Owners of newer New York City condominiums are facing higher property taxes, as once-beneficial tax abatements are starting to expire.
According to a study by StreetEasy, the imminent end of the tax abatements means that not only are property owners facing rising monthly tax bills, but it's making it more difficult for them to lure potential buyers.
For over 20 years, many new condo projects received 421-a or J-51 tax abatements from the city that allowed the owners of these developments to pay lower property taxes--on the condition they build below-market, affordable housing units. The abatements were originally designed to be phased out in 10 to 35 years.
“Now, with the city’s pre- and post-recession building booms fading into the past, and the abatements ending, tax bills on many condo units are rising far faster than they would from higher home values alone,” according to the article.
StreetEasy said that of the 12,000 New York City condos sold in 2010, about 1 in 3 have benefited from an exemption that lowered their owners' tax bills. Now the taxes for two-thirds of those apartments with exemptions have gone up. Breaking it down further, about 15 percent of those condos sold in 2010 have had their monthly taxes double, while 10 percent of those condos have seen their monthly taxes triple.
The article also looked at how the expiring abatements are affecting sales prices: “Of all condos bought since the start of 2010 and resold in 2018, sellers received a median annual return of 5.8 percent. For the 130 of these units that resold with tax increases of over $1,000 per month, the median annual gain for the seller was only 2.3 percent.”
StreetEasy cited the cases of the Orion and Rushmore buildings in Manhattan (built in 2007 and 2006 respectively), in which over 100 of their units that were sold after 2010 saw property taxes triple.
Meanwhile, New York Assemblyman Robert Rodriguez and Sen. Brian Kavanagh had earlier called for abolishing the condo and co-op tax abatement for the top 10 percent of owners (with properties worth $200,000 or more, according to the non-profit Citizens Housing Planning Council), and using the $170 million from that to finance the embattled New York City Housing Authority (NYCHA), reported City Limits.
David Chiu is an associate editor at The Cooperator.