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Case studies in new york city property development with comments
1. 7/14/14
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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.
Which one
Is the most
valuable?
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.
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Besides natural resources, there is all important location.
Do you recognize this island?
How about now…?
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
OK, back to reality, and today. The city
seems crowded, but is it really?
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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
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
Full?
Not Hardly!
Surface
parking lots
...in Midtown
...beside
subway stations
But vacant land is just the beginning.
Much more land is grossly underused.
Source: http://nypost.com/2013/10/31/
fleeing-the-nightmarish-northeast/
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.
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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
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.
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
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.
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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
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.
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
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.”
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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
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
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!
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.
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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!
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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!
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.
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!
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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?
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
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?
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: http://nypost.com/2014/01/04/east-river-ferry-
sends-property-values-soaring/
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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?
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.
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
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
Sources:
http://www.nytimes.com/2012/09/19/realestate/
rising-tower-in-manhattan-takes-on-sheen-as-billionaires-
haven.html
http://www.nytimes.com/2013/10/26/business/
taxing-new-yorkers-but-not-the-ultrarich.html
http://nymag.com/news/features/foreigners-hiding-money-
new-york-real-estate-2014-6/
10. 7/14/14
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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 that sailed through the state
Legislature singled out the five developments to make them
eligible for tax breaks — which 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
What happens when the
Rent is Privatized?
Who is left
homeless when
Billionaires buy and
sell lightly taxed
properties among
themselves?
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
Sources: http://www.nydailynews.com/new-york/
uptown/big-tax-breaks-mandated-millionaires-
nyc-digs-article-1.1375297
http://www.nytimes.com/2014/02/21/nyregion/
a-packed-forum-for-a-rising-concern-new-skyscrapers-
near-central-park.html
http://billmoyers.com/episode/full-show-long-dark-
shadows-plutocracy/
Enough about Billionaires…what about the other
end of the socioeconomic 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?
11. 7/14/14
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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
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…?
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?
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?
12. 7/14/14
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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
What can be done to return the
Land Rent to the Community?
Who are our allies?
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!
Henry George recognized the injustice of the
tax code over a century ago, and ran for
Mayor of NYC twice.
Source: http://www.rollingstone.com/politics/
news/five-economic-reforms-millennials-should-be-
fighting-for-20140103
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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]
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.”
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?
The 421-a abatement has been (ab)used to
generate enormous profits for wealthy
developers, but little truly affordable
housing for everyone else.
Source: http://www.mbpo.org/
release_details.asp?id=1838. We also
need to change the Byzantine property
class code system.
Source: http://www.crainsnewyork.com/
article/20131124/REAL_ESTATE/311249973
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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.”
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
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
The Lawyers support LVT!
These bills were spearheaded by Scott
Stringer’s Manhattan Borough office
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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.
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
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.prospercalifornia.com/lowers-taxes-on-most-californians/
New York State version in progress…
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.
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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
The best place in the world —
But it could be a whole lot better!
This is only a tiny sample of hundreds of useful
sites!