New Tax Break for Major Building Upgrades

Co-ops struggling to pay for critical building-wide upgrades may now be able to access new tax breaks for major renovations. It comes after Gov. Kathy Hochul signed legislation replacing the expired J-51 property tax abatement program with an alternative tax break system for buildings most in need of repairs.

The new Affordable Housing Rehabilitation Program (AHRP) offers tax breaks to affordable rental buildings and Mitchell-Lama properties. In addition, co-ops and condos with average assessed values for apartments at or below $45,000 are eligible, a slightly higher threshold compared with the previous J-51 program. “They raised the ceiling for assessed value, and any co-op and condo that can get below that is eligible,” says attorney William McCracken, a partner at the law firm Moritt Hock & Hamroff.

An assessed value of $45,000 equates to a market value of about $450,000, though it varies by borough and unit type. Another way to look at this is if the average full property tax payment per apartment is $5,600, and the building has at least three apartments, the co-op or condo may be eligible, says Benjamin Williams, a member at the law firm Rosenberg & Estis. He estimates about 3,300 properties will be able to apply for the co-op or condo benefits. “That’s about 2,100 buildings in Brooklyn and Queens and the balance in Manhattan, the Bronx and a few in Staten Island,” he says. The granular detail on qualifying work will come once the program gets New York City Council approval, which is expected soon.

With deadlines looming for co-ops and condos to reduce building emissions under Local Law 97, attorney Geoffrey Mazel, founding partner at the law firm Hankin Mazel, calls the program a game changer” opening up “millions of dollars in tax savings for the most vulnerable co-ops and condos.” The retrofits needed to move away from fossil fuels are extremely expensive, so the abatement program is timely, he adds. “The 2030 penalties are fast approaching and this is a tool to help buildings comply.” 

One of the criticisms of the previous J-51 program was the difficulty buildings had in calculating tax abatement savings ahead of a project being completed, making it hard to budget accurately. The new program has a simplified tax-abatement formula. “To the extent that this new program  will make this simpler and easier to predict what the abatement will be, that will be a huge win,” says McCracken.  

AHRP is part of a trio of housing bills signed into law this week aimed at creating and preserving affordable housing in the city. In addition to the tax break program, the city is getting more flexibility to provide loans and grants for affordable housing and support statewide efforts to meet energy efficiency goals. It follows a year in which ambitious plans to address housing affordability were dropped from the state budget. 

AHRP runs until June 30, 2026, and boards can apply for the abatement retroactively for projects completed after June 29, 2022, when the previous J-51 program expired. So eligible buildings that started a project in mid-2022 and finished in 2023 may find themselves qualifying for a cost-saving tax abatement that didn’t exist while the project was underway.

There’s a non-refundable filing fee for all applications, which should be filed within four months of building work being completed. Retroactive applications must be filed within four months of the legislation being signed. The program is not open to buildings with outstanding real estate taxes or unpaid water or sewage charges.