QUESTION
What measures are in place to prevent property owners from simultaneously receiving Major Capital Improvement (MCI) increases and J51 tax benefits for the same renovations?
1:41:54
·
4 min
The council member asks about the system in place to ensure property owners cannot receive both MCI rent increases and J51 tax benefits for the same capital improvement work. HPD states that the agency is notified when a building receives J51 benefits, so it will not issue an MCI increase for that same work.
- Previously, owners could apply for partial MCI increases for costs not covered by J51, but the new legislation prohibits this overlap entirely.
- HPD has confirmed with the state housing agency HCR that it will decline any applications attempting to receive both MCI increases and J51 benefits.
- There is little expected overlap between individual apartment improvement rent increases and J51, which focuses on building-wide work.
- Most HPD programs for capital repairs are limited to affordable housing and cooperatives, but other incentives like solar tax credits may be available to market-rate coops and condos.
Pierina Ana Sanchez
1:41:54
So the relationship between MCIs and J51, how would HPD and DCR prevent property owners from simultaneously receiving both benefits?
1:42:04
Mhmm.
Kim Darga
1:42:05
So there's actually a requirement.
1:42:06
I mean, HDR is notified if a building receives J51.
1:42:11
For a particular work.
Pierina Ana Sanchez
1:42:13
What do they do with that information?
Kim Darga
1:42:16
I don't think I can answer for HCR, but maybe Lucy has a squeaky sensitive to their
Lucy Joffe
1:42:20
individual systems, but they will not issue an MCI.
1:42:24
If if j 51 has been applied for that work.
Pierina Ana Sanchez
1:42:29
Now this isn't this isn't new to this legislation.
1:42:32
So do we have any information about how this has taken place in the past, how many buildings have applied to HCR for an MCI while receiving the benefit?
1:42:43
So it actually is Oh.
Kim Darga
1:42:45
It's different.
1:42:45
Yeah.
Lucy Joffe
1:42:46
Yeah.
1:42:46
So it's different.
1:42:47
Yeah.
1:42:47
They were able to apply for a partial for the amount that was not covered by J Fifty 1 before now.
1:42:52
It's just entirely off the table.
1:42:55
So that is new and something that we are excited about.
1:43:01
And while we have not, we are not aware of that as an issue in the past, the newer system is even cleaner, and so we don't expect there to be a lot of issues with that.
Pierina Ana Sanchez
1:43:14
And you've had you've had conversations with our partners at HCR and they're ready, willing, and able to work work to decline these kind of applications?
Lucy Joffe
1:43:23
Yes.
Pierina Ana Sanchez
1:43:25
Good.
1:43:26
Thank you for opinion on the record.
1:43:29
What about individual increases.
1:43:31
Is there any relationship between J51 and IAEs?
Kim Darga
1:43:36
The J51 is intended for major cap improvements, which are building wide improvements.
1:43:42
So that is not interior apartment work.
1:43:49
Other than there may be a couple things that where there's overlap.
1:43:52
I'm not I would have to verify this, but, for example, like, apartment doors.
1:43:56
Are eligible through j51.
1:44:00
Windows are also you have to get into the unit to install all a new window.
1:44:07
So I don't I'd have to double check if any of those are eligible for IIs.
1:44:14
Okay.
1:44:14
But there should not the intent of J51 is not to do apartment renovations.
Pierina Ana Sanchez
1:44:19
Okay.
1:44:20
But there there's a per unit, right, there's a per unit cost requirement of $1500.
1:44:26
And so you can reach part of that, right, via apartment store sorry, apartment doors, windows.
1:44:33
I guess, has there been any thought by the agency on just potential double dipping between gaining an IAI and and benefiting from J51.
1:44:43
So
Lucy Joffe
1:44:44
I wanna reframe a little bit the per unit requirement.
1:44:47
It's that really functions to make sure there's sort of a minimum scope of work versus that there is necessarily going to be work done within the units.
1:44:55
We really don't see that that often as part of J51.
1:45:00
And with an IAI, for example, you need a tenant's consent they're in place.
1:45:04
So there are a number of ways in which these programs deviate.
1:45:08
We don't have any reason to think that there is going to be overlap or sort of a workaround using IAs, but we can certainly talk more to our partners at HCR and just sure that we're not missing something here.
Pierina Ana Sanchez
1:45:21
Got it.
1:45:23
Thank you.
1:45:23
Yep.
1:45:24
I I would love to to hear the follow-up on on that assessment.
1:45:30
For co op and condo properties that are will not be eligible for the J51 abatement, are there other city programs that are available to them?
Kim Darga
1:45:41
So HPD's work focuses primarily on a affordable properties.
1:45:47
So most of our other work on the incentive side is for HDFC cooperatives and for Mitchell Lama cooperatives.
1:46:00
A otherwise another cooper condo building that is not regulated through one of those programs or a similar program is generally not available for other forms of assistance from HPD.
1:46:18
That being said, that there are other programs that may benefit those properties.
1:46:25
So for example, a lot of the decarbonization and efficiency programs that exist today are more widely available, you know, Solar credits, for example.
1:46:37
So I would certainly encourage those buildings to look at some of the other programs and speak to the accelerator folks if that's the type of work they're interested in doing.
Pierina Ana Sanchez
1:46:49
Got it.
1:46:50
Okay.
1:46:51
Thank you.