Government briefs

1031 exchange on the chopping block

Congress may eliminate the popular 1031 exchange as part of wider tax reforms, the Wall Street Journal reported. The provision allows investors to defer the capital gains tax incurred from the sale of a property if the money is reinvested in a “like-kind” asset. The 1031 exchange, which is frequently used in commercial real estate deals, was threatened last year by the House Republicans’ Better Way tax-overhaul plan. But that proposal included some other potential benefits for the real estate industry. Now, with Better Way less likely to be passed this year, real estate lobbyists claim the industry may lose the tax break without any sweeteners. Jeffrey DeBoer, CEO of the Real Estate Roundtable, told the Journal that losing the 1031 exchange would “cause a lot of transactions not to occur.”

Rendering of the Willets Point project

Willets Point developers face another hurdle

Sterling Equities and Related Companies may need to put together 47 acres of park space in Willets Point if they want to move forward with a $1 billion mall and movie theater as part of their planned redevelopment at the former site of Shea Stadium. The New York Court of Appeals ruled in June that the project needs approval from state lawmakers, who are expected to require the developers to create the green space for building on top of publicly owned land, according to Crain’s New York. The ruling favored local State Senator Tony Avella, who filed a lawsuit against the city in 2014 for approving Sterling and Related’s project two years earlier.

Brooklyn lawmakers propose house-flipping tax

Two Brooklyn legislators have proposed a “flip tax” that would increase transfer taxes on certain residential properties sold within two years of purchase, to discourage professional flippers from decreasing the city’s affordable housing stock. Assembly member Erik Dilan and State Senator Jesse Hamilton want to increase transfer taxes by 15 percent for one- to five-family properties if sold within a year of purchase and 10 percent if sold within two years. Transfer taxes in the city are currently between 1 and 2.6 percent in most cases. Savills Studley Chief Economist Heidi Learner said that there are holes in the bill. For example, a flipper could buy a home with cash, rent it for a year and sell it. Meanwhile, properties with at least six units could still be flipped, and the proposed bills do not address new developments, she told The Real Deal.

Brian Benjamin

State senator seeks to codify neighborhood names

A recently elected state senator representing Harlem resurrected a bill last month that would penalize brokers and developers who try to rebrand city neighborhoods to be “more desirable for affluent New Yorkers,” DNAinfo reported. Brian Benjamin said his proposed Neighborhood Integrity Act would require real estate professionals to use city-approved names and fine them for advertising properties in a “designated neighborhood that is not traditionally recognized as such.” The bill would, among other things, deter industry players from trying to market the south end of Harlem as “SoHa” to the dismay of some longtime residents, he said. Former Assembly member and now U.S. Representative Hakeem Jeffries introduced similar legislation under the same name in the State Assembly in 2011. But Crain’s pointed out that the new bill may be more complicated than it seems, since the definition of “traditional” is loose in the rapidly changing neighborhoods of New York.