The Real Estate Board of New York to The Committee on Housing and Buildings of the New York City Council Regarding Intro. No. 654

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REBNY thanks the committee for the opportunity to provide testimony on Intro 654, which seeks to implement a new tax benefit program for the rehabilitation of qualifying multifamily rental buildings.

The legislation under consideration by the Council today would authorize the State’s Affordable Housing Rehabilitation Program and replace the expired J-51 tax benefit. Intro 654 would permit owners of buildings that complete rehabilitation work after June 29, 2022, and before June 30, 2026, to reduce their tax bills by up to 70% of the “reasonable” improvement costs for up to 20 years. To be eligible for the program, rental buildings would need to be at least 50% affordable, be owned and operated by a limited-profit housing company or receive “substantial government assistance.” And notably, each building owner would be required to record a restrictive declaration binding the building to the program requirements for 15 years, including keeping the building units rent-stabilized for 15 years.

Now more than ever, New Yorkers need quality, affordable housing. Using tax incentives is a proven way of maintaining affordability while allowing owners to pursue expensive capital upgrades. Operating housing is increasingly expensive as costs continue to rise while incomes remain stagnant. Investing in our housing stock, particularly stabilized housing, is an important tool to ensure quality housing in New York.

Tools like the Affordable Housing Rehabilitation Program are needed. Earlier this year, REBNY, RSA, and SPONY commissioned a study led by HR&A Advisors to evaluate building revenue and expense data over the last four years. The study utilized 1,850 owner-provided TC201 tax forms from 2019-2023, representing over 291 buildings, to examine how owner expenses are changing and the impact on income over time.

Presently, the TC201 data shows that expenses have increased 10.8% over the last year driven by rising property taxes, fuel, and insurance. These increases make it more challenging to keep aging buildings in good physical condition for the people who live in them. The Rent Guidelines Board’s 2024 Income and Expense Study supports this finding, reporting a citywide increase in the number of distressed buildings for the sixth year in a row.

Intro 654 recognizes that owners need financial assistance to execute much-needed repairs for tenants of affordable housing units. However, the program is not a panacea. For rental units, Intro 654’s affordability restrictions will limit the program’s impact, as only a narrow universe of property owners will be able to participate. Further, units utilizing the program would not be permitted to simultaneously qualify for rent increases through the State’s Major Capital Improvements (MCI) program. Therefore, it is imperative that the City’s estimations for “reasonable” costs for certain repair work reflect rising maintenance and construction costs and enable owners to make much-needed capital upgrades. In addition, for ownership properties, the program will only apply to condominium and co-op buildings with an assessed valuation of less than $45,000 per unit, severely limiting eligibility among such properties.

Despite the need for reform to Intro 654 to effectively meet the dire needs of our aging housing stock, REBNY encourages the Council to proceed with the enactment of the proposed legislation. Preservation of and investment in housing is critical for New York at a time when the State and City are facing a dire housing crisis. The proposed program is a step towards enabling owners to offset the cost of critical infrastructure upgrades and providing stability to vulnerable New Yorkers.

Thank you for your consideration of these points.