Guess How Many Loft Owners Are Voluntarily Complying With the SoHo/NoHo Zoning Laws Eric Adams Won’t Enforce?
The "flip tax" that is supposed to fuel an arts fund is legal. Don't expect anyone to pay.
5:24 PM EDT on October 25, 2023
Does New York City have the right to charge non-artists a substantial fee to live in multimillion-dollar SoHo apartments that were originally meant for artists?
Yes, according to a state court ruling issued earlier this month.
This question, raised by one of the most controversial components of the SoHo/NoHo rezoning plan, spurred Eric Adams to issue a rare veto two weeks into his term as mayor, the first mayoral veto in eight years.
At the time the rezoning passed in late 2021, the largely term-limited City Council and the outgoing de Blasio administration argued that the rezoning would spur the construction of thousands of new apartments downtown, with almost a quarter of them designated for low-income New Yorkers. They also said the rezoning would support the artistic roots of the area, because all the money coming from non-artists paying to convert their artist lofts—$100 per square foot—would go into an "arts fund" overseen by the City Department of Cultural Affairs.
A group called the Coalition for Fairness in SoHo and NoHo, and several neighborhood residents, raised almost $250,000 and sued the City in May of 2022, arguing that the zoning was unconstitutional and that the artist conversion requirement represented an unfair seizure of their property.
In her decision dismissing the lawsuit, Judge Erika Edwards noted that the conversion requirement "falls far short of qualifying as a governmental taking of the property," and pointed out that the state legislature passed a subsequent law to ensure that poor New Yorkers weren't penalized, by absolving any non-artist living in their loft before the zoning law passed from having to convert their apartment. They're also immune from having to pay the fee if they sell to a non-artist.
For those non-artists lucky enough to buy one of the artist lofts in the neighborhood (where the median sales price is currently around $2.9 million) "the removal of the [artist loft] restriction would most likely increase the value of the property," Edwards wrote, since any potential buyers would want the artist restriction to be lifted, so they could be on the right side of the law.
But according to data from the Adams administration, loft owners aren't terribly interested in getting on the right side of the law.
The Department of Cultural Affairs told Hell Gate that there hasn't been a single application submitted by a non-artist to convert their artist loft since the zoning law took effect nearly two years ago. In that same time period, DCLA has received 18 applications for people seeking artist certification, and 11 have been approved.
The lack of wealthy property owners eager to voluntarily contribute hundreds of thousands of dollars into an arts fund isn't surprising, given that Mayor Adams's January 2022 veto killed a law that would have tracked these properties, and forced non-artists to comply with the requirement through a series of escalating fines. Hell Gate reported on this veto last year because it benefited Scott Sartiano, the owner of the private NoHo nightclub Zero Bond, where Adams likes to hold court. Sartiano owns a 2,900 square-foot, $3.45 million artist loft not far from Zero Bond, purchased in early 2022.
Sartiano hasn't responded to our requests for comment. Last year the Mayor's Office denied that the two ever discussed the rezoning, calling our original story "click bait" (Hell Gate is now suing the City, because the Adams administration has refused to turn over the mayor's communications with Sartiano), and insisting that the administration was still committed to setting up the artist fund, which would be up and running in months. To date, the fund still does not exist, and the Department of Buildings confirmed that it doesn't track or actively engage in artist loft compliance. Why would anyone pay?
The special lofts exist because artists began moving into the neighborhood's vacant industrial spaces in the 1970s and 80s. To normalize these living arrangements and support the arts, the City carved out a special exception for them—"joint living-work quarters for artists." Only artists certified by Cultural Affairs were technically allowed to live in the lofts, but as a Department of Buildings spokesperson put it in 2003, this was all but "virtually unenforceable." Some 1,600 remain, and the unusually spacious layouts made possible by the special zoning dispensation—it's common for them to be several thousand square feet—are now prized by the ultra-wealthy, most of whom are not artists.
Howard Slatkin, a former deputy at the Department of City Planning, and the current executive director of the Citizens Housing Planning Council, a group that supported the rezoning, said that the idea of rich property owners having to kick into an arts fund had its roots in the early stages of the rezoning.
"It was definitely something that was strongly articulated by the community participants in the working group that generated recommendations that led to the rezoning," Slatkin told Hell Gate. "That, you know, 'Don't just forget about the arts, let's try to do something.'"
He added, "I'm not gonna say that it wasn't a good idea. But has it been successful? Not yet."
The Coalition for Fairness in SoHo and NoHo have indicated that they will appeal the judge's court decision, and in a statement, said that the conversion fee is "an unfair taking of property from the very artists who built SoHo and NoHo, in violation of the U.S. Constitution."
Another vehement opponent of the rezoning, Andrew Berman of Village Preservation, said he wasn't opposed to charging loft owners a fee that went to artists, but that the scheme as currently devised is flawed, because it's wrapped up in the "terrible mistake" that is the rezoning.
"The fact that the fund has not been constituted and hasn't yet accomplished anything, really, unfortunately, doesn't come as much of a surprise," Berman said.
When the rezoning was passed, the City claimed it would generate up to 3,500 units of housing, including 900 affordable apartments under the city's Mandatory Inclusionary Housing policy. According to the Department of City Planning, two new rental buildings have applied to go up since the rezoning: 227 Canal Street, which is supposed to have 100 apartments, 25 of them affordable, and 126 Lafayette Street, which will have 105 apartments, 26 of them affordable.
"This is not Gowanus, which has massive, underutilized industrial areas," said Andrew Fine, the policy director at the YIMBY group Open New York, referring to the recently rezoned Brooklyn neighborhood, which currently has thousands of market-rate and affordable apartments under construction. "That was never the intent here or expectation here. It's going to be more of a stream instead of a river."
Slatkin also cited the expiration of the 421-a tax break, which has slowed housing construction down citywide, as the primary reason for the lack of new residential buildings downtown.
"What we have is a situation where there's just not there's not a tool available to build a mixed income rental building in this neighborhood right now," Slatkin said. "So you're not likely to see it until such a tool exists."
If the construction market has cooled, there are still dozens of housing transactions playing out every month downtown, and lots of artists who could certainly use some cash.
"The fact that it's not up and running—I just think that there's a wild missed opportunity to be able to fund artists and their ability to live and work in New York in creative ways," Andrea Gordillo, the development director at the Clemente on the Lower East Side. "Especially like in this moment, when there's like a real conversation about the theater model being completely not viable."
The Clemente provides studio space for 100 artists, many of them Puerto Rican or Latinx, and hosts performances and dozens of exhibitions from its neo-gothic building on Suffolk Street.
"I think a lot of people demonstrated the ways in which the arts got people through the pandemic every day, right? Reading books, watching movies, listening to music. These are things that people take for granted sometimes every day, and they shouldn't," Gordillo said. "I just would say to folks that are concerned about being excessively taxed: That's what comes with living in one of the greatest cities in the world."
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