With its summer recess approaching, the New York State legislature passed an Omnibus Housing Bill containing a number of benefits for real estate developers and owners. The legislation is currently pending, subject to Governor Cuomo’s approval. In the meantime, here are five of the highlights that, if approved, will affect local developers and land owners.
1. Cooperative and Condominium Tax Abatement
Owners of cooperative units and condominiums who meet certain requirements for the Coop/Condo Property Tax Abatement could have their property taxes reduced. Such abatements are extended for four years, until June 30, 2019. The amount of the abatement is based on the average assessed value of the residential units in the building.
2. 421-a Partial Exemption Program
The 421-a property tax exemption program for new residential construction in New York City with at least three units is extended to June 15, 2019.
In addition, the updated program, which would take effect on January 1, 2016, requires any rental project in the City that receives 421-a benefits to provide on-site affordable housing. The Bill provides three property tax break options from which a land owner may select, each containing certain tax abatements in conjunction with possible tax-exempt bonds, tax credits and other government assistance.
The new program also contains a homeownership option that provides 421-a benefits for condominium or cooperative housing projects containing not more than 35 units located outside Manhattan where all of the units have an original average assessed value of less than $65,000. Such a homeownership project that meets certain requirements is eligible to receive a 20-year tax benefit. Years 1-14 offer a 100% tax exemption, with only the mini tax due. For the final six years there is a 25% exemption. However, it should be noted that no exemption is available with respect to any portion of a unit’s assessed value that exceeds $65,000.
Other changes to the 421-a program include:
- An Extended Affordability Program that provides a 15-year tax exemption and rent stabilization for certain construction projects commencing before July 1, 2008.
- A redefining of the commencement date as the date upon which excavation and construction of initial footings and foundations begin. A full building permit is not required.
- A requirement that affordable units must share the same common entrances and common areas as the market rate units, and should not be isolated to a specific floor or area of the building.
- A new fee for a 421-a application of $3,000 per apartment.
3. Rent Regulations
In general, the rent regulations have been extended to June 15, 2019.
For apartments where the prior tenant was receiving a preferential rent, the vacancy allowance on the legal regulated rent increase cannot exceed:
1. 5% if the last vacancy lease commenced less than two years prior;
2. 10% if the last vacancy lease commenced less than three years prior;
3. 15% if the last vacancy lease commenced less than four years prior; or
4. 20% if the last vacancy lease commenced four years or more prior.
These restrictions do not apply to units leased at the legal regulated rent.
4. J-51 Exemption and Abatements
The final date for the completion of renovation projects to residential apartment buildings to be eligible for J-51 exemptions or abatements is extended to June 30, 2019.
5. Other Economic Incentives
- The Sales Tax Exemption program for the areas comprising the World Trade Center, World Financial Center and Battery Park City is extended to cover leases commencing by September 1, 2019. Additionally, the Sales Tax Exemption program for other areas of Lower Manhattan, generally south of Frankfort and Murray Streets, is extended to cover leases commencing by September 1, 2017.
- The Commercial Revitalization Program (CRP), which provides a real property tax benefit to tenants, is available for leases commencing by March 31, 2018.
- The Commercial Rent Tax exemption, available for those eligible for the CRP, can be applied to leases commencing by June 30, 2017.
- The Energy Savings Program, available to those eligible for the CRP, will now allow approval of applications filed by June 30, 2017.
- The Industrial and Commercial Abatement Program, which provides tax incentives for renovation and new construction, will allow applications to be filed until March 1, 2019.
- The Relocation and Employment Assistance Program, which provides tax credits of $3,000 per eligible employee per year, is extended to June 30, 2017.
- The Commercial Expansion Program, which provides real property tax benefits for tenants in designated commercial districts, is extended to June 30, 2018.