Development ‘taxing’ on Midtown West

BY Marika Washchyshyn

Village Green, a new luxury condominium which has not yet begun construction, will hit the New York City real estate market by the end of this week. Situated at 245 West 14^th Street, it has 27 multi-million dollar units, including four floor-through penthouses. Typically, these condos bring a healthy amount of money to the city by way of property taxes, but this time, that may not be the case: As a certified green building, it’s eligible for certain tax exemptions.

Asking prices for units at Village Green start at $1.2 million for a one-bedroom and range to more than $8 million for penthouses. The building features amenities like a wellness center, coffee bar for residents and rooftop terrace. 

Data from the New York City Department of Finance show that the current space that Village Green will occupy has an assessed value of approximately $1.75 million, based on an older 9-story residential building on the lot that was torn down. At the current tax rate of 13.18 percent, it would generate about $231,700 in revenue for the city, with these numbers expected to rise once the building is complete. That money would go into a general fund for services like education, social services and healthcare, said Owen Stone, the department’s press secretary. Stone said 27 percent of the city budget comes from property tax.

Donald Davis, a professor from Columbia University’s Department of Economics, thinks the surge in real estate price in the area shows a sign of health. Highly priced and taxed developments cause a trickle down effect to people who don’t live in this type of luxury housing.

“If this is a place that is particularly compelling, and they’re willing to pay a lot to be there, then we should tax the development and be able to make a lot of money for the city,” said Davis.

Beth McBride, whose public relations firm represents the developer of Village Green, said that she expects units to sell within six to 16 months — but Village Green will generate no taxes for four years, and only a percentage of the full property tax rate after that, if all the units sell.

Green projects that start renovations or construction after January 2013 are eligible for up to 10 years worth of tax exemptions, thanks to an August 2012 state bill. LEED Gold-certified buildings, like Village Green, could benefit from a four-year 100 percent tax exemption, tapering off to 20 percent each year thereafter (80 percent the fifth year, then 60, 40, 20 and finally full taxes). If Village Green applies for the tax credit, it won’t start paying taxes until four years after the exemption is initially claimed. If the building was not green, it would be taxed upward of the $231,700 example each year, depending on the finished building’s assessed value.

Clinton Housing Development Corporation project manager Brian Backscheider said there are other ways for developers to avoid paying taxes for years, including providing affordable housing. While this doesn’t apply to Village Green, other developments going up in Chelsea (like the 41-unit Chelsea Park on West 26 Street) benefit from these tax breaks, further diluting the pot going into the general fund. Currently, Chelsea Park is receiving a tax benefit of $74,829 for following the “80 percent luxury, 20 percent affordable housing” rule.

“It’s a system that makes sense if affordable housing is in perpetuity,” Backscheider said, because otherwise properties could be skirting taxes that go toward the city budget. He said the CHDC commits to affordable perpetuity on all of their projects.

Fred Harris, the Executive Vice President of Development at the New York City Housing Authority, doesn’t think these luxury buildings will do much for the neighborhood.

“You get these people who don’t, I imagine, consume a lot of city services,” Harris said. “They’re not sending their kids to the schools, they’re not using the local hospitals, they don’t take the train, they’re not even there a lot of the time.”

Harris thinks expensive apartments with nobody in them hurt street life, and advocates instead for more rental-style apartments because, “by economic necessity,” they stay full.

“No owner keeps apartments empty just for the hell of it,” Harris said. “The fact that prices are so high and vacancy is so low tells you that there’s not enough housing in New York.”

A report from the DOF states that the demand for all housing types, especially condos, is expected to rise by double-digits from 2013 to 2017. Property tax revenue is expected to bring in approximately $18.5 billion in 2013 and approximately $19.5 in 2014, which is promising for the city’s budget. This is up significantly from revenue streams during the 2008-2009 recession, which brought in between $13-$14.5 billion.

Backscheider said the gaps between “haves” and “have nots” are talking points so far in the New York election. Davis agreed, saying that existing taxes don’t benefit the community as much as they might because political debate over where the money gets spent. Neither the de Blasio nor Lhota campaigns replied to requests for comment by deadline.

Davis says it’s in the interest of the developers and owners to pursue green or affordable housing buildings to “get enough compensation and make it worth their while.” At the same time, he said,  “It impoverishes the city.”

This entry was posted on Thursday, October 3rd, 2013 at 1:17 am. It is filed under Chelsea, Featured, Property. You can follow any responses to this entry through the RSS 2.0 feed.