Williamsburg Condo Buyers Ask for Tax Break and Builder Concedes
(Bloomberg) -- As sales began at a boutique Williamsburg condo project, would-be buyers touring the apartments, each with a terrace or balcony, kept asking the same question: Do I get a tax break?
They’re offering to pay up to 2.5 years of buyers’ property taxes on any unit that goes into contract by the end of the month. The payments, which will be offered as a credit at closing, range from $23,000 on a one-bedroom apartment to $80,000 for each of the two penthouses, according to documents filed with the state attorney general’s office.
“It’s a checklist item,” said David Dweck, principal at Duke Equities, a developer of the project along with Flatiron Real Estate Advisors and MJM Contracting. “People say ‘I won’t go into anything without a concession’ because they’re really thinking long-term” about their monthly costs.
By many measures, the market in Williamsburg is doing well: Buyers seeking hipness and affordability relative to Manhattan are snapping up homes faster than they can be listed for sale, pushing prices ever higher. But as values rise, so do concerns about costs associated with homeownership -- something that’s come into sharper focus now, with mortgage rates at a four-year high and new federal rules limiting deductions for loan and tax expenses.
“People plan some degree of flexibility around what they can pay, and the recent rise in mortgage rates has eaten into a lot of that,” said Grant Long, senior economist at listings website StreetEasy. “That makes having a property-tax abatement much more valuable.”
At the North Third Street project, two blocks from the East River waterfront, units currently listed for sale are priced at an average of $1,520 a square foot, according to StreetEasy. That’s the higher end of the market in Williamsburg, where the median for homes that changed hands last year was $1,204 a square foot.
Apartments there include a 731-square-foot one-bedroom listed for $1.16 million, and a three-bedroom with 1,996 square feet for $3.075 million, according to StreetEasy. Sales at the project started in December and two of the 13 homes are under contract.
Thousands of condo buyers in Brooklyn have benefited from state-funded abatement programs such as 421-a, which rewarded developers with tax breaks for up to 25 years -- passed on to buyers -- in exchange for building or financing affordable housing. That program was replaced last year with a more restrictive one that essentially makes the next wave of high-end condos ineligible for such incentives.
Consumers, though, are still conditioned to seek them out.
When sales at 62-66 N. Third St. began, “we heard from buyers who came in saying, ‘I love the property, I have no problem with the pricing,’ but basically their hesitation was the taxes,” said Andrew Barrocas, chief executive officer of brokerage MNS, which is marketing the project.
That feedback inspired the developers’ rebate, according to Barrocas: “We said, ‘Let’s stay ahead of the curve.’”
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