Locating the Vacant Properties
One of the catalysts for this change was Manhattan Borough President Stringer. In 2006, his office launched the first ever large-scale, street-by-street count of abandoned buildings and vacant lots in Manhattan. That survey helped to identify possible locations for the creation of more affordable housing and led to greater understanding of what causes buildings and lots to lie unused when the demand for housing is so high. Based on survey results, in 2007, the Borough President released a report entitled No Vacancy: The Role of Underutilized Properties in Meeting Manhattan's Affordable Housing Needs. http://www.mbpo.org/uploads/NO%20VACANCY.pdf
Two of the report’s key findings were that the vast majority of vacant property in Manhattan is located in Upper Manhattan and that half of all of the vacant property in Manhattan is privately owned.
Specifically, the report highlighted that:
- 2,228 properties in Manhattan appear to be vacant or have vacancies; 1,723 of the properties contain built structures, and 505 are empty lots
- Enough developable space exists on these vacant lots and enough residential units exist in these vacant buildings to create nearly 24,000 units or one in eleven of the 265,000 housing units the NYC Mayor Bloomberg has said are needed to meet our city's future population growth
- 50% of the vacant properties are privately owned, while only 6% are government owned and 3% are owned by not-for-profit entities
- 74% of vacant residential buildings and 71% of all vacant lots are located above 96th Street, in Upper Manhattan
- $5 to $10 million in property taxes are lost annually because vacant lots above 110th Street are taxed as Class 1 residential properties
Changing the Incentives
Based on the findings of the No Vacancy report, State Senator Jose M. Serrano and Assembly Member Herman D. Farrell, Jr. introduced state legislation (S.6207-B/A.8666) that amends the Real Property Tax Law to equalize the treatment of vacant land throughout Manhattan by placing all vacant land into Class 4. The legislation encourages the development of much-needed affordable housing in Manhattan by allowing property owners to remain in Class 1, and therefore stay in a lower tax bracket if they file plans to develop affordable housing. It also provides financial penalties for owners who warehouse vacant properties, and it gives the city additional tools to work with owners to foster the creation of affordable apartments, along with more than $5 to $10 million in new tax revenues.
Governor Paterson signed the legislation into law on July 25th, 2008, and it will take affect on January 1, 2009.
Private Sector Solutions
This change in the NY State tax laws improves the likelihood that the private sector will invest in affordable housing and reduces the chances that valuable land will be underutilized for long periods of time. Rather than placing the government in the driver's seat for determining the future of the privately owned vacant properties in Upper Manhattan, these tax law changes leave the private sector flexibility. Owners can pay higher taxes than they did previously (but not any more than they would pay if the property were elsewhere in Manhattan) while keeping their properties vacant, or they can develop those properties and avoid the increased tax burden. By shifting the incentives for Upper Manhattan property owners in the direction of the creation of housing, NY State is enlisting the private sector to help accomplish the public goal of increased affordable housing while increasing tax revenues.