A 36-story hotel minding its own business in Midtown isn't supposed to be a hotel at all, the state attorney general announced today. It's supposed to be affordable housing, a commodity the city is already sorely lacking without greedy property owners misusing the space, in addition to taking unfair advantage of tax breaks.
The building, located at 49 East 34th Street, has been functioning as mid-range hotel with nightly rates ranging from $239 for a studio to $359 for two bedrooms. In addition to the profit culled from pricey nightly room rentals, its owners—affiliated with the Los Angeles-based CIM Group—have also been benefiting handsomely from a tax abatement program intended to spur the growth of affordable housing during the recession.
The office of the state attorney general announced Wednesday that CIM Group agreed to pay the $4.4 million it earned on illegal tax breaks, with the money going toward a fund for affordable housing. It will also pony up $275,000 to the state to cover the cost of the investigation. The building's operations as a hotel will end on March 11, and the 110 units therein will be converted to the rent-regulated apartments they were born to be.
Meanwhile, the controversial 44-year-old tax abatement program, called 421-a, will lapse later this year unless it's renewed. Mayor de Blasio is expected to ask the state to overhaul the program's regulations as part of his goal of growing the city's affordable housing.
Eric Schneiderman, the state attorney general, agreed that the program needs to be reexamined, but not abolished completely.
“I will not allow the 421-a tax exemption to line the pockets of the rich and powerful,” Schneiderman said in a statement. “The 421-a program provides massive tax benefits to developers in exchange for permanent housing development, and I will continue to make sure that the prerequisites for receiving those benefits are enforced.”
