Sunday, October 10, 2021

Trust fund dilletante brats take advantage of affordable housing tax break

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Bloomberg

 If you have a modest income but access to lots and lots of cash, New York City has an apartment ownership program that’s right up your alley. Even if it wasn’t meant for you at all.

 The changes at the building in Brooklyn’s Williamsburg neighborhood began in 2009, when a guitar shop owner whose father was a renowned art appraiser purchased a four-bedroom apartment. His mom lent him the money. Then came a writer who borrowed from her mother, a psychologist. A movie production manager and her partner, a photo director, bought their unit with a loan from her father, a physician in Maryland. A flurry of additional purchases without mortgages followed, including by a Shakespearean actress whose father lives in a terraced penthouse overlooking Central Park and a fashion designer whose father is a gynecologist in California.

Similar colonies of young people with creative sensibilities and well-off parents have taken root in Williamsburg for years, but the gentrification of this particular six-story building on South 2nd Street had a surprising set of enablers: the taxpayers of New York. It’s one of about 1,000 properties across the city that receive a special property tax break created to make homeownership affordable for low-income people. The building had income restrictions, and these buyers met them. At the same time, they had access to a lot of cash, which they used to score their units at well below market prices. Never mind their wealth or their parents’; the tax break doesn’t require any limit on assets or preclude gifts.

The children of America’s wealthy are quietly sewing up deals like this in some of New York’s most desirable neighborhoods, in buildings known as Housing Development Fund Corporation cooperatives, or HDFCs. These buildings were at one time in financial (and often physical) distress, and many are still shunned by conventional mortgage underwriters—hence the need for buyers to pay cash. Many are no longer cheap, because the agreements that once limited resale prices have expired. But even at prices that can crest well above $1 million, they’re discounted to the market, because of the income limit on buyers and the lack of available financing in some cases. And the taxes can be remarkably low. On South 2nd Street, the owners enjoy annual property tax discounts of roughly 70%.

The tax break was designed to be simple—too simple, as it turns out. The program sets a maximum taxable value for every HDFC unit across the city. This year it’s $11,079, in a market where the median price for a home has risen to $770,000. Because of this system, half the aggregate tax benefit will go to the top 20% of eligible buildings by value. Struggling buildings in poorer areas, meanwhile, will get no benefit at all. Their values are too low for the tax break to have any effect, and because of their HDFC status, they don’t get an abatement that most market-rate co-ops receive. Dozens have been foreclosed on in recent years for unpaid taxes.

In short, because of inadequate rules, poor design, and decades of lax oversight, these low-income tax subsidies are being scooped up by the well-to-do. “They’re just gaming the system,” says Penny Gurstein, an expert on affordable housing who directs the Housing Research Collaborative at the University of British Columbia. “This is now just being used as a playground for the rich.”

Across the U.S., studies have shown that local property tax systems, which raise more than $500 billion annually, are deeply unfair, favoring the wealthy and systematically applying higher effective tax rates to lower-valued properties. New York’s outcomes are among the most unequal. But even in a system shot through with inequalities, the exploitation of the HDFC program by affluent bargain hunters stands out.

HDFC sales are infrequent, and not all of them go for big-dollar prices. Nonetheless, it happens often enough that the city’s Department of Housing Preservation and Development acknowledges that “strong reforms are needed.” The agency made a run at that in 2016 but failed in the face of what a spokesman called “strong objections from many HDFC co-ops and their elected representatives.” Since then, the most desirable HDFC apartments, swept along by the forces of the New York real estate market, have only drifted further beyond the reach of the people they were set up for.

An HDFC cooperative exists, per New York state law, “exclusively to develop a housing project for persons of low income.” That doesn’t stop some HDFC buildings from advertising how lax they are about enforcing income limits. Bloomberg Businessweek found dozens of listings dating to 2010 that failed to mention income restrictions for the building or plainly said there were none. A four-bedroom unit at 238 W. 106th St. was listed this year for $1.85 million and advertised as having “no income restrictions,” despite city records showing it benefits from the exemption for low-income housing. The building’s HDFC status lowered its taxable value this year by $3.6 million and cuts its owners’ tax bill by more than $400,000. A building manager at ABC Realty, which manages the building, told Bloomberg Businessweek she would inform the brokers that “they need to be compliant.”

When income limits are enforced, the rules can be as complex and unintuitive as everything else about New York City real estate. Depending on its governing documents, a building will set the limit by various methods. One looks like this: Take the annual common charges for the unit, plus the estimated annual utilities, and multiply that by six (or seven if the buyer’s family is big enough). Then add 6% of the seller’s original purchase price. That’s your income ceiling. Some buildings keep it simpler—and perhaps get to a higher number—by using a percentage of the area median income, or AMI, for the New York metropolitan area. Buildings that are committed to low-income ownership might set the limit at 80% of AMI, which matches the city’s definition of low-income. But an HDFC can go as high as 165% of AMI. This year that translates to $137,940 for a single person and $196,845 for a family of four.

For buildings with high prices and tight income caps, gifting is just about the only way a qualified person can buy some of these apartments, especially if an all-cash deal is necessary. The upshot is that a child of well-to-do parents is something of a perfect buyer.

31 comments:

FUCK THE WOKE CROWD said...

And these asshole young folks who rely in their mommies and daddies are the same asshole woke crowd who cry about injustices toward other groups of people. I wonder if they let those "other groups of people" know exactly who the fuck they are, the privilege ones who mommy and daddy pay for everything.

Anonymous said...

Another stupid Demorat idea, their housing policies have cause such bad outcomes.
Prove me wrong...

Anonymous said...

I would say that the silver lining of all this is an awakening to just how corrupt our system has become. Sheeple Can’t keep the blinders on anymore.

Anonymous said...

Someone needs to address 'Generational Welfare Recipients' .

Anonymous said...

The Democrats way of doing Math is by COOKING the Books.

Anonymous said...

The best social program in the world is a job.

Anonymous said...

When you base all your decision making on your feelings this is what you get.

Anonymous said...

I'm a Flat Earther said...
NYC Electurds have no answers, we keep getting nothing but rhetoric.

Anonymous said...

And the reality is hyperinflation, low job growth, diplomatic idiocy, and a president in name only with growing cognitive issues.

Anonymous said...

Isn't capitalism wonderful?

Anonymous said...

Young Republicans. The spoiled over privileged offspring of old republicans.

Prove me wrong...



Anonymous said...

Plus free bike lanes for their bike fetish, being bored and nothing to do, joining various Marxist communists groups as activists.

SeerofZOG said...

I love when rich people exploit loopholes in Commie laws. Besides, why do we want a bunch of genuine poor people messing up a nice neighborhood? These programs are insane and should not exit, so exploit away!

Anonymous said...

How's Dan Halloran and Bernard keriks corrupt scum asses doing ?

Anonymous said...

It doesn't say how much these Trusta'fairy paid for these co-ops and apartments.
This is the next generation of welfare lifers will never be paid for arts and crap they do all day. The dumb yahoo parents can not understand this, all think they are doing great in New York on way to be the next Picasso rock star millionaires.
Dumb fucks.
I think it was Hillary Clinton and UFT who told them "Be who you wanna be" It was Very bad advice. These people are gonna be a huge burden on the taxpayer.

Q: What happens when the trust fund runs out and the utilities, taxes & maintenance fees are due ?

Anonymous said...

“There are two types of people in this world. People who think the government is looking out for their best interests...and people who think.”

FUCK THE WOKE CROWD said...

Anonymous said...

Another stupid Demorat idea, their housing policies have cause such bad outcomes.

------------------------
This becomes so old on here about Stupid Democrat ideas. like Republicans have never made a stupid ides, in fact trump had plenty of them. I get so tired in this day and age of Democrats vs Republican argument, it is TIRING. Both parties have many dumb ideas or no ideas whatsoever. It is a government issue period. Both parties like when we the people fight among ourselves, that way no actually sees all the bullshit from our government. We the people are being PLAYED like dumb woke ass's violin. You really think these elected officials really care about you the little guy, while they have the best health insurance, pensions and money galore. Do you think they care about the conditions of roads that we all have to drive, do you think they care the some of us have no health insurance or pay high premiums, do you think they care if you have no money for retirement, while they have pensions (yet republicans we constantly say unions are bad, but hey, these republicans have the best health insurance, etc, etc, etc.

Stop playing into their hands.

Anonymous said...

"In short, because of inadequate rules, poor design, and decades of lax oversight, these low-income tax subsidies are being scooped up by the well-to-do. "They're just gaming the system."

"This is now just being used as a playground for the rich."

The great politicians and city council members of NYC are really looking out for the poor and working class aren't they?

This is why they NEVER fix the tax loopholes, and stop giving tax breaks too the rich. They know who funds their campaigns, and pay to get what they want and ignore the needs of the working poor and lower middle class.

And sadly, this will continue until a majority of poor people stand up, stop paying their taxes and confront and demand politicians to fix the tax loopholes and end handing out tax breaks to the rich and their spoiled children taking advantage of the system.

But realistically, that will not happen. Most people have accepted that's the way it is and will do nothing to change it for the better.

Anonymous said...

If the tax loopholes are legal why not use them ?

Anonymous said...

Orange Dragon said...

The changes the Democratic Party already has in the works are clearly destructive.
Do you hear the rumblings of the Great Reset ? This is not “building back better”; this is a managed decline to bring America down to the rest of the world’s standard of living.

The United States of Venezuela

Anonymous said...

And so have the section 8 frauds....living in cheap housing and hiding their BMWs and vacation homes from the government.
Workfare not welfare. END IT! It encourages laziness. Note.....there are some....who genuinely need welfare. Those deserve the help.

Anonymous said...

@ "Isn't capitalism wonderful?" Yes it is.

High Energy Donald Trump is Back... Let's Go Brandon!

Anonymous said...

This is capitalism at it's best.

Anonymous said...

Corporate Welfare and Real Estate Welfare has really worked out for the SuperRich.

Everyone else, Pay UP or be Thrown in Jail!!

Anonymous said...

This is capitalism at it's best.

Of course. Communism is Capitalism - on other people's money.
See bike lanes and interest groups.

Anonymous said...

@This becomes so old on here about Stupid Democrat ideas. like Republicans have never made a stupid ides

Glad you understand this, some people seem to think only in party terms.
Usual indoctrination outcome.
They never see RIGHT vs WRONG.
Bike boy here can have his leaders crucify Jesus on live television and he still would be defending them.
That's how stupid these activists really are.

Anonymous said...

"That's how stupid these activists really are"
They have been brainwashed by the #UFT and #FAKENEWS !

Anonymous said...

@“ That's how stupid these activists really are"

Try looking at a mirror Trump Turd

Anonymous said...

@"Bike boy here can have his leaders crucify Jesus on live television and he still would be defending them."

Is that Jesus guy still around? I always found him much too liberal for my liking. All that peace and love. Caring and sharing.
Very un-American.

Then again, he was a Palestinian.

Anonymous said...

"Try looking at a mirror Trump Turd"
#TDS Alert !!!

Anonymous said...

This is all a part of a neo-feudalist scheme.