Tax Abatements Are Prized by Condo Buyers in a Tight Market
At The Rennie condominium in Harlem, 421-a tax breaks run through 2043.
Nov. 29, 2022 — With interests rates high and inventory low, tax breaks have become a plum.
The 421-a tax abatement — which rewarded developers for including affordable units in new buildings — was allowed to die a quiet death last summer. But many existing condo units will enjoy the breaks on their property taxes for years to come. And with so many negative factors in play — from inflation to rising interest rates to a lack of housing inventory — condo buyers in New York City are looking to tax abatements like 421-a to offset the pain, amNewYork reports.
“The buyers that are still out there have shown an avid interest in tax abated buildings, specifically buildings that still have years left on their tax abatement,” says Marie Bromberg, real estate agent with Compass.
According to a recent report from real estate intelligence company Marketproof, more than 3,500 new-development sponsor units in New York City come with an active 421-a tax abatement. Many still have 10 or more years left of the incentive — a compelling perk for those looking to buy now, despite the challenges.
Examples include One Manhattan Square in Two Bridges, where 421-a perks are active through 2039, with owners getting 100% relief through 2030. The 81-floor, 814-unit development is currently one of the top-selling projects in New York City based on monthly sales volume, with nearly 60% sold.
At The Rennie, BRP Development’s Harlem condo, 421-a runs through 2043. The new development is hitting a sweet spot in the market for buyers searching below $2 million
“Buyers are also willing to go further out on the hunt for the tax abatements,” Bromberg adds. “Those who had previously only considered Brooklyn are now considering projects in (Upper) Manhattan and even Queens if it means lower monthly costs.”
The 421-a tax break, which was derided by critics as welfare for wealthy developers, cost the city $1.1 billion a year in forgiven taxes. Despite such criticism, the long-term breaks on property taxes are one way for buyers to alleviate the squeeze of the current market. Affordable housing, according to a new report in The New York Times, has become even harder to find as prices and interest rates have risen while listings have declined. Between the second quarter of 2019 and 2022, as the typical home price rose to nearly four times the median family income nationally, the price of a home in New York City has remained more than nine times that level, according to the Federal Reserve Bank of New York.