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.
“Neighborhoods that are beginning to gentrify even more rapidly in areas of Crown Heights and Bedford-Stuyvesant used to have affordable housing and good housing stock,” Jones said, but “are easily beginning to price people out of the ability to afford that kind of housing.”
The J-51 program has become a hotbed for the real estate industry, with a price tag that is unmistakably costly. The CSS report found that over a 10-year period, the total amount of tax exemptions and abatements had ballooned by more than 100 percent, after inflation. In 2011, the total city costs for the program towered over $256 million, making it the second largest expenditure the city makes from its own resources, the report said. To put that number in perspective, it costs more than the entire annual expense budget for the city’s Department of Housing Preservation and Development, after the subtraction of the department’s federally funded Section 8 vouchers.
The program’s pricy undertaking is why CSS analysts and housing advocates strongly advise that state legislators not pass the bill under its same conditions. CSS recommends that the new bill, which is set to be voted on in the Assembly, eliminate all benefits for co-ops and condos except those being developed with government assistance, enforce better rules for the coordination of the J-51 benefit with rent increases and eliminate the exemption benefit to offset high-end developments.
So far, the J-51 bill, unchanged, has been passed by the state Senate. State Sen. Bill Perkins, who represents Harlem and the Upper West Side of Manhattan, told the AmNews that he and 12 other senators voted against the bill out of concern for the rights of tenants.
“Senators, along with tenant advocates, feel that this bill has been renewed every year without tenant protection,” Perkins said.
“We want to see housing improve, but we don’t want to see it improve in a way that costs are passed on to tenants and therefore forces a displacement or radically changes the complexity of the community.”
Housing Policy Analyst for CSS Tom Waters, who co-authored the report, said that while the bill was passed in the Senate, he doesn’t suspect the same outcome in the Assembly, which is currently controlled by the Democratic Party.
The Assembly is expected to vote on the bill in the near future.