Bill Extends Limited J-51 Tax Break for Co-ops and Condos

In the closing hours of a session that produced no breakthrough housing laws, the state Legislature passed a new version of the J-51 property tax break for landlords and co-op and condo boards who renovate their apartment buildings, The Real Deal reports. But provisions will narrow the tax break to mostly affordable properties.

Lawmakers over the weekend passed the “Affordable Housing Rehabilitation Program,” which replaces the lapsed J-51 tax break. The measure awaits the governor’s signature, which is expected. Assembly member Ed Braunstein (D-Queens), was a sponsor and driving force behind the bill. In the Senate, it was sponsored by Brian Kavanagh (D-Manhatttan) and Toby Stavisky (D-Queens).

The new J-51 program applies to condos and co-ops with an assessed valuation of less than $45,000 per unit, which is an increase from the old J-51 limit. (Assessed valuation, which is part of the formula used to calculate property taxes, is a fraction of an apartment's market value.)

If approved by the New York City Council, the state bill would apply to renovation work completed after June 29, 2022 — when the previous version expired — and before June 30, 2026.The tax break closely follows a proposal included in Gov. Kathy Hochul’s executive budget. Like the governor’s bill, the new program features a few key changes from the tax break that lapsed.It is now an abatement-only program that lasts for up to 20 years. For rentals, buildings must be at least 50% affordable, part of the state’s Mitchell-Lama program, or receive “substantial government assistance.” The Department of Housing Preservation and Development would determine the income levels for the affordable units.

The J-51 replacement was one of the few housing-related bills approved this session in Albany. The leaders of the Senate and Assembly majorities said they could not reach a broader agreement on issues including the tax break for new housing development, known as 421a, or a version of good cause eviction that mirrored California’s rent control law.

Jay Martin, executive director of the Community Housing Improvement Program, which represents the owners and managers of rent-stabilized properties, says the new tax break, due to the affordability restrictions, benefits only a “narrow universe” of landlords and co-op and condo boards. “They just don’t understand that a property owner can’t run a business like this,” Martin says. “We don’t view it as a victory at all.”

The tax break was a priority for Mayor Eric Adams, who also pushed for renewal of 421a and changes to state law to allow for more commercial-to-residential conversions — both of which failed to pass during the recent legislative session. Without these latter measures, the mayor’s goal to build 500,000 homes in the next decade is likely out of reach.