Posted by Leonard Steinberg on November 18th, 2013
Life in real estate land involves many liars and lies. It is especially bad when these lies are summarized and printed as truth by a major newspaper.
THE NEW YORK POST just reported how the millionaires will pay NO real estate taxes for 10 years in super-luxury buildings such as 157 West 57th Street because of the 421-a tax abatement …..read the excerpt below:
“Thanks to Albany, luxury developers may dodge property taxes in exchange for building — or at least funding — some affordable housing. But with $1 billion a year in uncollected taxes, are these really good deals for NYC? At 90 stories, it will be tallest residential tower in the city. With sweeping views of downtown Manhattan and Central Park, the $1.5 billion building is one of the most coveted addresses; a 14,000-square-foot penthouse already sold for more than $90 million. One57 has another perk as well — its residents stand to pay no property taxes for 10 years.”
This is completely false and inaccurate. The 421-a program phases real estate taxes in over a 10 year period incrementally escalating every 2 years over the 10 year period. At 157 West 57ht Street, ALL owners including the owner of the hotel component will be paying sharply reduced real estate taxes for 2 years. Then the taxes will jump….and then again 2 years later….and 2 years later …..until they reach the fully taxed amount which will more than likely be MUCH higher than in neighboring buildings where there are similar sized and similar quality apartments. All in all I would bet that this building will pay much higher real estate taxes in its first 2 years (of sharply reduced taxes) than it was paying when it was a vacant site or the building that existed on the site prior to it becoming 157 West 57th Street.
I am not a fan of Gary Barnet, and I am not here to defend him. But SOMEONE, SOMEWHERE has to speak up when the lies and mis-truths about this abatement are espoused and no-one seems to argue the facts. The reality is:
- the abatement program encourages developers to build
- encourages buyers to buy in knowing they are getting bit of a break ( it MAY just cover a bit of those transfer taxes they have to pay when closing)
- the taxes at the end of the abatement period are almost always SIGNIFICANTLY higher than comparable buildings
- the taxes paid at the beginning of the sharply reduced period usually bring in more revenues than what was on the site before anything was built, hence a net gain to the City and State.
- the taxes these transactions generate at closing are HUGE: think $ 1m+ for each $40 million apartment sold for transfer and mansion taxes….so 157 West 57th Street will generate well north of $50 million when the units close in its first year alone!
- now add in the taxes generated EVERY DAY by the hotel component….hotel taxes, sales taxes, etc.
- bottom line: this building will generate TENS OF MILLIONS of dollars in taxes every year and this will continue growing over the 10 year abatement period.
“Our city spends $1 billion every year on these kinds of subsidies, with little affordable housing to show for it. These valuable public resources should be used to keep New York affordable for middle- and low-income New Yorkers,” said Brooklyn Councilman Brad Lander. Mr. Lander: you are lying….please stop it!
In short, this article, and most others ever written about the 421-A program, are simply ignorant, pathetic attempts at reporting. They do not in any way address the big issue they deem most important: tax revenues. Yes, all these buildings generate MASSIVE revenues for the City and State. After the 10 year period they are being unfairly assessed too. Could we please install just a wee bit of fact-based intelligence into this abatement discussion?