will partially correct an oversight to an important new housing development program.

REBNY hopes the State Legislature takes the appropriate action on these three issues important to our industry.

In other REBNY News:

There’s still great advertising opportunities for your company to be part of REBNY’s annual Diary & Manual, the industry’s almanac that includes an alphabetized membership roster and comprehensive section on major real estate laws and regulations. The deadline for the 2013 issue is Friday, July 20. For more information, contact Marta Posner in the membership department at mposner@rebny.com or 212-616-5243.

New and gently worn women and men’s business shoes are needed.  REBNY has partnered with Dress for Success & Career Gear for the Annual Summer Donation Drive going on now until Aug. 24, 2012.

If your shoe donations are appropriate to wear to work and you would be comfortable wearing them to an interview, we’ll take them. All donations are 100 percent tax-deductible. Firms are welcomed to collect from their own offices to participate.

Shoes can be dropped off Monday through Thursday, 11 am to 3 pm and Friday, 11 am to 2 pm at the REBNY reception area, 570 Lexington Ave at 51st Street, on the second floor.

Dress for Success is an international not-for-profit organization and Career Gear is a national non-profit organization. Both promote the economic independence of disadvantaged women (Dress for Success) and disadvantaged men (Career Gear) by providing professional attire, a network of support and the career development tools to help them succeed in work and in life.

For more information, contact jtaylor@rebny.com.