QUESTION
What is the confidence level of HPD regarding the new J51 structure as an incentive for property owners to undertake rehabilitation?
1:32:18
·
120 sec
The Department of Housing Preservation and Development (HPD) expresses confidence in the new J51 abatement structure as an incentive for property owners to rehabilitate their properties.
- The abatement covers 70% of rehabilitation costs over 12-20 years.
- HPD believes the abatement benefit is competitive compared to alternative financing options.
- The abatement provides predictability, unlike the previous unpredictable exemption model.
- Property owners can recoup 8.33% of rehabilitation costs annually through the abatement.
- The abatement is considered more enticing than Major Capital Improvement (MCI) rent increases.
Pierina Ana Sanchez
1:32:18
So the new benefit is an abatement, not an exemption.
1:32:22
Is HPD confident that the new structure will be sufficient incentive for owners to undertake rehab at their properties?
Kim Darga
1:32:31
Yeah.
1:32:31
I think there's a couple of things we and maybe Lucy can step in in a second.
1:32:39
So we think there's really, for rent stylized housing, there are a couple ways to finance improvements.
1:32:46
Right?
1:32:47
1, the main one today is that an owner goes out and finances the works.
1:32:52
Hopefully, they can secure financing and a higher rent interest rate environment or they have some resources themselves, and then they could apply for an MCI increase.
1:33:02
Right?
1:33:03
The MCI increases are certainly more limited than they have been in the past, but that still is a way in which a owner could recoup some of the cost of the investment.
1:33:15
J51 provides an alternative to that, and we do believe that providing a benefit for 70% percent of the cost of the work and having the owner realize the benefit of 8 and a third of that from 12 to 20 years will be a significant benefit.
1:33:36
And we think competitive with the alternative.
Pierina Ana Sanchez
1:33:40
We were talking about this in internally.
1:33:42
So 8 and a third, that means that that's what percentage of the cost you can recoup on any given year.
1:33:48
Yes.
1:33:49
And your tax okay.
Lucy Joffe
1:33:52
One more note about the exemption.
1:33:54
The exemption was really unpredictable.
1:33:56
People did not know at the outset whether they would receive it, whether they would qualify.
1:34:00
So it wasn't really something enticing people to do it.
1:34:03
So that's sort of a long way of saying, in addition to the fact that the exemption wasn't loring people in.
1:34:09
We do think that the abatement will be an will provide an incentive people will want participate in this new program.
1:34:17
Got it.
Pierina Ana Sanchez
1:34:18
Thank you.
