Real Estate Board wants city to cap property tax for residential developers

David Frankel, New York City Commissioner of the Department of Finance, said yesterday that he was considering a proposal from the Real Estate Board of New York to cap property taxes at 20 percent of revenue for residential developers who agree to reserve low-income apartments for "multiple decades," according to an article today by Eliot Brown in The Wall Street Journal.

"Frustrated with ever-rising property tax bills on rental apartment buildings, the city's real-estate industry is warning the Bloomberg administration that if it doesn't change its tax policy, development of large new rental buildings will come to a halt. Earlier this month, members of the Real Estate Board of New York met with the Bloomberg administration to complain that tax bills have been climbing faster than income on rental apartment buildings. They said up to one-third of some building's revenue is going to taxes," the article said.

"The increase," the article continued, "has become a particular concern for owners of rentals built within the past two decades with 20% of their units set aside for low-income families. Should taxes continue to outpace revenue, the Real Estate Board says new development of these so-called 80/20 projects would be unfeasible. They also have warned that owners of existing 80/20 buildings will be forced to convert to condominiums or deregulate their low-income apartments once expiring tax abatements wear off. 'Once the abatement period is over, they cannot survive at 33% of net income,' Steven Spinola, president of the Real Estate Board."

The article said that Mr. Frankel said the city is "obviously always concerned if someone says to us that taxes would keep someone from investing in a property," adding that "what we are trying to do is assess properties in the fairest ways we possibly can."

Overall within the past five years, the article said, "Mr. Frankel agreed that revenues on rental buildings have been out outpaced by the city's valuations of the properties, but not by a large amount. 'It doesn't seem they're too out of line,' he said."

Underlying the Real Estate Board's criticism on the rental tax rates is a long and deep frustration among the city's top landlords with the property tax code.

Generally, the article said, "single-family homeowners and families who live in high-priced co-ops tend to be favored by the code and shielded from spikes in values, while owners of office buildings and rentals pay taxes accounting for a greater share of their value. Further frustrating landlords were the latest tentative assessment rolls, released last month, showed a jump of 8.5% in assessed values for Manhattan rentals, compared with 5.7% for one-, two-, and three-family homes."