Will tax incentives be big enough to tempt developers?In late December of last year the 421-A property tax exemption tax exemption, immunity from the requirement of paying taxes. Federal, state, and usually local law provide exemption from taxation for a wide variety of organizations, usually not-for-profit, such as churches, colleges, universities, health care providers, various was officially reformed by 486-a. In keeping with his promise to create hundreds of thousands of affordable apartments in 10 years, the Years, The the seven decades of Eleanor Pargiter’s life. [Br. Lit.: Benét, 1109] See : Time Mayor has approved what has been a somewhat controversial reform. In support of the reform, the Mayor implied that 486-a conforms to the needs of the present real estate market as developers no longer need encouragement to build in Manhattan. He also stressed that the focus of the reform is to provide affordable housing to low income families who cannot benefit from the many newly constructed apartments in the City. While careful not to remove the incentives to develop the poorer parts of the City, the Mayor, along with City Council Speaker Christine Quinn, are intent on ensuring that housing be accessible to those that cannot afford a mortgage. 421-a motivated mo·ti·vate tr.v. mo·ti·vat·ed, mo·ti·vat·ing, mo·ti·vates To provide with an incentive; move to action; impel. mo developers to develop Manhattan by granting tax exemptions if they built in certain parts of the City. 486-a, however, will strictly limit the ability to receive the exemptions, and hopes to provide developers with a strong incentive to build affordable housing. The question is: how strong is the incentive? The changes to 421-a will include: 1. Expanding the areas in which developers are required to provide affordable housing if they are to receive any tax exemptions from Manhattan between Canal and 96th Streets and a small area on the Brooklyn waterfront (which was the limited reach of 421-a) to Manhattan south of 136th St in West Harlem, south of 126th Street in Central Harlem and south of 117th street in East Harlem; Downtown Brooklyn Downtown Brooklyn is the third largest central business district in New York City (following Midtown Manhattan and Lower Manhattan), and is located in the , Carroll Gardens, Cobble Hill, Boerum Hill Boerum Hill is a small neighborhood in the northwestern portion of the New York City borough of Brooklyn that occupies 36 blocks bounded by State Street to the north, 4th Avenue to the east, Court Street to the west, and Warren Street to the south. , Park Slope, most of Fort Greene, Prospect Heights Prospect Heights may refer to:
2. Applying the tax exemptions to developers that build 20% affordable housing within the same building receiving the tax exemption, as opposed to being able to receive the exemption even if affordable housing was being built on another site. 3. Creating an Affordable Housing Trust Fund which would primarily target the 15 poorest neighborhoods in New York City New York City: see New York, city. New York City City (pop., 2000: 8,008,278), southeastern New York, at the mouth of the Hudson River. The largest city in the U.S. . The fund enabling the exemptions will be closely controlled by the Housing Development Corporation. 4. Limiting the amount of the exemption for market rate apartments by allowing an exemption on the first $650,000 of an apartment's assessed value only. The future of affordable housing complexes such as Stuyvesant Town (recently sold) and Starret City (up for sale) is uncertain. This year has seen an increase of 50% in condos and coops on the market, which has raised rents throughout the City and created an even greater need for affordable rentals. Home prices are increasing as well and are not expected to soften any time soon. While many people argue that the 421-a incentive has been costing the City too much money and is not necessary to encourage development in New York New York, state, United States New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of , others claim that the reform will deter developers from building. Not only will the tax exemptions decrease under 486-a, purchasers, they argue, will be discouraged from buying apartments. The requirement to create affordable housing in 20% of the building, they reason, will deter purchasers from buying as it will detract from detract from verb 1. lessen, reduce, diminish, lower, take away from, derogate, devaluate << OPPOSITE enhance verb 2. the feel of a luxury building. Additionally, purchasers will not be able to receive the abatement A reduction, a decrease, or a diminution. The suspension or cessation, in whole or in part, of a continuing charge, such as rent. With respect to estates, an abatement is a proportional diminution or reduction of the monetary legacies, a disposition of property by will, when from their monthly real estate taxes as they have in the past. Therefore, it is ultimately felt by those opposed to the amendment, that it will not lead to more affordable housing if no one is building at all. They believe the government should look for a better middle ground between "subsidizing luxury developments and forcing developers to co-mingle affordable and market rate housing." Still others see the reform as the perfect middle ground for the City by encouraging developers to build affordable housing while removing unnecessary tax breaks from the luxury market. The argument is that developers will continue to build luxury and market rate buildings regardless of the tax incentives, as evidenced by the numerous luxury buildings currently being built that did not receive the 421-a tax benefit. Furthermore, the city may be able to save money by not granting the exemption to as many developers and can use this money to build affordable housing itself. The latter is seen to be the best solution for creating more affordable housing. It will be interesting to see whether the City will independently create affordable housing or whether developers will still be enticed by the reformed tax exemptions. It seems that the City would be very supportive of anyone who takes advantage of the incentives. Could affordable housing be the new real estate cash cow Cash Cow 1. One of the four categories (quadrants) in the BCG growth-share matrix that represents the division within a company that has a large market share within a mature industry. 2. ? Heela Justin-Capell contributed to this report. BY JAMIE HEIBERGER, HEIBERGER & ASSOCIATES, PC |
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