15 versus 25 year tax abatement

Time to dig out the excel spreadsheet and do a present value. It's just that simple.

Time also to learn how to spell "Williamsburg".

Correct -- it's spelled "Williamsburgh"

http://www.google.com/images?q=Williamsburgh+Savings+Bank&oe=utf-8&rls=org.mozilla:en-US:official&client=firefox-a&um=1&ie=UTF-8&source=univ&ei=SKdETLGtA8b_lgf0gPWqDw&sa=X&oi=image_result_group&ct=title&resnum=4&ved=0CC8QsAQwAw

> Time to dig out the excel spreadsheet and do a present value. It's just that simple.

I think a bigger factor is when *you* would be selling. Very different to be selling something with low taxes for a bit, vs. something where the taxes just jumped or are about to...

The CC's aren't coincidentally cheaper in those other bldgs. look at what you are getting for those CC's; they are paying for conveniences such as doorman, gym, common areas, bldg staff. If you don't want/need them--don't pay for them

LOL, well it's hard to pinpoint when it went from Williamsburg to Williamsburgh (between 1852 and the 1890s) but it appears to formally be Williamsburg for a good 100 years.
I am a traditionalist but hey, I think the DH rule does apply here. :)

forgot the link

http://en.wikipedia.org/wiki/Williamsburg,_Brooklyn

Let's just call it the Eastern District and be done with it, then.

Could be worse though, it could be called Long Island City. :O

Oh no it couldn't ... that's actionable!

it is a plus as you'll be paying less taxes for a longer period of time. the problem is that many are purchasing without the understanding of what the taxes will be or say "Who know what will be in 15 years."

some developments were built 2003/4, so the first shock wave will be in 2017/18 and then there will be more. your condo with 25 yr tax abatement will be worth more then the 15 in 15 years, but it will get hit very hard once the owners start getting their full tax bills. they will then realize that with the high maintenance and high taxes, they are actually paying more then rent. then you add the mortgage and you'll see the meltdown of prices.

Moreover, with both of these, the value of the apartment will drop as the end of the abatement gets nearer and nearer, and potential buyers begin to ask themselves what the real total monthly cost will be once the taxes kick in.

It's a scary proposition.

Don't you think in the case of 25yr abatement that the length of time significantly mitigates those factors. It's the equivalent of today paying your first RE tax bill since 1985.

sorry, first FULL RE tax bill

Yes, exactly. If you sold five years ago, the buyer would calculate based on today's first full RE tax bill. And certainly the mortgage lender would, I assume. [Well, five years ago no. They barely made sure you were a living person before lending as much as possible and more. But y'know ... it's conceptually correct.]

The one good thing is.... the city will certainly be getting TONS of additional revenue (although I'm sure they already spent it).

But NY real estate taxes are typically a lot lower than they are elsewhere, are they not? Where would you flee to - New Jersey? Westchester? While I could see the tax issue chasing away people who might be stretching to buy, I don't see why it would be a major calamity for the taxes to reset (and they do phase in over 5 years).

> But NY real estate taxes are typically a lot lower than they are elsewhere, are they not?

Yes, but only because its made up for by the superhigh income taxes. And they're growing. And we're talking about one and two bedroom apartments with taxes that will exceed folks' entire houses in the burbs.

AND co-ops are the cheap ones, condos, what we're talking about here, not so much.

Its more of a pricing effect, like mortgage rates. It will affect affordability, and what folks will be willing to pay for these apartments.

I thought we were talking about tax-abated condos in Williamsburg, the vast majority of which are not going to have taxes that will exceed the taxes in the surrounding suburbs. Those suburbs have some of the highest RE tax rates in the country.

Yes, it's a pricing effect, but since it will only bring these buildings up to par the effect will be to lose a slight competitive edge in the market. Rationally, that is not the calamity some are making it out to be.

"the vast majority of which are not going to have taxes that will exceed the taxes in the surrounding suburbs"

I don't think you have any idea what the taxes in the burbs actually cost. I talked to two folks with 4 bedrooms houses (entire houses, with land, at least 3k sq ft) with taxes $1k a month or less.

"Those suburbs have some of the highest RE tax rates in the country. "

And if these condos are even higher, that really says something. Try comparing it to something other than the most expensive you can think of, and it will be a fairer comparison.

"U.S. Census Bureau data, released in late October 2009 and analyzed by the Tax foundation, show that over a three-year period (2006, 2007 and 2008), homeowners in New York and New Jersey counties paid the most in property taxes, while those in Louisiana parishes paid the least. In seven New Jersey counties and three New York counties, the median property tax over 2006-2008 is more than 7 percent of median house hold income, compared to the national median of 2.85%. The data covers counties whose population exceeds 20,000."

Highest counties: Westchester County, NY ($8,404); Hunterdon county, NJ ($8,347); Nassau County, NY ($8,306); Bergen County, NJ ($7,997); Rockland County, NY ($7,798); Essex County, NJ ($7,676); Somerset County, NJ ($7,67); Morris County, NY ($7,310); Passaic County, NJ ($7,095); and Union county, NJ ($7,058).

The top 10 counties in median real estate taxes as a percentage of home value over 2006-2008 are (all from the state of New York), from 1 to 10, Orleans County (3.04%), Niagara County (2.95%); Allegany County (2.92%); Monroe County (2.89%); Wayne county (2.85%); Montgomery County (2.75%); Genesee County (2.73%); Cortland County (2.71%); Chautauqua County (2.66%); and Seneca County (2.654%). The national median is nearly 1% (0.96%)."

Source: http://retirementliving.com/RLtaxes.html

Interesting that none of the counties mentioned are named either Kings County or Manhattan. Perhaps "fair" would be to compare the taxes to Louisiana? Except that the median income there is substantially lower, and the commute's a bitch.

So yeah, I do have a good idea of what taxes in the burbs actually cost - better than yours, apparently. I notice you don't say where these burbs are - Louisiana is my guess. For myself, I know several families who own in NJ and Westchester, and yeah, the taxes are hell.

"So yeah, I do have a good idea of what taxes in the burbs actually cost - better than yours, apparently. "

Apparently not.

"with taxes $1k a month or less."

and yet you're still hopping up and down about how high the taxes are when the averages are LOWER than the examples I gave!

As I said, $1k a month in taxes on a 2 bedroom condo is significantly higher than even the averages in these places!

Find me some examples of condos in williamsburg that have over $1k in taxes and 2 bedrooms - not top of the line, the kind of middle-market condos under discussion - and you might actually have demonstrated something. Until then, you've demonstrated nothing but your own inability to reason.

" thought we were talking about tax-abated condos in Williamsburg, the vast majority of which are not going to have taxes that will exceed the taxes in the surrounding suburbs. "

Want to take that one back perhaps?

Or are you still trying to claim that post-abatement, the 'vast majority' of these condos will have taxes under $700 per month (and thats not even comparing apples to apples!)

"Find me some examples of condos in williamsburg that have over $1k in taxes and 2 bedrooms - not top of the line, the kind of middle-market condos under discussion - and you might actually have demonstrated something. Until then, you've demonstrated nothing but your own inability to reason"

The number is actually $700, more like $300-500 if you compare similar sizes.

How about this... every single condo in NYC I've seen had higher taxes than this post-abatement.

Yep. That's what I claim. Care to actually come up with some examples instead of inventing figures?

The crickets are a bit telling. Seriously though, this is the "evidence" swe's going off in this particular thread:

"I talked to two folks"

Agreed, bjw. Again, if end of abatement simply brings the abated properties up to par with unabated properties, I cannot understand how that would do anything but erase a slight competitive advantage. Doesn't seem like a brewing crisis to me. The whole suburbs thing is a tangent - and a silly one.

I mostly agree. The problem (and this has happened in several cases) is when the abatement was heavily marketed as an advantage to the buyer, and prices were adjusted higher to account for this "benefit." That's where it really damages the buyer, as resales likely won't reflect the same as an advantage.

the property taxes will be high on new developments that's for sure. when you talk about property taxes in NYC, please take that 3.65% NYC tax into your tax consideration. now for the bonus.

friend of mine purchase a house that was rebuilt, foundation and 1 wall left standing. he was paying $5K per year. another one purchased a totally new construction on a somewhat larger lot and was a little bigger, let's use 33% larger, and was paying $14K per year. this is in Brooklyn.
another example. was looking at a highrise (1960's) waterfront 3 br 1/2 bath condo with parking, terrace, pool that had property taxes of $1900. have a friend who lives 1 mile inland in a walkup 1 br with parking and terrace paying $2200. the difference is in 350 sq ft having the 3 br bigger then the 1 br.

new construction property taxes will be significantly higher then old construction. on another thread i was able to find huge prewar apartment condos in prime locations that were paying less then 2 br in the surrounding area that were built in the 80s.

read this http://www.nytimes.com/2009/02/08/realestate/08COV.html?_r=1&em bottom page 2 and top page 3. then please start with your worthless comparison.

"Again, if end of abatement simply brings the abated properties up to par with unabated properties, I cannot understand how that would do anything but erase a slight competitive advantage."

If you think the advantage was "slight", thats where you completely fall out of the discussion.

Yes, they'll line up better. But the part you miss is how much more these properties were able to charge because of the abatements.

"Doesn't seem like a brewing crisis to me."

Only if you don't know the numbers.

> The whole suburbs thing is a tangent - and a silly one.

I get you'd think its silly if you're working off incorrect numbers.

> then please start with your worthless comparison.

The differential can be huge.

Strange that made up numebrs are being pulled out to make the case that they're not.

Love how the "evidence" is another version of "I talked to this guy..." and "I know exactly what's going to happen 10-20 years out." More would-be oracle-izing and paranoia.

From the article you link to:
"Consider the following hypothetical situation, provided by Paul J. Korngold, a real estate lawyer in Manhattan, which he said was consistent with many Manhattan units selling in the $1 million to $2 million range under the 421-a program. What starts out as a $1,214 annual tax bill climbs to $4,613 in the third year, $8,012 in the fifth year, $11,411 in the seventh year and $18,209 when the abatement expires.

But those numbers assume that the city doesn’t raise assessed values or tax rates. Factoring in what Mr. Korngold called a historically conservative 3 percent combined average increase, the unit owner who begins with a $1,214 annual tax bill owes $10,046 in the fifth year and a staggering $32,887 when the abatement expires."

Problems: a) a big chunk of the apartment in these condos in Williamsburg - last I heard, still the area under discussion - are selling for a LOT less than $1-2 m.

b) for those assessments to go way up, real estate would have to appreciate 3% a year. The article assumes this in the trough - February 2009 - of the worst recession in history. And IF real estate DOES go up 3% a year over, it'll affect old construction just as much as new. Nowhere does the article state that tax rates will be different from older construction.

So again, we're back to par, which isn't all that terrifying.

Furthermore, the article proposes that the most severe problems would occur if the sponsor couldn't sell all of the units and went bankrupt, ruining the e

Blast. Cut off.

"Furthermore, the article proposes that the most severe problems would occur if the sponsor couldn't sell all of the units and went bankrupt, ruining the" ... equity of the people who actually bought. However, if the developer has already gone bankrupt and the apartments are selling at lower prices, that risk is also substantially mitigated.

And now I have work to do. Let me know if you have any more worthless examples, ab.

ev, buy one of those condos and we'll be seeing you crying in 15 yrs. the statements that were made are true of comparing 1960's construction vs 1980's construction in building and 1950's construction and 2005 construction of houses. this is the reality.

the article points out the $1-2M range, so drop it 50% for the Willyb condos and you're still stuck with $18K in property taxes, high maintenance and NYC tax. high taxes + high maintenance = what you'd pay for rent in the hood. then add your mortgage and you're upside down and sideways.

ab, those are highly dubious calcs you're throwing up there. In the example given in the NYT, even BEFORE the assumed assessment increases, abated taxes jump up 1400% once the abatement period runs out. Knowing what my unabated taxes will be compared to what they are now, I can tell you that's a ridiculous overstatement.

> Love how the "evidence" is another version of "I talked to this guy..."

Its called my parents' house. and an in-law. I'm not talking about collecting samples on the street. but, hey, whatever you need to rationalize!

the stats you provided weakened your case even more.... so not sure why you're jumping on this. The numbers are simply lower than you claimed, as i said...

> "I know exactly what's going to happen 10-20 years out."

Now you're making things up. I'm just talking about the un-abated numbers, not the projections of increases.

You're also making the huge (did I say HUGE) mistake of looking at averages for NYC when we're talking specifically about new construction, which will be taxed higher.

Again, where does it say that new construction will be taxed higher? Where is this information coming from? No one has provided a source. Show me a legitimate source. Otherwise, bjw is right: those are some highly speculative calculations you're tossing around, ab.

Perhaps someone with some credibility would like to weigh in? Noah? Ali? West 81st?

you really disputing that this is the case? is this all you have left?

this is common knowledge... co-ops are based off nearby rent rolls (often stabilized), new condos 'aint.... here is the first google result.

http://www.nytimes.com/2005/12/11/realestate/11cov.html

The analysis of 68,000 sales by The Times found that this advantage is woven into the tax base of most older co-ops and to a lesser extent many condominiums and postwar co-ops across Manhattan as market values have risen sharply. State law bars assessors from basing taxes for condos and co-ops at their true market value

title... "When It Comes to Taxes, Older Is Better "

"As for co-ops and condos, they also got a special break. The law dictated that they be assessed the way rental buildings were, and no higher, even though values of rental buildings were kept low because of rent control and rent stabilization.... Because prewar co-ops were compared with older rental buildings, with rent regulated tenants, low values were assigned to them. But new condos have higher values: They are assessed initially on their construction costs and later on comparisons with new market rate rental buildings."

"According to the most recent Department of Finance tax records, the average official market value for prewar co-ops is stunningly low - $94 a square foot, or about $94,000 for a 1,000-square-foot apartment, values that haven't been seen in most of Manhattan in years. At 720 Park Avenue, the tax assessors assigned a market value of $141 per square foot, or $28.7 million for the entire building. But brokers say that recently, a single apartment in the 14-story building was put up for sale for $20 million and quickly went to contract, at a price estimated at $3,000 a square foot"

Excellent! Now if only your analysis was on par!

The article is concerned with...drumroll please...high-end ($20m and up) Manhattan co-ops.

So new condos will be taxed at a rate...comparable to new market rate rental buildings. Shocker. Rental market goes down, your taxes go down. Sounds far from a scare to me. So your options are: live in dumpy walkups (no gorgeous, super expensive $20m+ condos in Williamsburg*) or live in relatively shiny new condo with slightly higher taxes.

Plus, as rent stab and control continue to phase out throughout the city, the distinction will erode.

Again. Hardly the crisis, sure-fire way to sink your finances you two are making it out to be.

*Fine. You might find one - but it is hardly the norm.

"this is common knowledge... co-ops are based off nearby rent rolls (often stabilized), new condos 'aint."

Uh, no: http://www.nyc.gov/html/dof/html/property/property.shtml
Specifically: "NY State law requires Finance to value residential condominiums and cooperatives buildings as if they were residential apartment buildings. We apply income and expense information from similar rentals to value these properties."

evnyc, you're spot on about that 5-year old NYT article. They're looking at $20m condos. I own a 2/2 new condo - my unabated taxes, as they stand now, will come out to $460/month. Hardly the calamity that's being portrayed by some on this thread. FWIW, I can't think of a single Williamsburg condo that even remotely approaches $20m. I don't think we'll ever get there either.

> Again. Hardly the crisis, sure-fire way to sink your finances you two are making it out to be.

You're putting words in my mouth, I didn't say that. Not only did I not say it, I don't think its the case.

I said they would affect *values* substantially. I have at least a little faith that folks know the changes are coming are are financially ready for those things (to some degree).

I'm talking about the resale value. I think that will be a very substantial factor, especially given you're talking about area with a selling point of "value".... and that could get such original askings because of the low costs (albeit temporary).

guys, let's hope that 10-12 yrs from now SE still exists and we can revisit this topic once the market floods with condos that will be worth less then their coop counterparts.

its a date

of course, why not just look at what the current unabated taxes are? I saw them at 110 livingston and they were nutty, above 1k for the 2 beds.

ab, that's an awful lot of confidence for 10-12 years down the line. And yet the numbers from the NYT article you posted are pretty atrocious.

"of course, why not just look at what the current unabated taxes are?"

Well, we are. As I said, my unabated taxes (for a 2/2) would be $460/month. Under half what you seem to think they'd be.

"I saw them at 110 livingston and they were nutty, above 1k for the 2 beds."

Completely made up, it seems. I just looked up a bunch of 2BRs at 110 Livingston - unabated taxes were in the range of $525-$775. Either you're lying or have bad info. Wouldn't be the first time, of course.
http://webapps.nyc.gov:8084/CICS/fin1/find001i

come on bjw you can do better..if swe has not posted 4x in a row w/o anyone else responding your not trying hard enough....the only other acceptable result is his inevitable disappearance from the thread when faced with evidence that is contrary to his malarky

moxie, I know. The crickets are deafening. How's the new place going? Any new favorite spots?

i think 5 leaves americano has to be my favorite find in the nabe..really appreciate the heads up on tops market..don't know how long it would have been for me to find it..thx bjw

Don't mention it - 5 Leaves is pretty good.

Looks like the "inevitable disappearance" you mentioned has come true. I guess I shouldn't be surprised.

So I have a slightly different tax question - does anyone know if a 3 year construction 421A abatement automatically transitions into the standard 15 year abatement for new condo buildings? The realtor's telling me that it does but I'm not entirely convinced, and i'm not sure which city agency to call about this. The operators at 311 didn't know.

I'd try HPD or Finance

BklynChick, DOB should know as well. I'd definitely check.

bjw, just so that i understand how your are calculating what the unabated taxes would be, are you getting the "taxable value" from

http://webapps.nyc.gov:8084/CICS/fin1/find001i

and then multiplying that number by the tax rate (13%) and dividing by 12? thanks.

noob, for whatever reason, they don't seem to let you view the quarterly statements online anymore (it may be because I'm on a mac, but whenever I click on them now, it takes me to some water bill logon page - what gives?). Anyway, if you do get to an actual statement, it should be quite clear, but yes, I believe your calc is correct. Take the taxable value, multiply by the tax rate (it's right around 13 right now, I believe) and divide by 12 to get your monthly tax.

BJW
I think it's mac related, I can still see quarterlies.

BTW, I believe the exact current tax rate is 13.35%

Thanks truthskr. I will try a different browser.

thanks

Legal question concerning tax abatements - 15 or 25 year. Are they "iron clad"? In other words, is there a scenario where City Hall can say that abatements are no longer in effect? Can they tie it to income (only for those making less than $ x? Or can they say only for "owner occupied"? The municipal coffers will continue to be low, and I am sure they are eyeing these abatements.

sjtmd, it's a good question, and while I'd never say never, I'm fairly confident that the city can't really do much about the abatements. The consequences and backlash alone would probably discourage them from even thinking about it too seriously. That said, I've always been an advocate of running your numbers on a purchase assuming unabated taxes, and people stretching their money and using these temporary aides to buy a better place aren't being nearly prudent enough, to say the least.

somewhereelse, what happened? It's been over 7 months and still no backtracking from the made up bs on here? Shocking.