New York Governor Kathy Hochul’s $227 billion budget includes proposals that would make it easier to convert older office buildings into residential use.
(Bloomberg) — New York Governor Kathy Hochul’s $227 billion budget includes proposals that would make it easier to convert older office buildings into residential use.
Property-tax exemptions would be offered to landlords who agree to include affordable housing in their office conversion projects, according to the state budget. The proposal expands on recommendations by a task force established by New York City Mayor Eric Adams to transform underused offices into homes. Office conversions could potentially create as many as 20,000 homes in the next decade, according to Adams.
“The time has come for this. Buildings should take on a second life,” said Mitch Korbey, chair of Herrick Feinstein LLP’s land use and zoning group. “But if we don’t move on the tax relief front, we’re not going to be able to produce the housing.”
New York City’s office market is struggling to recover as workers slowly return to the office. In response, some landlords are exploring opportunities to transform empty offices to apartments. But conversions in the city are expensive and highly regulated.
Read more: NYC’s Silverstein to Raise $1.5 Billion for Office Conversions
Developers converting offices into apartments with at least 20% affordable units would qualify for a property tax break for 19 years. At least 5% of the units must be affordable to households whose income doesn’t exceed 40% of the area median income, or $53,360 for a family of four. The weighted average of all the affordable units is capped at 70% of area median income, or $93,380 for a family of four, as adjusted for household size.
Projects would receive a full property-tax exemption during the construction period. After construction is complete, properties south of 96th Street in Manhattan would get a 50% exemption for 15 years, while properties outside that area would get a 35% exemption for that period. The tax breaks decline over the next four years.
Legislation accompanying the budget also expands the range of buildings eligible for conversion to those built before 1991. Under current New York City zoning rules, only buildings constructed before Dec. 15, 1961, or Jan. 1, 1977 in lower Manhattan, are eligible.
For instance, the former AIG headquarters building on 70 Pine St., completed in 1932, in Manhattan’s Financial District was converted into apartments about 10 years ago. The residential building doesn’t have affordable units, said Korbey.
Conversions would also be exempt from a state law that caps density for residential properties, under the governor’s proposal.
Hochul, who called for building 800,000 units of new housing over the next 10 years, also proposed legislation requiring municipalities in the metropolitan New York City region to rezone areas around rail and subway stations. The budget also sets housing growth targets of 3% over three years in New York City and its surrounding suburbs.
–With assistance from Natalie Wong.
More stories like this are available on bloomberg.com
©2023 Bloomberg L.P.