J-51 Replacement Offers Help to Co-ops and Condos Needing Upgrades, But Many Miss Out

Hundreds of co-ops and condos are expected to apply for tax breaks for major building renovations following the passage of new legislation by the City Council. The program replaces the expired J-51 tax abatement and will help an estimated 1,358 boards recoup funds for facade and roof repairs, energy efficiency retrofits and electrification projects. The abatement is limited to buildings where the average assessed value of apartments is at, or below, $45,000, which translates to a market value of about $450,000. For limited-equity co-ops, Mitchell Lama housing and buildings with low average assessed values per apartment, these benefits are welcome news.

“As an affordable housing community, we simply do not have the capital to do this alone and are looking at every dollar,” says Ambur Nicosia, board president of Penn South, one of 127 Manhattan co-ops and condos eligible for the program. Penn South is a limited equity co-op with a 15-building campus-style complex and is eligible for the program. “We’ve done our facades for this cycle and plan to submit a portion of those costs as well as our project to repair and insulate six of our roofs,” says Ryan Dziedziech, Penn South’s general manager.

The total cost of Penn South’s recent facade and roof repairs was $13 million. “We can’t afford to do it all at once,” Nicosia says. “We have to budget, do the project and budget again.” The reinstated J-51 program allows eligible housing owners to offset 70% of the capital improvement costs against their NYC property tax bill. The tax break can be spread out over a minimum of 12 years, with a maximum of 8.3% of the cost applied annually. Qualifying projects must be completed between June 30, 2022 and June 30, 2026. “We are looking forward to that new valuation credit for the projects,” Dziedziech says.

According to council member Pierina Sanchez, who introduced the bill, some buildings will be able to get an abatement of up to $50,000 a year for eligible projects. Once the bill is signed by the mayor, NYC’s Division of Housing and Community Renewal (DHCR) will create a list of the types of improvements eligible plus a reasonable cost schedule. Eligible projects will include Local Law 97-mandated energy upgrades such as weatherization and delayed capital repairs.

The reauthorization of J-51 was enabled by the passage of state legislation last year. While it is widely welcomed, it leaves many middle-to-low-income co-op and condo boards disappointed they don’t qualify. “Even though the assessed value of our building is too high, some of us have lived here for decades and can’t take advantage of increased property values unless we sell,” says Kathryn DeFehr, a co-op board member in Brooklyn Heights. Her building just spent nearly $700,000 on heat pumps, funded through loans and assessments. Geoffrey Mazel, a founding partner at the law firm Hankin & Mazel, explains some garden apartments in Queens will qualify but others won’t. “Their assessed valuation goes up every year,” he says, noting that the program’s eligibility “is not enough to engulf a huge swath of working and middle class housing.”

Acknowledging there’s more to do, Elijah Hutchinson, executive director of the Mayor’s Office of Climate and Environmental Justice, notes the city is working to bring more resources to the co-op and condo community through utility companies and the New York State Energy Research and Development Authority. “We are also going to continue to work with the state to make sure J-51 remains an option in the long term,” he says. Shay O’Reilly, an organizer with the Green Co-op Council and Spring Street Climate Fund — which led advocacy on the J-51 reinstatement — has another legislative package in mind. The so-called Bucks for Boilers bill, introduced earlier this year at the state level, proposes subsidies for replacing fossil fuel boilers with green alternatives after a certain date. “It’s a tiered subsidy rather than an all or nothing, and I think that’s really important,” O’Reilly says.