Tax Credits from NYS Homes & Community Renewal:
Crannell Square is primarily funded by tax credits from NYS Homes & Community Renewal and is subject to strict NYS guidelines. For example, the income that the project is allowed to earn is limited to about $29,000 annually, which is very low considering the variables at play when managing a large property.The $29,000 net income takes into account the lower rents being received because of the affordable nature of the project and relies on tax savings, such as a Payment in Lieu of Taxes (PILOT), in order to make the numbers work.
The PILOT agreement proposed for Crannell Square is $100,000 annually, with a 3% annual increase. The tax savings from the PILOT do not result in additional income that is passed on to HRH or Kearney Realty Group, but is used directly to keep rents low. Just as tax dollars can be invested in things like education or public spaces, the PILOT is a choice to invest in affordable housing as one of the necessary components of a thriving city.
The PILOT will guarantee lower rents for 30 years. If a 581-A tax assessment were used as an alternative to the PILOT, the same guarantees are not possible. A 581A is re-evaluated annually, with taxes based on the expenses and “profit” of the project. The expenses allowed in this calculation are discretionary, which puts the project at risk of a significant tax increase, and subsequent rent increases, on an annual basis. A PILOT protects the project from this potential fate and guarantees renters an affordable place to live.
Reimagining Vacant Spaces:
The lot where the Crannell Square project will be located has been widely underutilized by the city for decades. The PILOT is an investment in affordable housing as a necessary component to a thriving city. In addition to the city earning the proposed PILOT, the city will also receive $462,500 for the lot.