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BILL NUMBER:S7649

TITLE OF BILL: An act to amend the real property tax law, in relation to exemption from taxation of alterations and improvements to multiple dwellings

SUMMARY OF PROVISIONS: This bill creates a New Housing Preservation Act. Building off the former J-51 program which expired in December 2011, it provides a tax abatement and/or exemption program available for the rehabilitation and upgrading of New York City's housing stock. It would extend from June 1, 2011 until June 1, 2015 the deadline for local legislative action providing these tax incentives for the rehabilitation and upgrading of multiple dwellings. It also would authorize the local legislative body to extend the completion date from December 31, 2011 to December 31, 2015.

This bill also would make significant reforms to the former J-51 Program. It would reduce the period of time for applicants to complete eligible conversions, alterations or improvements from thirty-six months to twenty-four months, while authorizing the local legislative body to grant extensions to governmentally-assisted projects. The bill would require any local law or ordinance providing for J-51 benefits to: (1) limit benefits for most cooperatives and condominiums to governmentally-assisted eligible alterations and improvements; (2) limit benefits to governmentally-assisted nonresidential to residential conversions; (3) impose a penalty equal to 10% of claimed costs on applicants whose projects are not completed at the time that the local housing agency inspects the items of work for which benefits have been sought; and (4) provide that the revocation of benefits does not exempt any multiple dwelling, building or structure from continued compliance with the requirements of Real Property Tax Law Section 489 or of any local law or ordinance providing for these benefits. Finally, the bill authorizes any local law or ordinance providing for these benefits to require the electronic filing of applications.

REASONS FOR SUPPORT: The continuing shortage of affordable housing in the City of New York requires the extension of tax exemption programs that serve as an incentive to owners to maintain and upgrade existing multiple dwellings. The new Housing Preservation Act benefits would apply to a variety of improvements, including, but not limited to, the installation or replacement of heating systems, plumbing, wiring, elevators, windows and a range of other major capital improvements. The Program would issue fourteen or thirty-four year exemptions from taxes on any increase in assessed valuation resulting from those alterations certified by the City's Department of Housing Preservation and Development ("HPD") and an abatement of property taxes for construction costs certified by HPD.

The proposed legislation would retroactively extend the Program from June 1, 2011 to June 1, 2015. The precursor to the program been primarily responsible for the rehabilitation and upgrading of New York City's housing stock since 1955. It has also been essential in

 ensuring that affordable housing will continue to be available to the residents of New York City.

The proposed legislation also reduces the time frame for completing conversions, alterations and improvements from three to two years. The three year period is unnecessarily lengthy for the typical project. Applicants have the option of dividing complicated projects up into their component parts in order to meet the shortened completion deadline. Additionally, the local legislative body is authorized to grant extensions to governmentally-assisted projects.

The proposed legislation also requires local laws or ordinances offering these benefits to limit these benefits to governmentally-assisted alterations or improvements performed in most cooperatives and condominiums. Market rate cooperatives and condominiums need not rely upon an incentive program in order to make the necessary repairs, since such owners are incentivized already to maximize their return on equity. For the same reasons, the local law or ordinance would also have to limit J-51 benefits to governmentally-assisted conversions from nonresidential to residential buildings.

The proposed legislation requires such local laws or ordinances to impose a penalty equal to 10% of claimed costs on applicants whose work has not been completed when the local housing agency conducts an inspection. Since these applications cannot be filed until the work is completed, applicants should not be trying to get a jump start on the process by starting it prematurely. This wastes the local housing agency's limited and valuable resources.

The proposed legislation also requires local laws or ordinances offering Program benefits to provide that revocation of these benefits does not exempt a building from continued compliance with the State or local Housing Preservation Act law. Hence, for example, if program benefits were revoked for any reason, a rental building that had received such benefits before they were revoked still must comply with the rent regulation requirements of the Housing Preservation Act Program for rental buildings.

Finally, the proposed legislation authorizes a local law or ordinance providing for Housing Preservation Act benefits to require the electronic filing of applications. Electronic submission would significantly streamline the processing of Program applications.

Accordingly, the Mayor urges the earliest possible favorable consideration of this proposal by the Legislature.

EFFECTIVE DATE: Immediately, with provisions.

Text

STATE OF NEW YORK
________________________________________________________________________

7649

IN SENATE

June 11, 2012
___________

Introduced  by  Sen.  YOUNG  -- read twice and ordered printed, and when
  printed to be committed to the Committee on Rules

AN ACT to amend the real property tax law, in relation to exemption from
  taxation of alterations and improvements to multiple dwellings

  THE PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND  ASSEM-
BLY, DO ENACT AS FOLLOWS:

  Section  1. The opening paragraph of paragraph (a) of subdivision 1 of
section 489 of the real property tax law, as amended by chapter  244  of
the laws of 2006, is amended to read as follows:
  Any  city  to  which  the  multiple dwelling law is applicable, acting
through its local legislative body or other governing agency, is  hereby
authorized  and  empowered,  to  and  including June first, two thousand
[eleven] FIFTEEN, to adopt and amend local laws or ordinances  providing
that any increase in assessed valuation of real property shall be exempt
from taxation for local purposes, as provided herein, to the extent such
increase results from:
  S  2.  The  closing  paragraph  of  subparagraph 6 of paragraph (a) of
subdivision 1 of section 489 of the real property tax law, as amended by
chapter 244 of the laws of 2006, is amended to read as follows:
  Such conversion, alterations or improvements shall be completed within
[thirty-six] TWENTY-FOUR months after the date on which  same  shall  be
started [except that such thirty-six month limitation shall not apply to
conversions  of  residential  units  which  are registered with the loft
board in accordance with article seven-C of the  multiple  dwelling  law
pursuant  to  subparagraph  one  of this paragraph]. Notwithstanding the
foregoing, [a sixty month period for completion shall be  available  for
alterations  or  improvements  undertaken  by a housing development fund
company organized pursuant to article  eleven  of  the  private  housing
finance  law,  which  are carried out with the substantial assistance of
grants, loans or subsidies from any federal, state or local governmental
agency or instrumentality or which are carried out in a property  trans-
ferred  from  such  city  if  alterations and improvements are completed
within seven years after the date of transfer. In addition,]  the  local
housing  agency  is hereby empowered to grant an extension of the period

 EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
                      [ ] is old law to be omitted.
                                                           LBD16214-02-2
S. 7649                             2

of completion for any project carried out with the  substantial  assist-
ance  of  grants,  loans  or  subsidies from any federal, state or local
governmental agency or instrumentality[, if such alterations or improve-
ments   are   completed   within   sixty  months  from  commencement  of
construction]. Provided, further, that such conversion,  alterations  or
improvements  shall  in any event be completed prior to December thirty-
first, two thousand [eleven] FIFTEEN.  Exemption for conversions, alter-
ations or improvements pursuant to subparagraph one, two, three or  four
of  this  paragraph  shall  continue for a period not to exceed fourteen
years and begin no sooner than the first quarterly tax bill  immediately
following  the  completion  of  such conversion, alterations or improve-
ments. Exemption  for  alterations  or  improvements  pursuant  to  this
subparagraph or subparagraph five of this paragraph shall continue for a
period  not  to  exceed thirty-four years and shall begin no sooner than
the first quarterly tax bill immediately  following  the  completion  of
such  alterations  or improvements. Such exemption shall be equal to the
increase in the valuation which is  subject  to  exemption  in  full  or
proportionally under this subdivision for ten or thirty years, whichever
is  applicable.  After  such period of time, the amount of such exempted
assessed valuation of such  improvements  shall  be  reduced  by  twenty
percent in each succeeding year until the assessed value of the improve-
ments  are  fully taxable.  Provided, however, exemption for any conver-
sion, alterations or improvements which are aided by  a  loan  or  grant
under  article  eight, eight-A, eleven, twelve, fifteen or twenty-two of
the private housing finance law, section  six  hundred  ninety-six-a  or
section  ninety-nine-h  of  the  general municipal law, or section three
hundred twelve of the housing act of  nineteen  hundred  sixty-four  (42
U.S.C.A.  1452b),  or  the Cranston-Gonzalez national affordable housing
act (42 U.S.C.A. 12701 et.  seq.), or started after July first, nineteen
hundred eighty-three by a housing  development  fund  company  organized
pursuant  to article eleven of the private housing finance law which are
carried out with the substantial assistance of grants, loans  or  subsi-
dies  from any federal, state or local governmental agency or instrumen-
tality or which are carried out in a property transferred from any  city
[and where alterations and improvements are completed within seven years
after  the  date  of  transfer] may commence at the beginning of any tax
quarter subsequent to the  start  of  such  conversion,  alterations  or
improvements and prior to the completion of such conversion, alterations
or improvements.
  S  3.  Section  489  of the real property tax law is amended by adding
four new subdivisions 17, 18, 19 and 20 to read as follows:
  17. (A) FOR PURPOSES OF THIS  SUBDIVISION,  "SUBSTANTIAL  GOVERNMENTAL
ASSISTANCE" SHALL MEAN:
  (I) GRANTS, LOANS OR SUBSIDIES FROM ANY FEDERAL, STATE OR LOCAL AGENCY
OR  INSTRUMENTALITY  IN  FURTHERANCE OF A PROGRAM FOR THE DEVELOPMENT OF
AFFORDABLE HOUSING APPROVED BY  THE  LOCAL  HOUSING  AGENCY,  INCLUDING,
WITHOUT  LIMITATION, FINANCING OR INSURANCE PROVIDED BY THE STATE OF NEW
YORK MORTGAGE AGENCY OR THE NEW YORK CITY RESIDENTIAL MORTGAGE INSURANCE
CORPORATION; OR
  (II) A WRITTEN AGREEMENT BETWEEN A  HOUSING  DEVELOPMENT  FUND  CORPO-
RATION  AND  THE  LOCAL  HOUSING  AGENCY LIMITING THE INCOMES OF PERSONS
ENTITLED TO PURCHASE SHARES OR RENT HOUSING ACCOMMODATIONS THEREIN.
  (B) ANY LOCAL LAW OR ORDINANCE PROVIDING FOR BENEFITS PURSUANT TO THIS
SECTION MUST ALSO PROVIDE THE FOLLOWING  WITH  RESPECT  TO  CONVERSIONS,
ALTERATIONS OR IMPROVEMENTS COMPLETED ON OR AFTER DECEMBER THIRTY-FIRST,
TWO THOUSAND ELEVEN:
S. 7649                             3

  (I)  EXCEPT  AS  OTHERWISE  PROVIDED  IN  THIS SECTION WITH RESPECT TO
MULTIPLE DWELLINGS, BUILDINGS AND STRUCTURES OWNED AND  OPERATED  EITHER
BY  LIMITED-PROFIT HOUSING COMPANIES ESTABLISHED PURSUANT TO ARTICLE TWO
OF THE PRIVATE HOUSING FINANCE LAW  OR  REDEVELOPMENT  COMPANIES  ESTAB-
LISHED  PURSUANT  TO ARTICLE FIVE OF THE PRIVATE HOUSING FINANCE LAW, OR
WITH RESPECT TO A GROUP OF MULTIPLE DWELLINGS THAT WAS  DEVELOPED  AS  A
PLANNED  COMMUNITY  AND  THAT  IS  OWNED  AS  TWO  SEPARATE CONDOMINIUMS
CONTAINING A TOTAL OF TEN THOUSAND OR MORE DWELLING UNITS, ANY  MULTIPLE
DWELLING,  BUILDING  OR  STRUCTURE  THAT  IS OWNED AS A COOPERATIVE OR A
CONDOMINIUM SHALL ONLY BE ELIGIBLE FOR SUCH BENEFITS IF THE  ALTERATIONS
OR  IMPROVEMENTS FOR WHICH SUCH MULTIPLE DWELLING, BUILDING OR STRUCTURE
HAS APPLIED FOR THE BENEFITS PURSUANT TO THIS SECTION WERE  CARRIED  OUT
WITH SUBSTANTIAL GOVERNMENTAL ASSISTANCE, AND
  (II)  NO  BENEFITS  PURSUANT  TO THIS SECTION SHALL BE GRANTED FOR THE
CONVERSION OF ANY NON-RESIDENTIAL BUILDING OR STRUCTURE INTO A  CLASS  A
MULTIPLE  DWELLING  UNLESS SUCH CONVERSION WAS CARRIED OUT WITH SUBSTAN-
TIAL GOVERNMENTAL ASSISTANCE.
  18. ANY LOCAL LAW OR ORDINANCE PROVIDING FOR BENEFITS PURSUANT TO THIS
SECTION MUST ALSO PROVIDE, WITH RESPECT TO CONVERSIONS,  ALTERATIONS  OR
IMPROVEMENTS  FOR WHICH APPLICATION WAS MADE AFTER THE EFFECTIVE DATE OF
THIS SUBDIVISION, THAT IF SUCH CONVERSIONS, ALTERATIONS OR  IMPROVEMENTS
ARE  NOT  COMPLETED  ON  THE  DATE  UPON WHICH SUCH LOCAL HOUSING AGENCY
INSPECTS THE ITEMS OF WORK CLAIMED IN SUCH APPLICATION, THE LOCAL  HOUS-
ING  AGENCY SHALL IMPOSE A PENALTY ON THE APPLICANT EQUAL TO TEN PERCENT
OF THE COSTS ASSOCIATED WITH SUCH ITEMS OF WORK AS CLAIMED BY THE APPLI-
CANT IN SUCH APPLICATION FOR BENEFITS PURSUANT TO THIS SECTION.
  19. THE REVOCATION OF  BENEFITS  GRANTED  TO  ANY  MULTIPLE  DWELLING,
BUILDING  OR  STRUCTURE  PURSUANT  TO  THIS SECTION SHALL NOT EXEMPT ANY
DWELLING UNIT THEREIN FROM CONTINUED COMPLIANCE WITH THE REQUIREMENTS OF
THIS SECTION OR OF ANY LOCAL CODE PROVIDING  FOR  BENEFITS  PURSUANT  TO
THIS SECTION.
  20.  NOTWITHSTANDING  THE  PROVISIONS OF ANY GENERAL, SPECIAL OR LOCAL
LAW, ANY LOCAL LAW OR ORDINANCE PROVIDING FOR BENEFITS PURSUANT TO  THIS
SECTION  MAY  REQUIRE THAT APPLICATIONS FOR EXEMPTION OR ABATEMENT UNDER
THIS SECTION THAT ARE FILED ON OR AFTER A DATE SPECIFIED IN  SUCH  LOCAL
LAW OR ORDINANCE BE FILED ELECTRONICALLY.
  S 4. Separability. If any clause, sentence, paragraph, section or part
of  this act shall be adjudged by any court of competent jurisdiction to
be invalid, such judgment shall not affect,  impair  or  invalidate  the
remainder  thereof,  but  shall  be  confined  in  this operation to the
clause, sentence, paragraph, section or part thereof  directly  involved
in the controversy in which such judgment shall have been rendered.
  S  5.  This  act  shall take effect immediately and shall be deemed to
have been in full force and effect  on  and  after  December  31,  2011,
provided  that  the  amendments made to section 489 of the real property
tax law by section two of this act shall not be  deemed  to  change  the
eligibility  for  benefit pursuant to such section, and any local law or
ordinance providing for benefits pursuant to such  section,  of  conver-
sions, alterations or improvements completed before December 31, 2011.