State tax break, looming issue of gentrification

GERREN KEITH GAYNOR Special to the AmNews | 6/27/2012, 3:54 p.m.
Nearly 10 years ago, the Mount Morris Park West historic district in Harlem, between 120th...
State tax break, looming issue of gentrification

Nearly 10 years ago, the Mount Morris Park West historic district in Harlem, between 120th and 121st streets, was full of vacant properties, according to city records. Since being acquired by a private developer, the properties have been transformed into high-end luxury condominiums valued at as much as $1 million. But according to a study by the Community Service Society (CSS), a New York advocacy group, the developer of the properties benefited from a rehabilitation tax break that was originally signed into state law to benefit low-income and moderate-income tenants.

The tax benefit program known as J-51 is becoming a looming issue for communities like Harlem and Brooklyn, where the encouraged rise in property development is leading to unaffordable rent hikes for area residents, what some say are indirect causes of displacement and gentrification. Many of those who benefit from J-51 are developers of nonaffordable properties, subsequently absorbing millions of dollars that could otherwise go to more deserving properties, benefiting lower-income tenants and government-assisted apartment buildings that remain in poor conditions throughout the city.

Cases like the Mount Morris Park West condos in Harlem are a glaring red flag to CSS, which strongly recommends that state legislators reform the current J-51 bill. The bill, which expired last December and was recently voted on by the state Senate, gave incentives to landlords to improve housing to benefit moderate- and low-income residents.

The J-51 tax program was signed into law by former Mayor Robert Wagner in 1955 to encourage improvement of substandard residences that were "lacking the ordinary decencies and comforts of modern dwellings," according to a report released by CSS. The program offers tax breaks in the forms of exemptions and abatements to developers and landlords for improving eligible units such as roofs, cabinets and boilers. The report shows that a rising number of condos and co-ops are also reaping the benefits of the incentive program.

Currently there is no value limit for co-ops and condos at the time of conversion, which CSS says will likely make the benefit to unaffordable apartments.

Now, says CSS President and CEO David Jones, the program has "morphed into something that in many ways may encourage gentrification and force low- and moderate-income people from having any housing options.

"It's almost become an as-of-right benefit that people feel entitled to," Jones said. "Against that, they feel totally free to set their own rent levels," he said of the undeserving landlords who take advantage of the tax program.

Jones said he thinks the J-51 bill has yet to be amended because of political and economic interests. "Look at where the campaign contributions are coming from," he said. "I think the reason we can't make movement on this to date is that the real estate and developer interests want to continue going along this way."

In parts of Brooklyn such as Crown Heights, Jones says, the effects of the J-51 program are rearing its head in the form of rental costs hitting the $3,000 range. Many of the properties benefiting from the J-51 program, compiled in a list by CSS, reveals that a significant number of Brooklyn benefactors have been condos and private co-ops in places like Bedford-Stuyvesant, Brooklyn Heights and Clinton Hill, which are quickly gentrifying.