Slideshow presented November 22, 2013 & February 5, 2014, at the Henry George School. Shows the effect of under-taxing land and over-taxing buildings and improvements. Based on the Henry George Single Tax theorem.
Case studies in new york city property development
1. Case Studies in New York
City Property Development
Presented By:
Scott Baker
SSBAKER305@YAHOO.COM
Public money for private benefit?
An examination of development projects in New York City, and
evaluation of economic benefits given to encourage development, with
emphasis on current and future policy options.
6. NYC is the Most densely Populated place in the USA
– 26,953 people per square mile*
And the most densely productive place as well
- Over $1 billion in GDP per square mile
* 2010 census
7. But the city’s growth is slowing
According to the New York Post, the exodus from the city has been going on for decades:
“The movement from high-tax, high-housing-cost states to low-tax, low-housing-cost
states has been going on for more than 40 years ... From 1970 to 2010, the population of
New York state rose from 18 million to 19 million. In that same period, the population of
Texas grew from 11 million to 25 million.”
…and the rent is too damn high!
Jimmy McMillan, perennial Candidate for NYC Mayor and NY
Governor, from the Rent-Is-Too-Damn-High Party
8. So... Is New York City Full?
6% of the buildable land - 154,000
acres - in New York City is classified as
Vacant.
6% is 9,240 acres in the 5 boroughs,
including 2.6% or 282 acres Vacant,
and 1.9% or 206 acres, with no
information, in Manhattan!
- NYC Department of Planning
9. Full?
Not Hardly!
Surface
parking lots
...in Midtown
...beside
subway stations
But vacant land is just the beginning.
Much more land is grossly underused.
10. Surface
parking lots
...in Midtown
...beside
subway stations
Boarded-up
buildings
...on the Upper
East Side
...beside
subway stations
Full?
Not
Hardly!
1-story “taxpayers”
...in up-and-coming
neighborhoods
11. Park Ave. South & 29th
Street
Four lots sold for a
combined $31 million in
2006.
The four old buildings
were torn down. So, the
land value psf is $2,159.
But the city says it was $502
psf, less than ¼ of what it
sold for!
Who is pocketing the
difference?
When the Land Rent goes down, the Land Price goes up.
12. 1185-1193 Broadway
Lot: 79 x 86 ft.
LV psf: $753
BV: $2,912,000
LV: $5,000,000
Value: $7,912,000
In this zip code, for parcels with 4
stories or less, Average sale price
psf: $2,322
Value: $15,775,668
Average # of stories: 8
13. 55-63 Bleecker St.
82 x 100
LV: $859,000
BV: $1,725,000
LV psf: $110
In this zip, parcels 3 stories or less,
Average sale price psf: $2,012
- roughly 18X the assessed LV psf!
Average # of stories: 5
14. HowStuffWorks.com:
Let's get to the nitty-gritty: McDonald's looks for intersections with traffic
signals — typically corners of two well-trafficked streets — and ample
parking.
dailywealth.com:
Most people don't realize it, but McDonald's is not a burger-flipping restaurant
chain; it is one of the world's best real estate portfolios. Franchisees flip the
burgers. McDonald's simply owns the best commercial property all over the world
and collects 8% annual royalty fees from its tenants on top of rental income
equivalent to about 10% of the sales.
From November 2002-July 2014, McDonald's dividend has risen 425% and their
stock price by 5X! Much of what passes for profit is really indirectly collected
land rent.
15. McDonald's near a subway
stop:
114 Delancey
Lot size: 65’ x 100’
BV: $3,427,000
LV: $2,000,000
LV psf $307
In this zip, parcels 3 stories or less,
Average sale price psf: $1,571
Average # of stories: 5
16. McDonald’s:
2549 Broadway
LV: $2,300,000
BV: $1,014,000
LV psf: $914
Next door:
2541-2547 Broadway
7 stories, 76x100
on corner
LV psf: $568 (?!?)
sold in 2005 for
$14.5 million.
Went co-op in 2007;
Units sell for $1 mil+ In this zip, parcels 4 stories or less,
Average sale price psf: $1,781
Average # of stories: 6
17. Dunkin Donuts:
737-747 4th Avenue
Lot: 100x150
LV: $225,000
BV: $1,323,000
LV psf: $15 (!)
In this zip: average sale price psf of a vacant
lot: $337
– over 22X more than assessed LV!
Number of lots, vacant or 1 story: 513
18. 515 & 517
East 138 St.
LV psf: $28
179 Vacant lots in this zip code,
Average sale price psf: $191
Average sale value: $1,403,322
301 East 139th St.
Current property tax: $300 for the entire lot!
19. The 8 vacant lots that make up this parking lot pay 1/10th the
property tax of the 286-unit building in back on a 34% smaller
lot!
#
1
2
3
4
5
6
7
8
1
20. Desperate Landowners call for
desperate measures*
“Super-tall spire OK'd to rise over landmark.
The Landmarks Preservation Commission approves Extell
Development's plan to cantilever its new residential tower
over the neighboring American Fine Arts Society Building.
It will include NYC's first Nordstrom and a hotel.
With the city's OK, Extell
will now be able to
extend the tower, 215
W. 57th St., 28 feet to
the east so that it
overhangs the American
Fine Arts Society
Building.”
– Crain’s newspaper
* Only “desperate” to make more money!
21. Land Owners Pay a lot for Air Rights, but the ones who prosper are
those who use Land least efficiently. In this case that’s the two 3-story
buildings under the new construction.
Looking at the West side of Third Avenue between 21 & 22 streets
n
N
Note the vacant lot off to
the left, near the older high
rise.
Low-density properties are under-taxed and
there is no incentive to build higher density
buildings.
13 units from 266-274 Third Avenue occupy
71% of the land of 39 Gramercy Park around
the corner, but pay just 19% of the property
tax.
22. The High Line Park leads to
High Real Estate Values
“Michael R. Bloomberg, proclaim(ed) that preserving the High Line
as a public park revitalized a swath of the city and generated $2
billion in private investment surrounding the park… All of that
commerce more than makes up for the $115 million the city has
spent on the park and the deals it has made to encourage developers
to build along the High Line…the price of apartments had doubled
since the park opened, to about $2,000 a square foot.”
– NY Times, The High Line Isn’t Just a Sight to See; It’s Also an Economic Dynamo
A new park is great!
But aren’t the real questions:
• Why is the city spending money to benefit a handful of already
rich land owners, when charging them a Land Value Tax (really, a
rent on the Land), would have brought in enough to build the
park in the first place?
• And, is it really charity when land owners give a million to build a
park and then gain 10s of millions when they sell their land? Isn’t
that just another investment at taxpayer expense?
23. Who profits when the Subway
comes to a neighborhood?
“…the steady progress of the subway's 7-train extension and
the northern encroachment of the High Line is turning the
area around the Hudson Yards into one big real estate
boomtown. The Times reports that more than 5,000
apartments have been built and more than $5 billion
in private development has been invested in the
area between 28th and 43rd Streets west of 8th
Avenue since it was rezoned in 2005.” - Curbed
If development in this neighborhood is so lucrative, why do they need tax
breaks? And who is paying for the subway extension?
“The (EDC’s) Industrial Development Agency is expected to clear a big tax discount for a portion of
Related Cos.' vast Hudson Yards project…a 20-year long 40% property tax break for a 1 million-square-
foot mall and 2.4 million-square-foot office spire. Related could realize $328 million in
savings from the exemption…Fiscal watchdogs say that the break is especially problematic given the
city plans to use tax revenue from the Hudson Yards to pay off the over $2 billion cost of extending
the No. 7 subway to the site. Between 2006 and 2012, the city spent $137 million servicing the
bonds for the No. 7 line, and is girding itself to spend…$155.6 million in 2013 and 2014.” – Crain’s
24. Profits from the Sea too…
“The East River Ferry has caused total property values in Brooklyn and Queens waterfront
neighborhoods to soar by hundreds of millions of dollars, according to a new study.
The service, which launched in 2011, led to a jump in home values within an eighth of a
mile of its stops by 8 percent above the normal market rate, according to an analysis by
the city Economic Development Corporation.
And it has increased total property value by
$500 million for all homes within a mile of its
stops.
“You really see the connection in the uptick in
sales prices,” said Kathleen Perkins, a broker
at Douglas Elliman. “It’s a huge draw for the
river communities.” She added the ferry is a
boost for luring Manhattanites across the
river...” – NY Post
Who Profits from the new ferry service?
The Riders? The Residents? Or, the Land Owners?
Shouldn’t those who profit also pay for the service?
25. And what about the future, if sea levels rise due to Global Warming?
Who should pay for protection from the water then?
“As temperatures continue to rise, so will sea levels, and the
increase of both temperature and sea levels will increase the
risk of large storm tide events. According to the NYC Panel on
Climate Change (“NPCC”), our sea level is expected to rise
between 15 and 75 inches by the 2100s. Rising seas
dramatically increase the odds of damaging floods from storm
tide.”
– Southern Manhattan Coastal Protection Study, May 2014
In response, NYC plans to build an elevated multi-purpose levy in lower Manhattan
If the landowner gains newly created land
to build upon, shouldn’t he pay rent for its
creation and upkeep?
Yet, President Obama recently signed an
order to roll back national flood insurance
rate hikes that were put in place after
Hurricane Sandy.
Who gains?
Is that fair?
26. Who profits when leaseholds on
Land are resold?
“Extell Development is selling the leasehold on 20
E. 46th St. The company's brokers said it
hopes to fetch about $25 million for the 15-
story property. That would be about 44%
more than Extell shelled out when it acquired
the leasehold in 2006 for $17.4 million. The
lease for the building extends for 31 years…
‘It [the building] is in a great location,’ (said
the broker).”
– Crain’s, Aug, 2012
Tax Class: 4 (commercial property)
Tax Rate: 10.3%
Market Value: $19,986,000
Assessed Value: $7,249,410
Land Assessed Value: $3,492,000
If land is under-assessed, the rental
profits go to the leaseholder, or sales
profits if they sell.
27. Why would anyone pay over $90
million for an apartment?
“Extell Development Company, which is building One57, said that
the buyers of the first nine full-floor apartments — plus two
duplex penthouses — were all billionaires. The top-floor
penthouse, which spans nearly 11,000 square feet, sold for
about $95 million, a city record. The full-floor apartments…
have open views of Central Park. High-end real estate has
become a magnet for the world’s superrich, who are looking
for better investment returns and a safe haven from thornier
economic conditions in their home countries…A lot of
what is happening at One57 is about wealth
preservation” – NY Times
Wealth preservation?! For whom?!
What about taxes on that property for services they use too?!
“Places like One57, 15 Central Park West and Plaza Hotel are another New York entirely, one for the
ultrawealthy with a primary residence elsewhere, for whom a $55 million condo is a pied-à-terre and just another
place to park their wealth. Mr. de Blasio’s proposal would have little, if any, effect on them. They pay no city
income tax and comparatively low property taxes even as the city’s services prop up the value of their trophy real
estate.” – NY Times
“In New York, by contrast (to foreign cities like London which now taxes foreign investors and offshore entities),
buyers of new construction often qualify for a tax abatement. At One57, currently the city’s most expensive new
address, the tax break amounts to around 94 percent. A Times analysis estimated that its priciest penthouse,
which is reportedly in contract for more than $90 million, would initially be billed less than $1,500 a month.” –
NY Magazine, Stash Pad
28. Tax Breaks for Billionaires
“The millionaires buying apartments in a soaring tower rising on 57th St. will
get more than sweeping views of Central Park: They’ll also be eligible for
massive city tax breaks.
So will the homeowners and builders of four other luxury Manhattan condo
and rental developments.
Language quietly inserted into a bill…could cost the city tens of millions of
dollars in property taxes...
The sponsor of the bill, Sen. Martin Golden (R-Brooklyn), defended the tax
breaks, saying the projects would create jobs and boost the economy.
…the Assembly sponsor, Keith Wright (D-Manhattan), said he knew little
about the tax breaks. “These five properties — it was important that they
benefit from the piece of legislation probably, and I don’t know why,
because some of the folks in the Senate wanted them to be included.” –
The Daily News, writing about the newly designated “Billionaire’s
Row” on mid-57 street.
“These buildings will make a lot of money for developers,” Assemblywoman
(Linda) Rosenthal said. “And that’s their right. But we need something
back.” – The New York Times, A Packed Forum for a Rising
Concern: New Skyscrapers Near Central Park
NEW YORK STATE SENATOR LIZ KRUEGER: “(The taxes on the $90m
penthouse at One57) per year would be $20,000. If they were not rolled
into this legislation their taxes would be $230,000.”
29. What happens when the Rent
is Privatized?
Who is left
homeless when
Billionaires buy
and sell lightly
taxed properties
among
themselves?
30. What happens when the Rent is Privatized?
…Oh, and another thing: there are more than
enough vacant apartments, in abandoned
buildings, to house all the street homeless persons,
including 1/3 of whom who are children.
Citywide, underutilized vacant property could
house the entire city shelter population five times
over at a cheaper cost than city-supported
housing programs.
“In 2005, New York City spent $709 million to
provide shelter to…an average shelter population
of 34,000* a night… Many city policies
encourage landlords to keep their buildings
empty. As neighborhoods gentrify, many
speculating landlords choose to keep
buildings empty so that they can rent them at a
future date and charge far higher rents.”
– Picture the Homeless
Total number of Homeless Families: 40,000
Total number of vacant buildings: 3,551
Total number of vacant lots: 2,489
Total Housing Potential in vacant buildings & lots: 199,981
Note: this survey only surveyed 1/3 of the city and under-counted
vacant lots by over 10-fold.
– Picture the Homeless , from a 2012 survey conducted with
Hunter College.
* As of April, 2014, 54,667 on average stay nightly in city shelters, up 75% since 2002, at a cost of >$800m –
Coalition for the Homeless, DNAinfo
31. Why can’t we just Build our way out of this Mess?
‘“It is not enough to simply build more market rate housing in hopes of…supplying more
than the demand,” write the authors of the housing chapter of Toward a 21st Century City
for All. From 2000 to 2010, New York’s housing supply grew at more than twice the rate of
the city’s population. “If we could build our way out of our affordability crisis…[costs and
rents] should have gone down.” Yet as the authors point out, they did not…. From the days
of Henry George in the nineteenth century, New York’s progressive politicians have tried to
recapture the vast—and totally unearned—income created by the rise in land values.
But none have succeeded: even
today, when projects like the Hudson
Yards and the No. 7 subway
extension prompt huge increases in
values, only a tiny portion ends up in
the city’s coffers.’
- What Bill de Blasio Can Learn From
New York City’s Last Radical Mayor,
The Nation - D.D. Guttenplan
32. What happened to the Law of Supply and Demand?
Even with all the exemptions, under-assessments,
and tax breaks, the city is
collecting more property tax revenue
than ever and construction is booming
(though mostly at the high end).
Why then is living in New York City so
expensive, even unaffordable?
Well, what about other taxes and
costs? If taxes and costs – as a
percentage of income – are so
much higher for the middle and
working classes, is it surprising that it is
so hard for them to afford to live
here?
What are those other taxes…?
33. What is the tax breakdown in New York City?
At current assessments and rates, land values account for just 18.1%
of New York City's municipal tax revenue.
+ Buildings: 24% - This is more than ½ the property tax & discourages building!
+ Personal Income: 19.4% - Discourages Working!
+ General Sales: 13.3% - Discourages buying!
+ Other: 25.2% - Discourages everything else!
= Total: 100%
That's not the way to ensure sensible, progressive economic
development, a greener city, and full employment!
What would be the effect of a tax policy that
incentivized development & production, and
disincentivized hoarding & speculating on
land?
34. At current assessments and rates, land values account for just
18.1% of New York City's municipal tax revenue.
Buildings: 24%
Personal Income: 19.4%
General Sales: 13.3%
Other: 25.2%
The tax upon land values is the most just
and equal of taxes. It falls only on those who
receive from society a peculiar and valuable benefit,
and upon them in proportion to the benefit they receive.
It is the taking of the community, for the use of the
community, of that value which is the creation of the
community.... When all rent is taken by taxation for the
needs of the community, the equality that is ordained by
nature will be attained. No citizen will have an
advantage over any other citizen except what is given by
his industry, skill and intelligence — and each will obtain
what he fairly earns.
— Henry George, Progress and Poverty
35.
36. Support from the National Media
– You have to look for it, but it’s there
“(Landlords) don't really do anything to earn their money. They just claim ownership of
buildings and charge people who actually work for a living the majority of our incomes for…
staying in boxes that these owners often didn't build and rarely if ever improve. In a few
years, my landlord will probably sell my building to another landlord and make off with the
appreciated value of the land s/he also claims to own – which won't even get taxed, as long
as s/he ploughs it right back into more real estate.
The value of the land has nothing to do with my idle, remote landlord; it reflects the nearby
parks and subways and shops, which I have access to thanks to the community and the
public. So why don't the community and the public derive the value and put it toward uses
that benefit everyone?
The most mainstream way of flipping the script is a simple land-value tax. By targeting wealthy
real estate owners and their free rides, we can fight inequality and poverty directly, make
disastrous asset price bubbles impossible and curb Wall Street's hideous bloat.” – Jesse
Myerson, Rolling Stone Magazine - Five Economic Reforms Millennials Should Be
Fighting For
This article generated over 10,000 comments!
37. Support from the Local Media
- from Curbed: ny.curbed.com/tags/tax-breaks
Hudson Yards Watch: As expected, a city agency approved a 20-year $328 million tax
break for Related Companies' Hudson Yards megaproject. [Bloomberg]
Tax Breaks for the Rich: A housing bill extending tax breaks to low and middle income
housing that just sailed through the state Legislature also contained language that made
five new luxury developments, including One57, eligible for 421-a abatements. The bill's
sponsors claim to not know where the language came from, but support the tax breaks
nonetheless. The developers of the projects have given a combined $1.5 million to various
state campaign committees over the past four years. [NY Daily News]
Fun with 421-a: Major changes are hitting the complicated 421-a tax abatement
program next month. It's supposed to finance affordable housing, but it's also provided
huge tax breaks for luxury housing. Now, the list of neighborhoods where they can be
used is shrinking and "certificates" allowing developers to sell credits to, say, luxury
developments, are being phased out. Some developers of affordable housing say chaos is
coming. [NY Times - 2008]
38. Support from Comptroller Scott Stringer
Former Manhattan Borough President, Scott Stringer, wrote in his annual report:
Transforming Vacant Lots: Stalled Construction Sites
“Unfinished construction sites and vacant properties litter New York
City, leaving neighborhoods in flux and reducing our quality of
life. In 2007, Borough President Stringer published “No
Vacancy? The Role of Underutilized Properties in Meeting
Manhattan’s Affordable Housing Needs.” The report found that
in Manhattan 74 percent of vacant residential buildings and 71
percent of all vacant lots are located above 96th Street.
Additionally, more than $100 million a year was
being lost because vacant lots above 110th Street
were taxed as Class 1 residential properties .
Borough President Stringer issued a series of recommendations,
including advocating for legislation to reform tax policy to spur
development of vacant property and prioritize affordable
housing. A year later, Governor David Paterson signed a bill
authored by Assembly member Herman D. Farrell and State
Senator Jose Serrano that amended the property tax equalizing
the treatment of vacant land throughout Manhattan by taxing
all vacant land as Class 4 property.”
39. Support from Mayor Bill de Blasio for Taxing
Vacant Land
• Former Public Advocate Bill de Blasio’s publication,
Foundation for an Affordable City, second of 8
recommendations was to: “Create new development
opportunities by unlocking the potential of vacant
buildings, lots and accessory units.”
Crain’s article: De Blasio tells lot owners to put up or
pay up “(Mayor) Bill de Blasio's bid to close a tax
loophole could force landlords to build new housing on
their vacant plots or sell out to those who will…If carried
out, the idea would affect more than 10,500 lots in the
five boroughs…(to) hike yearly rates by an average of
$15,300 (and) generate $162 million annually.”
How can we encourage Stringer and de
Blasio to live up to their campaign
promises?
40. Support from the NYC Bar Association
On Page 67 of the 2013 NYC Bar Association Policy Recommendations For
New York City’s Next Mayor report, they conclude:
“The City taxes land and improvements to the property using the same rates
and method. This may be counterproductive, as taxing improvements to a
property may discourage investment in that property. For example,
landlords may permit residential buildings to deteriorate rather than maintain
and improve the buildings, thus contributing to the deterioration of
neighborhoods and negatively affecting the quality of life for the families
and neighborhoods involved. Other municipalities have contemplated
and/or experimented with the “two-rate” or “split-rate” property tax
reform…Over the long-term, the lower rate on buildings/structures has the
potential to encourage economic development, increase available housing,
and rejuvenate blighted neighborhoods while discouraging absentee
landowners from forgoing improvements. This approach should be
considered as part of a property tax review.”
41. Support from the NYC Progressive Caucus
In 13 bold ideas put out by the new
Progressive Caucus, the caucus
promotes affordable housing, and
calls to:
“Conduct an annual survey of vacant
units and put them into productive
use as affordable housing.”
13boldideas.org
42. Bills that Transition to Taxing Land
Start by taxing vacant land. No one is going to be displaced. We’ll just get new
places to live and work. Examples of possible legislation are:
Assembly Bill #S06207-2008 – Passed - to omit the huge tax break for vacant
and underutilized sites above 110th street.
Assembly Bill #A05671-2009 – Tabled - provides a fifth property class for
vacant/underutilized sites.
City Council Bill Int 0048-2010 – Tabled - provides for the annual citywide
Census of vacant and underutilized properties.
City Council Bill Int 0652-2011 – Tabled - provides for an annual Registration
of vacant and underutilized properties in the five boroughs.
These 2 city council bills would help end the practice of holding valuable
land out of service until the market rises, i.e. "Warehousing."
Learn more from Common Ground-NYC’s e-petition:
www.change.org/petitions/tax-vacant-unused-land-to-return-its-value-to-the-community
43. Other Land Reform Bills
Bill #A7314A – “An act to amend the real property tax law, in relation
to requiring assessment disclosure notices in New York City to include a
description of the method of assessment.”
Bill #A7327A – “An act to amend the administrative code of the city of
New York, in relation to requiring assessment rolls to be published on
the department of finance website.
Bill #A7326A – “An act to amend the administrative code of the City of
New York, in relation to requiring real property to be assessed using a
fair comparative.”
These bills are all sponsored by Assembly member Dan Quart.
There are other examples of land reform!
Contact your Assembly Member, Council Member, or State Senator.
44. Three first steps to sensible reform
1. Place a higher tax on vacant land
There are 28,613 privately-owned vacant lots, 9,706 acres
The effective tax rate on their listed value is 0.97%
But they sell for almost 4x their listed market value
2. Shift Class 1 property taxes off buildings & onto land
Exempt the median value of a class 1 building from taxation
Collect the same revenue from the resulting taxable value (this will shift more tax onto land)
This penalizes underuse and speculation, and provides a tax break for responsible homeowners
3. Reform assessments in Classes 2 and 4
Assess real estate values by comparable sales, not by income streams
Use building-residual assessment method*
Assess condos as real-estate assets, not as apartments
Offset with reductions in income, commercial occupancy, and other taxes
* “The building-residual approach starts by valuing the land, leaving the difference between the land price and the property’s
market value to represent buildings.” – Michael Hudson
45. More Long-Term Transition Proposals
Shift NY state to Land Value Taxes and
off of Taxes on Production and
Improvements. This would lower
taxes for most New York State
residents, but raise them for a few
land hoarders and speculators.
See Prosper California - the inspiration for a
Prosper New York tax-shift initiative.
An archived website from April 5, 2011 can be found here:
http://web.archive.org/web/20110405211331/http://www.pros
percalifornia.com/lowers-taxes-on-most-californians/
New York State version in progress…
46. Helpful Websites
http://commongroundnyc.org and
www.facebook.com/CommonGroundNewYorkCity - Common Ground-NYC
https://www.facebook.com/groups/landvaluetax/ (this slideshow will be in the
files section of this Facebook site and on Slideshare.net)
www.schalkenbach.org/ - Robert Schalkenbach Foundation
www.urbantoolsconsult.org/ - Center for Study of Economics
www.theiu.org/ - The International Union For Land Value Taxation
http://new.livestream.com/talkingtransition/NYC/videos/35193117 - NYU
Furman Center (video)
www.nyc.gov/html/dof/html/property/property.shtml - NYC Department of
Finance
www.picturethehomeless.org/ - Picture the Homeless
http://www.cgocouncil.org/showcgo.php - Council of Georgist Organizations
Directory
47. The best place in the world —
But it could be a whole lot better!
Editor's Notes
In the beginning…of this slideshow…
It’s worth remembering that what nature gives us for free is so valuable that life could not exist without it.
None of these resources were created by a land owner! They are part our commons and those who use them should pay rent.
OK, back to reality, and today. The city seems crowded, but is it really?
A 2007 study by the office of Manhattan Borough President Scott Stringer tallied 1,723 vacant buildings and 505 vacant lots in Manhattan alone.
“In New York today we have a booming real estate market and a terrible shortage of affordable housing,” explained Mr. Stringer. “Yet there are still perverse incentives in place that encourage speculators to hold vacant property rather than build. That may serve some private interests, but it sure doesn’t serve the public interest. We’ve got to change the system.”
Source: http://www.nyc.gov/html/dcp/html/landusefacts/landusefactshome.shtml: “Vacant Land Approximately six percent of the city’s land is classified as vacant. Staten Island has the most vacant land with more than 4,200 acres.“
Are we against parking lots? No...
If it's legal to drive cars in the city, and people are willing to pay to park them, parking lots would have to be OK, wouldn't they?
But, this is an extraordinarily valuable corner lot in midtown Manhattan.
Highest and best use is suggested by the neighboring buildings (note the lack of windows in the next-door building)!
But aren't we concerned about open space? Sure! That's important. But who should make such decisions? Surface parking lots don't really count as usable public space! For example:
Community gardens are long-abandoned lots that have been improved by local residents. But they aren't secure! The market can reclaim them whenever it wants, despite the community's hard work on them.
Here's a corner lot in Brooklyn's “Carroll Gardens” neighborhood - formerly “Red Hook,” it has been re-christened with a name that more befits its investment potential.
Note, again, that the neighboring building doesn't expect its upper stories to have a view in this direction.
A “taxpayer” is a user of a parcel of land that brings in sufficient income to pay the property taxes (and possibly make a bit of profit).
All three of these lots are examples of “taxpayers.”
You can see this in your own life. Most people would consider an otherwise equal co-op that cost $300,000 and had maintenance charges of $3,000/month to be less valuable than one that cost $350,000 but had maintenance of $1,500/month. Over time (under 3 years), the lower maintenance (rent) will offset the higher initial cost of the second co-op. If the first co-op keeps maintenance at $3,000/month, they will need to lower the price of the co-op to attract buyers in a competitive market.
Here is a similar and actual example: 301 EAST 63RD ST. Apt. 6A (between First Ave, and Second Ave)
PRICE: $185,000, MAINTENANCE: $812, ASSESMENT (to pay off a land purchase): $903. Notice how the Assessment + Maintenance lowers the Price. Comparable units in this neighborhood go for ~$360,000. Now, imagine if that instead of paying an Assessment, this money was paid as a Land Rent to the city. It makes no economic difference to the resident what the charge is called. However, with this change, housing would be more affordable, though less speculative…which is a good thing for the city overall!
This is why raising the land rent does NOT drive out affordable housing.
Let’s take a look at some properties near busy subway stops, using the city’s assessments, that are guaranteed to have heavy foot traffic and to be commercially attractive.
This is a property near a busy subway stop, yet it is grossly under-utilized, and under-taxed.
Here is another grossly under-utilized property. Note the outline on the building next door of what used to be a 4-story building in this location. We are going backwards!
OK, so what’s in it for the big landowners? How does this actually work? Does McDonald’s win or lose when its franchisee goes out of business, leaving behind the property to be sold?
Additional Source: Corporate Real Estate Strategies – A Multinational Approach By: Pedro Manuel Costa dos Reis Ferreira Student Number: 15000164 Wednesday, 06 January 2010 - http://run.unl.pt/bitstream/10362/10298/1/Ferreira.P_2010.pdf – “McDonald’s operates as a real estate company because it owns the land and buildings in many of its franchised locations across the world. While the royalty ranged around 4% (presently 8.5%) of the sales, rental income was equivalent to about 10% of the sales on top of the royalties paid by the franchisees. This makes McDonald’s more a property owner, than a conventional fast-food chain.”
What happens when properties near McDonalds sell? Is being next to a McDonalds really worth so much, or are there other locational factors?
I’m not just picking on McDonald’s!
What is the incentive to develop any of these properties? There is none from the meager property tax.
Conclusion: Vacant properties are under-taxed and there is no incentive to build. The fully built building on 34% less land area is paying 10 times as much property tax.
We’re going to be hearing more about Extell Development…
This residential tower is 100 feet taller than the Empire State Building!
Sources: www.citylandnyc.org/approved-mixed-use-tower-will-cantilever-over-landmarked-art-students-league
The large brick apartment building on the corner has 95 units and the 2 small buildings next to it have only 13 units, but it’s the 2 small buildings that collect air-rights rent from the large building currently under construction beside and above them!
What about parks? Would they get over-developed in a Land Value Tax scenario? No, because they add value to the surrounding buildings and so would be encouraged, and not developed.
Sources: Development Land Rush Around Hudson Yards and 7 Train http://ny.curbed.com/archives/2012/04/04/development_land_rush_around_hudson_yards_and_7_train.php
$330M tax break expected for Hudson Yards http://www.crainsnewyork.com/article/20131014/REAL_ESTATE/131019954
http://www.nytimes.com/2012/04/04/realestate/commercial/development-flourishes-in-manhattans-hudson-yards-district.html
Source: Southern Manhattan Coastal Protection Study: Evaluating the Feasibility of A Multi-Purpose Levy, May, 2014, “Flood insurance fix may end up being no fix at all” - http://www.cnbc.com/id/101539750
According to the Coastal Protection Study, only the most densely built-upon new levy would end up being self-funding, but shouldn’t the real question be why would ANY levy be built with commercial interests that couldn’t pay for the improvement? Why should the general public pay for new land to be developed at all?
Sources: https://a836-propertyportal.nyc.gov/ExemptionDetails.aspx;
East Side building hits the market—with big hitch http://www.crainsnewyork.com/article/20120803/REAL_ESTATE/120809938#article_tab
Enough about Billionaires…what about the other end of the socio-economic spectrum?
Source: Picturethehomeless.org, http://www.coalitionforthehomeless.org/pages/basic-facts, http://www.huffingtonpost.com/2013/03/07/new-york-city-homeless-shelter-spending-surge-800-million-dollars_n_2831909.html
– the number of vacant lots city-wide is actually over 10X as much as this in-person survey suggests, according to the NYC Dept of Finance database, but even at just 2,489 lots, when added to the number of vacant buildings, that is far more than enough to house the homeless. So, why isn’t this being done?
It ought to be clear by now…we cannot simply let “the market” decide. Current policies favor landowners and high end buildings over moderate to low income buildings.
Source: http://www.thenation.com/article/177822/what-bill-de-blasio-can-learn-new-york-citys-last-radical-mayor
Although property taxes are climbing now, assessments have to be legally phased in for up to 5 years, so we may just be catching up to previous valuations.
What is the damage of these wealth-destroying tax policies, including punitive taxes on building? What would happen if we reduced or eliminated all taxes that discourage production and replaced them with taxes on land alone?
Henry George recognized the injustice of the tax code over a century ago, and ran for Mayor of NYC twice.
These bills were spearheaded by Scott Stringer’s Manhattan Borough office
Be flexible! Other bills can get us to the promised Land!
Assembly member Dan Quart’s website: http://assembly.state.ny.us/mem/Dan-Quart
Common Ground-NYC’s e-petition: http://www.change.org/petitions/new-york-governor-assess-high-value-property-using-a-reasonable-comparative
Source: NYC Dept of Finance. Class 1 are 1-3 family homes. Class 2 are more than 3-family apartment buildings. Class 4 are commercial properties.
Prosper California was an attempt to put on the California ballot an initiative to replace most state taxes with Land Value Taxes. Common Ground-NYC is trying to do the same with NY State.
This is only a tiny sample of hundreds of useful sites!