In addition to the sluggish market, the current incentives for developers and landlords are well, not so incentivizing. The J51 tax program had applications drop 69% over a 10yr period. Under J-51, tax assessments are frozen at the property’s pre-renovation level for a period of 14 to 34 years. The city’s Department of Housing Preservation and Development is expected to provide the state legislature with a proposal for how to change the J-51 program by next year. One of the issues is that apartments would have to remain rent-stabilized throughout the program. Seeing the new Housing Stability and Tenant Protection Act of 2019, landlords are extremely limited to the possibilities of raising the rent on stabilized apartments which puts a further damper on the J51. Other tax breaks give landlords a bit more leeway to up rents. What seems to be the favorite incentive is the Affordable New York program, formerly known as 421a, which lasts for 35 years. Units must remain rent stabilized through the life of that break as well, but owners have the option to deregulate apartments once they become vacant and rent reaches a certain level.
Opportunity Zones have been the biggest surprise. The program was part of a 2017 tax overhaul with the intent to spur economic growth in disadvantaged communities. Despite all the hype, investor interest hasn't been what fund managers have hoped for who have raised just 15% of what they were expecting. One of the largest issues is that Opportunity Zone investments must be held for 10 years in order to get the most benefit from the program in deferring capital gains. This brings an investor much uncertainty in addition to remaining details still being decided by federal regulators.