‘Critical’ tax break for city rentals, co-ops may soon return after lapse

Two years after it lapsed, city officials are moving to reinstate a key tax break for multifamily buildings that could help co-ops stave off financial crises and assist landlords in complying with the major climate ordinance Local Law 97.

The program, J-51, incentivizes repairs and renovations of multifamily buildings by offering the owners a break on property taxes. State lawmakers let the longstanding tax benefit expire in 2022, but Gov. Kathy Hochul signed a bill in October that would allow the city to create a new version of J-51.

The City Council is now considering a bill that would authorize the new version, at the urging of Mayor Eric Adams’ administration. Kim Darga, a deputy commissioner at the city’s Housing Preservation and Development Department, said during a Thursday council hearing that J-51 “plays a critical role in the ecosystem of rent stabilization.”

Under the new J-51 drawn up by state lawmakers, tax abatements would last up to 20 years and cover as much as 70% of the costs of renovation work in eligible buildings, which include low-cost rental apartments, co-ops and condominiums. Darga urged the council to pass the program “as soon as possible,” since renovations must be completed by July 2026 to be covered, as the law is written.

“Major capital improvements such as installation or replacement of heating systems, plumbing, wiring, elevators, windows or roofing are exactly the types of critical upgrades that impact housing quality for residents of the entire building,” Darga said. People who live in the low-cost housing subject to J-51 are more likely to be elderly or have a disability, she noted.

The tax break could also be a “powerful” tool for helping landlords do the costly work of complying with Local Law 97 next year, Darga said. She added that the abatement could cover the costs of decarbonization upgrades to windows, cooling and hot water systems, heat pumps and insulation.

Although participation in the old J-51 had declined in the years before it lapsed, Darga called the new program “better than the old version.” Changes include targeting the tax benefit more narrowly to buildings with low-cost housing — for example, rental buildings are only eligible if at least half of the units are rent-stabilized at between 20% and 80% of the area median income, or if the building receives government subsidies through a program like Mitchell-Lama. Homeownership units like co-ops and condos must have an average assessed value of less than $45,000.

The city would also gain enforcement powers under the new program, with the ability to fine landlords who break the rules by harassing tenants or renting out units on Airbnb.

J-51 has cost the city an average of $270 million per year over the last 15 years, and the new program will cost a similar amount, Darga testified. Usage has historically been concentrated in the outer boroughs, especially Queens and Brooklyn. About 700,000 homes would be eligible under the new rules, which includes about 70% rental units and 30% co-ops or condos.

It’s unclear how long the council will take to pass the bill by Bronx lawmaker Pierina Sanchez that will authorize the new program. Although tenant advocates once criticized the old J-51 as wasteful and insufficiently targeted to low-income housing, there appeared to be little opposition to the new version during Thursday’s hearing.

Criticism did come from the landlord group CHIP, whose policy director, Adam Roberts, said the new J-51 “will not be usable for most buildings with rent-stabilized units.” A requirement that landlords certify tenants’ incomes in order to qualify for a tax break will be infeasible, Roberts said, and few buildings will meet the rule that half of units rent below 80% of area median income.

But owners of co-op apartments, who could see relief from rising operating costs once the program returns, urged the council to pass it quickly. Ambur Nicosia, board president of the large Penn South co-op complex in Chelsea, said her development has been forced to raise residents’ maintenance fees to cover the costs of a utility project that would have fallen under J-51 before the program expired.

“Losing J-51 has been a severe blow to our economic well-being,” she said.

Nick Garber , 2024-05-30 21:56:18

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