Page 6 - NY Cooperator June 2019

6 THE COOPERATOR —JUNE 2019 COOPERATOR.COM COOPERATOR.COM O wners of newer New York City condominiums are facing higher property tax- es, as once-beneficial tax abatements are starting to expire. According to a study by StreetEasy, and later reported by Crain’s New York Business, 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 abate- ments 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. Cooperator.com From A n initial push to tax expensive second homes in the Big Apple appears to have lost its momentum. Legislation for a pied-à-terre tax, which was originally introduced by New York State Senator Brad Hoylman in 2014, would have targeted New York City homes worth $5 million or more that are not their owners’ primary residence. The tax was seen as a poten- tial source of revenue for much-needed MTA repairs and upgrades, and as a support for the city’s public housing developments. Such legislation had garnered support from Demo- cratic leaders in Albany — including Gov. Andrew Cuomo — in the wake of billionaire Ken Griffin’s jaw-dropping purchase of a $238 million apartment in Manhattan. However, the real estate industry decried the tax for a variety of reasons, citing its po- tential to discourage wealthy investors from buying in New York City—and thus have a negative impact on luxury sales and associated taxes. According to The New York Times, the industry rallied against the tax in short order, dispatching lobbyists to present eco- nomic projections, commission opinion pieces, and warn of the possible collapse of the entire high-end residential market. This full-court anti-tax press effectively killed the idea for lawmakers in March. “The recurring pied-à-terre tax proposal lost momentum,” Real Estate Board of New York President John Banks said in a statement as quoted by Gothamist, “after people began to understand that it would reap far less than initially estimated, and that the City had no ability to implement the tax. Most importantly, people realized that a recurring pied-à- terre tax would have a devastating impact on New York City’s economy.” Instead of the pied-à-terre tax, legislators turned their focus to an initiative that would distribute the cost burden more widely, via a mansion tax on purchases over $2 million. Additionally, homes sold for over $3 million would be subject to a higher transfer tax. This new plan would affect around one quarter of the housing sales market in Manhattan, ac- cording to real estate appraiser Jonathan Miller based on data from 2018, as reported by Gothamist. Sponsors of the original pied-à-terre tax lamented the real estate industry’s thwarting of their plan. Speaking to The New York Times, Hoylman said: “We know that the real estate industry was very present over the last couple of weeks. I think they did a number on the pied-à-terre.” Assemblywoman Deborah Glick, one of the co-sponsors of the bill, echoed Hoylman’s sentiments. “I don’t think there’s a question real estate has driven politics, really, forever,” she told the TImes . “So it’s not a shock.” In a recent piece in City & State, Senior Editor Ben Adler took aim at opponents’ criti- cisms of the proposed tax, concluding that its defeat was a “deference to the narrow inter- Visit Cooperator.com for related news, articles and videos. Momentum Behind Pied-à-Terre Tax Stalls NYC Real Estate Industry Lobbies Against Tax on Luxury Second Homes BY MIKE ODENTHAL U pgrading an elevator is one of the most potentially disruptive – and expensive – projects a co-op or condo can undertake. Many hours of deliberation by boards after extensive consultation with managers and elevator consultants are required. That said, a decision to upgrade – or not – may be somewhat moot in light of two new regulations adopted in New York City that will affect elevator ma- chinery and cabs. The first concerns door-lock monitors, which must be put in place by January of next year, while the second focuses emergency brakes – the installation of which is required by 2027. What to Consider Before we get into the new requirements, what factors should a board take into ac- count when deciding whether or not to upgrade their building’s elevator? ElevatorLab, an elevator consultancy located in San Francisco, offers several factors for consider- ation: ride performance, acoustic performance, aesthetics, longevity, reliability, ser- viceability, and occupant needs. Other factors affecting a decision include age, repair cost, energy rebates, and emergency service bills. A good rule of thumb is that the cost to repair should be less than the cost to replace, plus 50 percent. “Certainly, safety should be the first consideration,” says Alan Warshavsky, a senior account executive with Manhattan management firm Gumley Haft. He points out that the useful life, or ‘life-expectancy,’ of elevator machinery is in the 20- to 25-year range. Simply put, every elevator installed before 1994 should be subject to review and in- spection to determine whether upgrading is necessary, or can be postponed to a later date. Joseph Caracappa, President of Sierra Consulting Group, an elevator consultancy located in Manhasset, New York, points to the age of the elevator system as the most important factor. “The first thing we do is gauge the remaining useful life of the eleva- tor,” he says. “We also look at whether the manufacturer is still supporting the elevator and machinery, in other words, are parts and technicians still available to repair the Elevators: When It’s Time to Consider an Upgrade 2 New Regulations Take Effect in the Coming Years BY AJ SIDRANSKY Report: Abatements Expire, Taxes Jump Monthly Condo Tax Bills Double – Even Triple BY DAVID CHIU continued on page 7 continued on page 7 continued on page 7