NY State Bill A02889: Summary
Author: AdamDate: Apr 21st, 2023
Looking through new proposals can be laborious. Therefore, we've tried to summarize reasons why one could be in favor of OR opposed to the NY State Bill A02889.
Reasons to be in favor of Bill A02889:
The bill's provision for tax incentives for the rehabilitation of historic properties has the potential to encourage property owners to invest in the preservation and restoration of historically significant buildings, which can help maintain the unique character and cultural heritage of a community.
In addition to preserving historic buildings, the rehabilitation process can also provide economic benefits, including job creation and increased property values. The restoration of historic buildings can attract businesses and visitors to the area, boosting the local economy.
Furthermore, the preservation of historic properties can have a positive impact on the environment by reducing waste and promoting sustainable building practices. Instead of tearing down older buildings and constructing new ones, the restoration of historic properties allows for the reuse of existing materials, reducing the environmental impact of construction.
The bill's provision for a tax credit program for large rehabilitation projects that also qualify as low-income housing projects has the potential to address the shortage of affordable housing in the state. By incentivizing developers to undertake large-scale rehabilitation projects, the state can increase the availability of housing for low-income families and individuals.
In addition, the program's focus on rehabilitating existing structures instead of new construction can help preserve the state's existing housing stock and prevent the displacement of long-time residents in established communities. The rehabilitation of existing structures can also be more cost-effective than new construction, as the infrastructure for water, sewer, and electricity already exists.
Furthermore, by coupling the tax credit program with the low-income housing qualification, the bill ensures that the benefits of the program are targeted toward those who need it the most. The program can encourage developers to create affordable housing units in neighborhoods where housing costs are high and rents are unaffordable for many low-income residents. This can help create more diverse and inclusive communities where people of different income levels can live and work together.
The bill includes a provision that exempts a qualified white elephant rehabilitation project, which also qualifies as a low-income housing project under article two-A of the public housing law, from the requirement that the project is located within a qualified census tract. This exemption could be beneficial in promoting the development of affordable housing in a wider range of locations, including areas that may not have been eligible under the previous requirements.
Qualified census tracts are geographic areas designated by the federal government as having a high level of poverty or low income, and projects located in these areas are typically eligible for certain tax incentives and benefits. However, by exempting white elephant projects that also qualify as low-income housing projects from this requirement, the bill could encourage the development of affordable housing in areas that are not designated as qualified census tracts but still have a need for affordable housing.
This provision could also help to address the issue of housing segregation and promote more inclusive communities by allowing affordable housing developments to be built in a wider range of neighborhoods, rather than limiting them to areas with high levels of poverty or low income.
The bill requires the commissioner of taxation and finance to report annually on the aggregate amount of historic rehabilitation credits claimed and awarded, which could help ensure transparency and accountability. First and foremost, it promotes transparency by providing stakeholders with a clear picture of the tax credits that have been granted and used, and for what purposes. This information can be crucial in evaluating the effectiveness of the bill's provisions and identifying areas that may require further improvement.
Next, such reporting can help ensure accountability by creating a system of checks and balances that incentivizes the responsible use of public funds. With regular reporting, taxpayers and policymakers can better understand the impact of the tax credits and ensure that they are being used in accordance with the intended purposes of the bill.
Lastly, the reporting requirement can help with program evaluation and planning for future budgeting and resource allocation. By understanding the aggregate amount of historic rehabilitation credits claimed and awarded, policymakers can better forecast the potential demand for such credits and allocate resources accordingly.
Reasons to oppose Bill A02889:
This bill could potentially lead to a reduction in tax revenue for the state of New York due to the creation of two new tax credits. The first credit is for the rehabilitation of large "white elephant" projects, which are often costly and challenging to redevelop due to their size, age, or condition. This credit would be equal to 100% of the amount of credit allowed for a certified historic structure that is also a white elephant project. The credit for a qualified white elephant project would be ratably allocated over a five-year period and could not exceed $15 million. Additionally, for taxable years beginning on or after January 1, 2035, the credit for a white elephant project would be capped at $300,000.
The second credit is for large rehabilitation projects that also qualify for a low-income housing project tax credit under Article 2-A of the public housing law. This credit would be equal to 100% of the amount of credit allowed for a certified historic structure that is also a qualified low-income housing project. The credit for a qualified white elephant project would be ratably allocated over a five-year period and could not exceed $15 million.
The creation of these two new tax credits could lead to a reduction in tax revenue for the state of New York because taxpayers who are eligible for these credits would be able to reduce their tax liability by the amount of the credit. Additionally, the availability of these credits could encourage developers to undertake more large rehabilitation projects that they might not have pursued otherwise, which could further reduce tax revenue for the state.
The bill's focus on large rehabilitation projects may mean that smaller projects and communities do not receive as much support or attention. Large-scale rehabilitation projects for residential use can require significant resources and funding, as well as extensive planning and coordination with various stakeholders, such as contractors, architects, local government officials, and community members. As a result, these projects may receive more attention and resources from the government, non-profit organizations, and other entities involved in housing and community development.
However, smaller-scale rehabilitation projects, such as the renovation of single-family homes or small apartment buildings, may not have the same level of resources or attention. This can be due to various factors, such as limited funding or a lack of political or community support. As a result, these smaller projects and communities may not receive as much support or attention as larger projects, which can lead to disparities in housing quality and affordability across different neighborhoods and communities.
The white elephant project tax credit program included in the bill is intended to incentivize the redevelopment of large and potentially challenging sites that have been abandoned or underutilized for a significant period of time. While this program may lead to the redevelopment of such sites, it may also be viewed as favoring large developers or companies who have the resources to undertake such complex and expensive projects.
Smaller businesses or individuals may not have the financial capacity or expertise to take on such large-scale projects, and therefore may not be able to take advantage of this tax credit program. This could result in the program benefiting only a select group of developers or companies, potentially leading to an uneven distribution of benefits and reinforcing existing power dynamics in the real estate industry.
While tax incentives can be a powerful tool in encouraging the rehabilitation of historic properties, they may not be enough to address the underlying systemic issues that contribute to the neglect and disinvestment of these properties. In many cases, historic properties are located in economically disadvantaged areas where there is little demand for real estate investment, or where the cost of rehabilitating these properties is simply too high.
Tax incentives alone may not be enough to overcome these barriers to investment. Instead, a more comprehensive approach that includes targeted investment in infrastructure, community development, and affordable housing may be necessary to ensure that historic properties are not left behind in the broader economic development process.
Moreover, while tax incentives can encourage the rehabilitation of historic properties, they may not address the larger issues of affordability and access to housing that affect many communities. In some cases, historic preservation efforts may even exacerbate these issues by driving up property values and making it more difficult for low-income residents to remain in their homes.
Our takeaway
Bill A02889 has several pros and cons that need to be carefully considered. While the preservation of cultural and architectural heritage and the encouragement of affordable housing are positive developments, the potential reduction in tax revenue and the over-reliance on tax incentives are concerns that need to be addressed. Furthermore, the bill's focus on large-scale projects and the potential favoring of large developers or companies may lead to an uneven distribution of benefits.
