NY Loses $900 Million Annually On Condo Tax Loophole

02/25/2011 11:21 am ET | Updated May 25, 2011

Alex Rodriguez paid a steep price for his new 3,000-square-foot, five-bedroom penthouse at The Rushmore Towers.

But the Yankee slugger won't be paying much in property taxes for his $6 million pad.

A-Rod is expected to pay $1,200 this year in taxes, and he and his fellow residents can look forward to rock-bottom tax rates for the next ten years, according to the Daily News' Juan Gonzalez.

Rodriguez is hardly alone in reaping the benefits of a little known tax abatement program that has saved wealthy New Yorkers millions over the last several decades.

Without the tax break, Rodriguez would owe about $60,000 in property taxes this year, according to city assessment records.

From the Daily News:

The politicians and real estate insiders call it the "421A" program. It grants as much as a 98% percent tax abatement for up to 25 years to condo owners in newly built housing.

The bulk of the 421A benefit has gone to luxury housing in Manhattan, though a few reforms by City Hall and the Legislature in 2007 at least required developers to build 20% affordable housing to qualify for the tax abatement.

This year, the 421A program will cost New York City $900 million in lost revenues, according to the Independent Budget Office.

"That's money that could prevent layoffs of firefighters and teachers," Gonzalez writes.

Under Gov. Cuomo's proposed budget, New York City would lose more than $1 billion in funding.

The 421A program is scheduled to end this December, but the real estate industry is already lobbying for its renewal, and even expansion.

Developers want to tie any extension of rent stabilization laws to a deal to prolong the 421A program.

Bayta Lewton of the Coalition for a Livable West Side, argued that the law was imbalanced and unfair. "Where's the fair share if people who have paid millions of dollars for an apartment get away with paying no real estate taxes, when people in co-ops are being slaughtered?"

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