421-a and J51 Building Owners Failing to Register Apartments as Rent Stabilized

ProPublica, a nonprofit with a focus on investigative journalism, recently conducted an analysis of government data on nearly 15,000 rental buildings receiving the 421-a and J51 tax subsidies as of 2013. About 40 percent—or 5,500 buildings—weren’t listed as rent stabilized, yet records show the owners are receiving more than $100 million in property tax reductions.

Owners who register properly for rent stabilization must do so annually with the state. Lists of buildings that have done so are published by the Rent Guidelines Board. To determine if a tax-advantaged building was registered, ProPublica cross-checked that data against a listing of properties receiving the tax breaks, known as 421-a and J51, published by the city’s Department of Finance.

The two tax-incentive programs at issue together provide almost $1.4 billion in property tax savings to New York City real estate owners, with most of the money flowing to multifamily apartment buildings. Owners who receive the 421-a and J51 tax benefits are supposed to submit all the units in their properties to rent stabilization for the duration of their tax breaks, which can span up to 34 years and significantly lower property tax burdens, in some instances by more than 90 percent.

Most of the buildings identified by the investigation were repeat offenders. About 80 percent that didn’t register units in 2013 also didn’t do so from 2009 to 2012. Some appear to have never registered, according to searches against the state’s master directory of rent-stabilized buildings.

The noncompliant properties were mostly smaller buildings receiving 421-a benefits, including many three-family homes and four- to 10-unit apartment complexes. Among the five boroughs, Brooklyn and Queens had largest numbers of unregistered buildings.