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Affordable Co-ops See New Tax Abatement as an “Important Tool”

Bill Morris in Legal/Financial on June 15, 2023

New York City

J-51 property tax abatement, affordable co-ops, state Legislature, HDFC co-op.

Ray Sage, president of his HDFC co-op board, is hoping the new tax abatement will help put solar panels on the roof.

June 15, 2023

When the state Legislature passed a last-minute reboot of the expired J-51 property tax abatement over the weekend, a loud cheer erupted among advocates of affordable co-ops. Leading the cheers was Warren Schreiber, board president at the 200-unit Bay Terrace Section 1 co-op in Queens and a leader of the Presidents Co-op & Condo Council (PCCC), which aggressively pushed the legislation.

“The PCCC had been advocating for this bill because it’s an important tool,” Schreiber says. “We reached out to all of our representatives in Albany. I’m glad to know that state Sen. Julia Salazar (D-Brooklyn/Queens) is among the growing group of legislators who recognize the challenges facing the co-op community.”

The Affordable Housing Rehabilitation Program replaces the old J-51 tax abatement, which helped co-ops defray the cost of improvements to their properties before it expired on June 29, 2022. The new abatement, which is retroactive to June 30, 2022 and runs to June 30, 2026, is designed to benefit affordable rental properties and affordable co-ops. 

To that end, it has numerous restrictions. The abatement is available to co-ops with an average per-unit assessed valuation of $45,000 or less, which is an increase over the J-51 limit. (The assessed valuation is part of the formula used to compute property taxes; a valuation of $45,000 means a unit’s market value is roughly $350,000.) All Mitchell-Lama co-ops are eligible, regardless of their assessed valuation — provided they agree to stay in that affordable-housing program for 15 years.

Additionally, the abatement cannot exceed 50% of a co-op’s annual property taxes. Co-ops with unpaid property taxes or water and sewer charges are not eligible. And the tax abatement can be applied only to work on the residential part of a property, not its land. Schreiber notes that these restrictions are similar to those under the old J-51 program. Bay Terrace got a J-51 abatement when it performed $1 million worth of repairs to the roofs of its 16 residential buildings, and another for $1 million worth of window replacements. But repaving of the co-op’s driveways did not qualify for an abatement.

“J-51 was a big help, especially with our large projects,” Schreiber says. “Many co-ops wouldn’t be able to do this kind of work without the abatement.”

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Ed Braunstein (D-Queens) sponsored the bill in the Assembly and worked doggedly with Senate co-sponsors Toby Stavisky (D-Queens) and Brian Kavanagh (D-Manhattan) to get it passed. “It took a lot of work on our part,” Stavisky says. “People do not understand that there are a lot of middle-income, affordable co-ops with crumbling infrastructure. There are certainly a lot of affordable co-ops in my district.”

Bay Terrace’s Schreiber isn’t the only co-op board president with fond memories of the J-51 abatement and high hopes for its replacement. Ray Sage, board president at a 26-unit HDFC co-op on the Lower East Side of Manhattan, says that a J-51 abatement helped defray the cost of major work to the building’s plumbing, gas lines and structural beams. The abatement ran out last year.

“It was a big help,” Sage says. “Now we have to pay our full property taxes, and we’ve had to dip into our reserve fund. We’re trying not to assess the shareholders. We’re also hoping to put solar panels on our roof. A new property tax abatement would make it work.”

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