Monday, July 22, 2013

Exemption Gives Rich People Obscene Real Estate Tax Breaks

Exemption Gives Rich People Obscene Real Estate Tax Breaks
July 14, 2013

The requirements for New York's tax abatement program to entice developers to build new housing tightened in 2008, but rules tend to mean very little when money is involved. This weekend Times reports that recently passed state legislation exempted several luxury buildings under construction from certain requirements for the tax break, including One57 and 30 Park Place. The law gives property owners a 10-year pass on real estate taxes—so the buyer of the $115 million penthouse at One57 would have an annual bill of under $18,000, when they would typically owe $300,000.

The abatement law, known as the 421A program, is complicated and controversial. Created in the '70s to spur economic growth, it has since added affordable housing requirements and tighter restrictions, restrictions that developers apparently had no trouble skirting.

“The idea of the program was that tax subsidies can be an important tool to create residential housing and affordable housing that otherwise wouldn’t be built,” said Vicki Been, the faculty director of the Furman Center for Real Estate and Urban Policy. “I don’t see how giving a tax break to a building like One57 helps either of those goals.”

As if to offer some warped concept of "balance," the article notes that these tax breaks could be offset by obscenely high hidden fees tacked on to the sale agreements (the proceeds of which go to the developers, not state or city coffers).

At 432 Park Avenue, which will be the tallest condo in the Northern Hemisphere when it opens in 2015, full-floor penthouses are priced between $72.5 million and $95 million and will be saddled with common charges of more than $17,000 a month.

On top of those costly common charges come fees like the mandatory membership in the building’s gym, known as The Club at 432 Park Avenue, which bases its charges on the size of the apartment, with larger units owing more. Then there is the $2,000 that owners are required to pay annually toward the building’s dining room, and the additional $1,200 in private dining services that owners are required to buy annually, whether or not they use the restaurant.

Pity the owners of the $72.5 million apartments who owe mandatory gym membership fees.

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