In 1955, New York City implemented the J-51 tax abatement program to encourage building owners to install hot water plumbing in their properties. Over time, the tax program was extended to include a number of significant capital improvement repairs, like window replacements or elevator repairs. In the beginning, the program saw significant success among property owners, but in the last decade, J-51 applications dropped 69%. In an attempt to revive the program, lawmakers passed the Affordable Housing Rehabilitation Program to replace the lapsed J-51. Once signed by the governor, the state bill would apply to renovation work completed after June 29, 2022 – when the previous J-51 program expired – and before June 30, 2026.
Everything You Need to Know About the Update
The tax break features a few key changes from the original lapsed J-51 program as follows:
- J-51 is now an abatement only program that lasts for up to 20 years.
- The assessed valuation for eligibility for the program for condos and coops increased to $45,000.
- The abatement is now limited to 70% of reasonable renovation work over the life of the break, with a cap of 8.3% per year.
- For rentals, buildings must be at least 50% affordable or receive “substantial government assistance.”
Are There Any Downsides?
Jay Martin, executive director of the Community Housing Improvement Program, argues that the new tax break is in fact not a victory for the owners and managers of rent-stabilized properties that his agency represents. Due to the affordability restrictions, the new J-51 program will only benefit a “narrow universe” of property owners and coop and condominium boards. As a condition for receiving the tax abatement under the Program, not only will building owners and boards be required to record a restrictive declaration binding the building to the Program requirements for 15 years. Moreover, the new J-51 does not exempt taxes on increased valuations resulting from the renovation work, a change from the previous program which provided an exemption on such increases for up to 34 years.
This J-51 program may face the same problems as its predecessor. Many property owners are concerned that there will be little actual incentive to apply for the abatement due to its arguably more restrictive nature. Only time will tell if this version of the program will be more popular than the last.