Billionaires Get 'Low-Income' Tax Breaks in Condo Tower
The billionaires paying more than $90 million for top apartments at the new One57 tower in New York have some very special amenities. They get more than 10,000 square feet, 75 floors above Manhattan. They get VIP concierge and doorman services, along with some of the best views in the city.
But they may also get a less publicized benefit: tax breaks of more than $150,000 a year from a program aimed at low-income housing.
According to financial documents obtained by CNBC, One57 may receive a tax abatement under a long-existing city program designed to provide more low-income housing. The program, known as 421-a, gives developers tax breaks for 10 to 20 years, which are then passed on to buyers. At One57, those savings may be substantial.
Take the "penthouse" on the 75th and 76th floor. The apartment, at 13,554 square feet, reportedly sold for more than $90 million to an unknown billionaire. (The building is still under construction and will open next year). Normally, the annual real-estate taxes on the apartment would be around $230,000 a year. With the special abatements, however, the taxes are projected to be only be $20,000 a year - saving the owner $210,000 a year in real-estate taxes.
The penthouse on the 89th and 90th floor gets similar-sized savings. The unit, which also reportedly sold for $90 million or more, would normally be assessed real-estate taxes of $205,000 a year. The tax abatements, however, allow the owner to pay only $18,400 a year, providing a savings of more than $186,000 a year.
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The tax savings for the units on floors 75 through 90 add up to more than $1.5 million a year, according to the documents. The tax savings are in effect for two years, then are reduced by 20 percent every two years for 10 years, according to people familiar with the building.
Although the building has applied for the tax benefits, they have yet to receive final approval, according to city records.
"This is an outrageous giveaway," said Brad Lander, a New York City councilman who has worked to end tax breaks for luxury condos. "We can't afford to be giving away millions of dollars in tax breaks for nothing."
The tax-reduction program has come under fierce criticism over the years. According to the city's Independent Budget Office, 421-a cost the city more than $1 billion in revenue in the latest budget year.
read more: Billionaires get tax breaks meant for poor