A Discussion Tax Incentive Programs Original Intent Encourage needed upgrades for existing housing Reduce operating costs for highly subsidized projects Stimulate needed residential construction and related economic activity ID: 314793
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Slide1
The Future of Real Estate Tax Incentives
A DiscussionSlide2
Tax Incentive Programs
Original IntentSlide3
Encourage needed upgrades for existing housingReduce operating costs for highly subsidized projects
Stimulate needed residential construction and related economic activityHold city expenditures to the minimum needed to reach these objectives
Objectives of Tax Incentives?Slide4
1950’s
Encourage needed upgrades for existing housing
J-51Slide5
1960’s
Reduce operating costs for highly subsidized projects
Article XISlide6
1970’sStimulate needed residential construction and related economic activity
421-aSlide7
1990’s
Reduce operating costs for highly subsidized LIHTC projects
420-cSlide8
Other CitiesSlide9
Many places have PILOT programsDC, Philadelphia, Seattle, Cincinnati have as of right programs
May cap total amount awardable in a yearMay require affordability
Usually 8-10 year abatement periodSome programs are highly targeted (e.g. SRO program in DC)
New ConstructionSlide10
Usually require a threshold investmentMay require affordability component
Seattle – 20% of units “affordable”
RehabSlide11
Tax Incentive Programs
The ContextSlide12
NYC Tax Revenue by Type 2011
(in millions)Slide13
Annual RE Tax Incentive Expenditures 2011
(in millions)
Source: Annual Report on Tax Expenditures Fiscal Year 2011Slide14
2011 Tax Expenditures and Units By Program
Units with Tax Exemptions
Annual Dollar Costs of Exemptions (in millions)
Source: Annual Report on Tax Expenditures Fiscal Year 2011 and DOF Data on J-51Slide15Slide16
Monthly Expenses per Stabilized Unit - 2009
Source: RGB 2011 Income and Expense StudySlide17
The IssuesSlide18
Talked to 28 industry and government leaders about,
Objectives and effectiveness of programsAdministration of programsPractical issues
SurveySlide19
Many old tax incentive programs designed to take advantage of different state and federal programs
Article 2 for Mitchell LamaArticle 5 for federal programsArticle 4
Article 16/UDAAPThese are not growing and slowly fading out
Old Tax Incentives Slide20
Is this still a valid objective?New variations
Energy efficiencyPreserving at risk buildingsPreserving affordability
Encouraging RehabSlide21
J-51Is it too complicated?
Processing takes too longApproval amount subject to too much variation
Does the Roberts decision make this program more “efficient” going forwardEncouraging RehabSlide22
J-51Is the term long enough?
Promoting RehabSlide23
Is this a valid objective of public policy?Does the incentive generate construction that would not otherwise occur?
Encouraging For Profit New ConstructionSlide24
421-aPanelists said current tax rates are a significant barrier to new construction.
Could a reformed tax policy for new rental housing achieve the same objective more efficiently?
Encouraging For Profit New ConstructionSlide25
421-aDoes the economic value of the incentive go to the seller of the land or to the project?
How can we insure it goes to the project?
Encouraging New ConstructionSlide26
Should the 421-a link to rent stabilization continue?
Does the Roberts decision make these programs more “efficient” going forward?
Encouraging For Profit New ConstructionSlide27
In general, do the tax incentives match the term of affordability restrictions of the projects?
Promoting AffordabilitySlide28
Article 11/ 420cGenerally seems to be working
Possible changesShould one program go the Council and the other be as of right?Could Article 11 extensions be approved without Council approval?
Promoting AffordabilitySlide29
Are there new priorities that should be brought into the tax incentive process?
Over Mortgaged buildingsTPT projectsPreserving former Section 8 and Mitchell Lama projects
Energy efficiencyPreserving affordability
Promoting Affordability