Buffalo News: Tax breaks for senior housing may return


By Jonathan D. Epstein | News Business Reporter | @jdepstein 

on March 6, 2015 - 10:11 AM, updated March 6, 2015 at 12:18 PM

Senior housing projects could be eligible for tax breaks again from local industrial development agencies. IDAs for Erie County and five municipalities will soon be asked to approve a new county-wide policy allowing tax breaks for middle-income senior apartment buildings that meet certain criteria.


The proposed new policy, which was passed by ECIDA's Policy Committee on Thursday, addresses a sticky problem for the six agencies that have struggled with the question of whether and how to support for-profit senior housing projects in recent years. Erie County has a significant older population, and the aging of the Baby Boomer generation threatens to overwhelm the existing supply of senior-focused housing, developers say.


But critics say such projects do nothing for economic development, because they create few jobs and are primarily geared toward housing, which they say is not the purpose of IDAs. They say economic development officials should not be providing tax breaks to support privately owned facilities, especially when they're aimed at market-rate tenants who can afford to pay the rents.


Instead, they say that such projects should be able to stand on their own, since they don't bring in new companies or otherwise benefit the community. Citing a 2011 study by UB's Regional Institute, critics have noted that there's little risk of seniors leaving the community simply because they can't find an apartment, so tax breaks can't be justified by a fear or threat of losing population and thereby hurting the regional economy. And that's not likely to change until after 2030, the study found.


Supporters of the breaks say the senior housing provides a community and public policy benefit by enabling senior citizens to stay in their home communities. Developers say they can't make such projects work in Western New York because the rents they'd be able to earn aren't sufficient to cover the costs of construction without tax breaks to cover the gap.


"I think it is good they have a policy but they are missing the need for better quality senior housing for middle-class seniors who don't want to stay in their homes," said Michael Joseph, whose Clover Management development firm has developed 11 projects in Western New York that are all at least 95 percent occupied with medium-income seniors. "Some of the projects would not have worked without PILOTs (payments in lieu of taxes) and sales tax relief due to the cost of the land or really high real estate tax rates."


Current ECIDA policy allowed that agency to consider such facilities for years as "general commercial projects" under state law, but that drew criticism from taxpayer watchdogs more recently. A related provision in state law that was used for nonprofit senior housing also expired. In response, the ECIDA and the Amherst IDA imposed moratoriums on such projects until an over-arching policy could be developed.


The new policy, developed after 18 months of work involving representatives from multiple agencies, seeks to address the issues, but with clear restrictions and conditions. At least 90 percent of the units must be rented to and occupied by a person who is at least 60 years old, and benefits will not be provided for any units that are not available for rent as senior housing. The policy does not cover low-income subsidized projects, luxury units, or upscale "continuing care communities."


Projects will be evaluated under nine criteria, but do not have to meet each one. A project will be looked on more favorably if there is official written support from the municipality in which it would be located, if it would be located in the business center of the municipality, if it is consistent with a municipal master plan, or if it advances the concept of walkable neighborhoods and communities close to local amenities and services. Other criteria would include an independent market study showing an unmet need, provision of amenities for seniors that differentiate the facility from other market-rate apartments, or a location where much of the population within five miles is at or below the median income level. Another consideration is whether the project is aimed at and will be at least half-occupied by senior citizens whose income is at or below 60 to 80 percent of the county median income.


"It is not appropriate or the intention of the ECIDA to subsidize activities that the private market can bear" or projects with a return on investment that is high enough for the developer to get financing elsewhere, the policy document said. Instead, the agencies will focus on "desirable projects that would not proceed without an inducement," particularly those facing "development obstacles," with "documented unique costs" or that "address a larger community need."


The policy will be considered by the ECIDA board on March 25, after which it will be mailed out for comments to all the taxing authorities in the county, and would also be voted on by the other IDAs.


"There is consensus among all the IDAs on this draft to adopt this as county-wide policy," said James Allen, executive director of the Amherst IDA, who sits on the ECIDA Policy Committee. "As soon as ECIDA adopts it, the other IDAs will, too. This is a good policy for the entire county."


"That's really good news, because we've spent a lot of time developing something that will respond to the needs of our aging population," said ECIDA Chairman Brenda McDuffie, also CEO of the Buffalo Urban League.


email: jepstein@buffnews.com

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