Home News How office-to-residential conversions in New York can actually work

How office-to-residential conversions in New York can actually work

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preferential tax system

steep office vacancies It’s something the city has dealt with before. The 1989 recession led to a 17% citywide office vacancy rate by 1991 (from about 22% today) and a 20% drop in average asking rents. That recession followed a boom in office development, with 62 million square feet of space being built, according to Citizens Budget Commission figures. By comparison, he has 26 million square feet of space built since 2000, excluding the World Trade Center.

To burn off the enormous glut of office space in the 1990s, the financial district experienced a massive wave of office conversions thanks to the 421g tax incentive program. From 1995 to 2006, the city’s Department of Housing Conservation and Development used tax breaks to encourage the conversion of his 98 office buildings in Lower Manhattan to housing.

This includes 90 Washington Street, a 335,000-square-foot building originally built in 1969 that was converted into apartments in 2005. The building’s value fell from his $48 million in 1991 to just $17 million in 2002. Completed in 2006, it was discovered by the Citizens’ Budget Board to be worth $51 million.

Tax programs have mitigated the high costs of acquiring and converting buildings. Then-Mayor Rudy Giuliani argued that the city would recoup its money through economic development and revenues from a revitalized financial district.

Between 1995 and 2006, this incentive was used to convert approximately 13 million square feet of office space, or 13% of the Lower Manhattan office market, to residential use, creating 12,865 units. About 75% of the units were built as rentals, with the rest being condominiums.

This momentum has led developers to build or convert an additional 17,000 units without the 421-g.

Today, 421-a, another tax program designed to encourage market-price housing development with affordable housing requirements, allowsexpiredthe city has lost one of the ways developers make money-making homes.

Changes to facilitate the office conversion will likely include an affordable housing component, according to Kramer Levin’s land use attorney Valerie Campbell.

“At some point, without government subsidies and new versions of 421-a, it may not be economically viable to include the types of affordable housing that the city council would like to see in its new zoning action. I can’t,” she said.

So far, the city has had no incentives for repurposing mixed-income homes. But a panel commissioned by Mayor Eric Adams and Gov. Kathy Hochul put them forward in a report released in December. The “New” New York Action Plan.

The plan outlines 40 initiatives to reimagine cities, including improving central business districts, building housing, adding public spaces, revitalizing storefronts and improving public transportation.

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