The city desperately needs more rental housing. Hundreds of dilapidated old office buildings remain largely vacant. So why not use one problem to solve another?
The solution is to give landlords property tax breaks to cover the high cost of converting useless old offices into rental apartments.
SL Green, the city’s largest commercial landlord, has been quietly promoting such a strategy, which has worked brilliantly in the past, although it is largely forgotten.
That time has come again — but only if woke Albany lawmakers overcome their deep-seated hatred of real estate companies and show common sense.
Gov. Kathy Hochul and lawmakers are at loggerheads over hornet-infested housing issues, including whether to restore tax incentives for new construction that includes affordable housing. This incentive will be eliminated when the 421-A program expires in 2022.
It was a fatal blow to new housing construction. In 2023, there were only 9,090 homes across the city, compared to more than 45,000 in 2022.
But now SL Green has floated the very real idea of giving tax breaks to developers. This would involve converting existing, useless offices into new housing, rather than necessarily constructing brand new buildings, provided that it includes a significant number of affordable units.
“This will have significant seismic implications for the city’s Class B and Class C buildings,” said Robert Schiffer, executive vice president of development for SL Green. This means a large number of outdated office addresses that are no longer attractive to tenants.
A similar approach was taken a quarter century ago, when former Mayor Rudy Giuliani, with state support, gave tax breaks to owners of downtown office buildings on the hill to redesign them for residential use. It helped save the area from ruin.
From 1995 to 2006, the so-called 421-g program converted a staggering 13 million square feet of useless downtown offices into nearly 13,000 apartments, transforming parts of town that once closed at 5 p.m. brought about a big change.
Unlike the plans currently being discussed, these were all market rate.
SL Green does not engage in formal lobbying activities. Rather, Schiffer said, “we’re educating key stakeholders, including elected officials, community organizations, and housing advocates, about the benefits of such an approach.”
The company is “illustrating” opportunities that could transform its 750 Third Avenue location between East 46th and 47th Streets, for example.
The aging 34-story office building, which opened in the 1950s, is currently 80% vacant.
“We’re helping frame the issue” in a way that could ultimately lead to legislation, Schiffer said.
SL Green wants to convert 543 750 Thirds, 25% of which will be affordable.
Schiffer estimated the project would likely cost $250 million.
But it will bring much-needed new housing and life to Third Avenue, the ailing midtown market where office vacancy rates exceed 30% and numerous stores and restaurants have closed. It will be.
Doesn’t this beleaguered city need every tax dollar it can get? In fact, a tax break for conversion would put a significant strain on local government coffers.
For example, at 750 Third Avenue, the city would waive $10 million in annual property taxes.
However, the city is expected to collect $16.1 billion in property tax revenue in the second quarter of 2024 alone, according to the City Auditor’s Office.
Negotiations in Albany are taking place in a fog of conflicting agendas, but City Planning Secretary Daniel Galodnick told me: [for conversions] This is currently being considered as part of budget discussions. ”
Such measures do not only benefit SL Green.
Rudin Management, which owns 845 Third Ave., a half-vacant property built in 1963, is also taking note.
So is the owner of 111 Wall Street. His 24-story tower of 1960s vintage is completely empty and redesigned for modern use, only to be reeling from the devastating one-two punch of the pandemic and interest rates.
Owner Intervest Capital Partners wants to convert it into 1,300 apartments.
Mayor Eric Adams is trying to ease the transition from office to home with an “accelerator” program that cuts through the bureaucracy.
We are also working on reviewing zoning to expand the areas where conversion to housing is permitted.
But tax cuts depend on persuading far-left lawmakers to replace free enterprise real estate with Soviet-style five-year plans if possible.
The Big Apple is rooting for Albany’s obstructionists to rise above their Marxist illusions and do the right thing.
