With a recent report finding that New York City will lose out on $1.4 billion in tax revenue in fiscal year 2017 thanks to the 421a developer tax break, the City Council is calling for greater oversight of the $2.8 billion developers received in tax breaks last year. Meanwhile, interest among investors in New York property continues to grow, with the Bronx seeing a particularly large eruption of interest.
A number of different programs, many of which are outdated or are no longer supposed to be in place, have helped developers enjoy more than a billion dollars in tax breaks. For example, recent studies into the city’s tax breaks have found that the Industrial and Commercial Incentive Program (ICIP) accounted for $681 million in tax breaks in the past fiscal year despite the fact that the program was killed in 2008. This program offered exemptions of up to 25 years for rehabilitating or constructing commercial and industrial buildings. Its replacement program accounted for $28 million in tax breaks last fiscal year.
The study further found that the Commercial Revitalization Program, which was meant to serve as a stimulus for Lower Manhattan and the Garment Center District, provided $33 million in city tax exemptions. In response to these and other similar findings, the City Council plans to introduce legislation that will require lawmakers to review some of the tax breaks each year with the review process scheduled in such a way that all of the laws are reviewed in an eight-year period.
Investors Turn to the Bronx for Opportunities
Just as the City Council is looking to tighten down on tax breaks for developers, the Bronx is seeing an influx of interest from developers. In fact, the borough experienced $1.2 billion worth of real estate investment in 2014, representing a 26 percent increase when compared to the previous year. $788 million of that was in residential projects with the borough on track to have 8,000 new residential units hit the market this year, which is up significantly from the 3,697 units from last year.
A number of different factors have combined to create such a significant amount of interest in the Bronx. Not only is the borough located conveniently near to Manhattan, but it also boasts a strong transit system, a number of available development sites and land prices that are less expensive than other boroughs. Furthermore, while residential rents are lower in the Bronx than in the other boroughs, they are n the rise. As such, for investors who are priced out of Manhattan where land costs are around $638 per foot, the Bronx offers a relatively affordable market at approximately $50 per foot. This is still significantly less than the $233 per foot in Brooklyn and the $168 per foot in Queens.
Some of the commercial and retail projects that have been shaping the area include the conversion of the Kingsbridge Armor into an ice skating complex boasting nine rinks, the redevelopment of the Bronx General Post Office into an open-air food market and the construction of new Bronx headquarters for Fresh Direct.