Over the past 20 years, New York City granted 421-a or J-51 tax abatements to many prominent new condo developments. More than a third the 90,000 condos sold between 2010 and today benefited from some type of exemption, which allowed owners of these developments to pay lower property taxes in exchange for the construction of below-market, affordable units distributed through the city’s housing lottery system.
But these abatements were structured to phase out over 10 to 35 years. And now, with the abatements starting to expire, tax bills on many condo units are rising far faster than they would from higher home values alone, according to a new StreetEasy report. In some cases, they’re tripling.
Buildings completed just before the financial crisis of 2008 and the ensuing Great Recession are among those now feeling the greatest pain from higher property taxes. More than 100 of the units in both the Orion in Midtown (built in 2007) and the Rushmore in Hell’s Kitchen (built in 2006) sold since 2010 have had their property taxes triple.
These increases can severely affect selling 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 more than $1,000 per month, the median annual gain for the seller was just 2.3 percent.
There are plenty more of these units on the market: 190 condos listed on StreetEasy as of April 1 had taxes at least $1,000 per month higher than the last time they were purchased. They’re a vivid reminder to buyers eyeing condos with tax abatements that what can look like a great deal now may look very different when the abatements expire.
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