NYC Pied-à-Terre Tax Clears Court Hurdle, J-51 Returns

Hello, let’s get into today’s news at the intersection of policy and real estate:

• An appellate court judge allows NYC to continue its pied-à-terre tax rollout.
• The City Council is reviving J-51, three months after the state rebooted the tax break.
• A contentious city pilot aimed at preventing tenant harassment will become permanent and much stricter under a Council bill that passed Thursday.  

In this edition we mention: Staten Island state Supreme Court judge Wayne M. Ozzi, attorney Randy Mastro, Appellate Division, Second Department judge Phillip Hom, the city’s Corporation Counsel Steven Banks, City Council member Pierina Sanchez and others.

We Heard

• Court clarification: An appellate court on Thursday cleared the Mamdani administration to continue rolling out its pied-à-terre tax, at least through the end of August. The ruling resolves confusion over whether a temporary restraining order issued Monday by Staten Island state Supreme Court judge Wayne M. Ozzi — which blocked the city from implementing the tax — was stayed when the city appealed the order. In a Tuesday letter to the Staten Island judge, Randy Mastro, an attorney representing homeowners in their lawsuit against the city’s implementation of the levy, suggested that the Mamdani administration would be in contempt of court if it continued its work of carrying out the tax. Judge Philip Hom of the Appellate Division, Second Department disagreed. Hom granted the city’s request Thursday morning to confirm that Ozzi’s order is stayed while the city’s appeal is pending. He also granted the city permission to formally appeal Monday’s decision. In court papers filed Thursday, city Corporation Counsel Steven Banks argued that the restraining order threatened to “derail” the city’s rollout of the tax and jeopardize its efforts to collect a projected $500 million in revenue to help balance the city’s budget. The stay will remain in effect through Aug. 31, when the homeowners and the Mamdani administration are expected to appear in court for a hearing on the merits of the case.
• J-51 returns: A tax break to help multifamily, co-op and condo owners offset the cost of building upgrades is poised to return. City Council member Pierina Sanchez introduced a bill Thursday to reauthorize and expand J-51, three months after Albany revamped the program as part of this year’s state budget. State lawmakers increased the abatement’s value and expanded eligibility for co-ops and condos, but stopped short of raising the threshold for rent-regulated buildings. The Council’s bill would codify the new program locally and allow owners to tap the benefit. J-51 can help cover upgrades including boilers, facade repairs and climate-friendly improvements. Sanchez described it as a critical tool for offsetting costs at low- to moderate-income residential buildings while helping owners cut greenhouse gas emissions as Local Law 97 requirements ramp up. “To respond to the housing and climate crises, we must do everything in our power to preserve and retrofit New York City’s aging building stock; this bill would do just that,” Sanchez said in a statement shared with The Real Deal. A person briefed on the bill not authorized to speak publicly said the Council plans to hold a hearing on the legislation in September and pass it this fall. The bill language was only recently finalized, but at least a dozen Council members have expressed support in early talks, including Council Majority Leader Shaun Abreu, finance committee chair Linda Lee and environmental protection committee chair James Gennaro, the person said. The Council previously took heat for moving slowly on J-51, taking more than a year to enact the program’s last iteration after state lawmakers approved it in 2023. The revamped program aims to avoid that lag with a 10-year renewal, rather than the typical four-year cycle. It also raised the benefit cap to cover up to 100 percent of what the city deems “reasonable” project costs, up from 70 percent. The annual abatement remains capped at 8.33 percent of renovation costs over the life of the benefit, which can run for up to 20 years. Under the prior program, co-ops and condos qualified if they had an average assessed value of $45,000. The budget deal raised that threshold to $60,000, with annual increases tied to the consumer price index. Many Manhattan co-op and condo buildings will still exceed the cap, but the higher threshold should open the benefit to more buildings in the outer boroughs, where assessed values tend to be lower. The reboot keeps the requirement that rental buildings be up to 50 percent affordable, receive substantial government assistance or participate in the state’s Mitchell-Lama program. A bill from State Sen. Brian Kavanagh and Assembly member Ed Braunstein sought to expand eligibility to buildings where up to 90 percent of units are rent-regulated. But that provision did not make the final cut.
• A bigger stick: A pilot program that requires some distressed building owners to prove their tenants are not being harassed before making major renovations or demolishing their properties will soon become permanent. The City Council passed a bill Thursday making the Department of Housing Preservation and Development’s contentious Certification of No Harassment pilot a permanent city program. The initiative, which was enacted in 2018 and expanded in 2022 to last through Sept. 27th of this year, requires owners of buildings typically with high physical distress to obtain a CONH prior to acquiring certain major permits from the Department of Buildings. The current pilot covers 1,508 properties across all five boroughs. The newly-approved bill, also sponsored by Sanchez, requires HPD to publish a new list of properties subject to the program by April 15, 2027, and every three years after that, with some significant additions from the original bill introduced in April. Arguably the biggest change is that buildings can be added to the program if they share the same owner — as determined by a building’s registration statement — as a building that was denied a CONH or had one rescinded within the last five years. Other big updates include expanding the definition of harassment to include threats of reporting a tenant to federal authorities over their immigration status, creating a mechanism for tenants to request the city rescind a granted CONH and creating a path for owners to apply for removal from the program after 180 days. Another noteworthy addition is language that explicitly clarifies that “cosmetic work” such as painting, cleaning and replacing minor hardware or appliances can be done at buildings without a CONH. Landlords often argue that being on the list can result in apartments sitting vacant as owners wait for the ability to move forward with certain renovations, but Sanchez stressed that the bill’s language does not prohibit routine maintenance. “Colleagues, this is a thing that will be lodged at you about this legislation, ‘oh, now we can’t do basic repairs because of the CONH program,’” Sanchez said to fellow Council members during a Thursday committee vote on the bill. “That is false. Basic repairs are still allowed.” More coverage to come.

Have a tip or feedback? Reach me at caroline.spivack@therealdeal.com. 

Bill Tracker

The Catch-Up

Manhattan’s median rent hit a record $5,000 in July, while the average rent reached $6,300, reports TRD’s Lilah Burke.

A Kips Bay tenant’s $1.5 million holdout is pitting tenant rights against a stalled development that would build affordable housing, reports The City Reporter.

Multi-Housing News takes a look at the city’s affordable housing owners grappling with mounting financial strain from rising costs, weak rent collection and a looming rent freeze.

The Kicker
“The project is not shovel ready, no major stakeholders have been engaged, and absolutely no one has identified the $21 billion needed just to build the platform over the tracks,” said City Council member Julie Won, who represents the district of the proposed Sunnyside Yard redevelopment in Queens.