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As landlords and tenants await what happens next regarding the ruling that found Stuyvesant Town rents were wrongfully raised while its owner received tax breaks, the NY Times looks at how the real estate industry is nervous. The J-51 tax break program was "meant to encourage building renovations," and after significant renovations, landlords "are allowed to pass along a portion of the renovation costs to the tenants’ rent. As a result, landlords can raise rents that exceed or approach the $2,000 deregulation threshold." In the case of Stuyvesant Town, it's argued rents went up too much (the Observer has some examples). Right now, the ruling has been stayed, but a court must decide whether to let Stuy Town owner Tishman Speyer appeal; if upheld, the Times reports, "Industry officials say the decision could affect as many as 80,000 apartments in the city, trigger widespread defaults on loans, eliminate construction jobs and reduce property tax revenues for the city." Tenants' advocates, though, say the real estate industry is exaggerating.
NYC Landlords Worried About Stuy Town Rent Ruling
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I'm not sure who to believe here. On the one hand, I used to live in Stuy Town and my rent was yanked by $1000 in two years. That was ridiculous and considering the kind of tax breaks they were getting from the city, I feel like they had some obligation to, you know, help the community and avoid turning the place into a virtual boarding house of revolving tenants.
On the other hand, if the govt makes them hand over that much cash, you can bet they will virtually abandon the property. And then sure, the tenants can take them to court again. But they're going to be the ones suffering.
http://www.newyorkcity.us/html/dof/html/property/property_tax_reduc_j_51.shtml
This link will show you a list of the J-51 buildings.
You need pdf or excel to view. Manhattan pdf is 236 pages and sorted from downtown to uptown.
On a personal note, my rent was raised for what I thought were questionable building renovations. Painting the doors and planting flowers does not justify the lining of our landlords pocket with tax breaks and raised rents. I want that money back!
I have quite a few friends that bought lofts back in the seventies and the eighties and had J51 tax relief on their buildings. As soon as the time ran out on the tax relief and their maintenance charges tripled they bailed out, sold their places, and moved to the hinterlands.
For the most part those tax incentives don't work. They are stop gaps for those who can sneak through the system. Meanwhile the average property owner who doesn't have that tax relief gets screwed carrying those that don't pay their fair share, tenant,owner and landlord alike.
I'm not a lawyer, but I did look into investing. The law seems pretty clear. Major system wide upgrades can count towards a j51 tax abatement, for which you agree to rent stabilization in exchange for the benefits (however these buildings are regulated anyway so its a moot point). However, improvements inside apartments can be passed on to tenants if the tenant approves, if the apartment is vacant, and only if its within the timeframe (X years between kitchen upgrades). So in sum -- inside work is not relevant to j51, but can lead to deregulation, building wide work counts toward j51, but not toward raising rents for deregulation.
I don't see what landlords are nervous about -- it sounds like Tishman double dipped and counted building wide improvements as in apt improvements to try to deregulate. You can't have it both ways. Its either in the apt or its not. So unless the others are double dipping too, they've got nothing to worry about.
If Tishman Speyer is allowed to break the rules, then all the landlords getting J51 can break the rules! This is dangerous.