- John H. Banks | REBNY President
- William C. Rudin | REBNY Chairperson
- Code of Ethics
- REBNY Residential Listing Service
- Become a Member
- Benefits & Rewards
- REBNY Action Network
- REBNY Services
- Our History
- Contact Us
- Looking for a NYC real estate broker?
- Contests & Awards
- Sponsorship Opportunities
- REAL ESTATE EDUCATION
- MEMBER SPOTLIGHT
- GIVING BACK
Now is the Time to Discuss Property Tax Reform
February 7, 2018
Last week, I participated in the Manhattan Chamber of Commerce’s panel discussion about New York City’s property tax system. The event was hosted by New York University and featured some of New York’s leading thinkers on this important topic: Finance Commissioner Jacques Jiha; former Finance Commissioner Martha Stark; Carol Kellerman, president of the Citizens Budget Commission; and former City Housing Commissioner, Vicki Been. It is my hope that this worthwhile event will trigger a renewed and robust citywide conversation about reforming New York’s property tax system.
For decades, we’ve heard complaints about the unfairness and inequities of an inordinately complex system that is poorly understood by taxpayers. The problem is politically challenging, and that is one reason why public officials have been hesitant to make major changes. Last year, a coalition of taxpayers filed a lawsuit over the issue. REBNY is not a party to the legal action but we hope the courts will compel action that brings about substantive reform.
Here’s the way the system currently works. The Department of Finance determines market values for all properties in New York City and then determines their assessed values: six percent of the market value for one-, two-, and three- family homes and 45 percent for co-ops, rental buildings, utilities, and commercial buildings.
Family home values are determined by the sale prices of comparable buildings, while co-ops and condos are classified as revenue-producing apartment buildings instead of as homes. The City then uses this value to find the final levy. According to a study by NYU’s Furman Center, the way the City values cooperative and condominium buildings and units grants them an additional tax advantage. The unusual valuation method the City applies to co-ops and condos ends up lowering the effective tax rate imposed on these units. The Furman Center identified 50 individual co-op units that were sold in 2012 for more than the Department of Finance’s estimated market value for the entire co-op building.
The real inequity is found in the disparity between the classes and their share of the levy and their market value. Single-family homes represent 50% of the total market value of all properties in the city, yet they account for less than 15% of real estate taxes. Rental multi-family buildings represent between 20-24% of the total market value of all properties in the city yet they pay almost 40% of the total taxes. This imbalance is striking and unsustainable given that 60% of New York City residents are renters.
Martha Stark made the point that “nobody understands the tax, so everyone thinks they’re paying too much.” Vicki Been echoed that sentiment, saying that because homeowners are more likely to vote than renters, “tenants often do not get involved in the property tax debate and don’t know how it affects their rent.” The more New Yorkers who get informed and involved in this process, the better.
Stark predicted that the fear of reform from homeowners and elected officials is probably overstated. She proposed the best way to understand the potential adjustments that change would bring is best determined by objective analysis of accurate market values for all classes. Class shares could be adjusted to provide equity among all property owners. Policy makers could find prudent measures to protect vulnerable homeowners whose home values have risen while their incomes have declined.
An overhaul of the property tax system must be done thoughtfully. Proposed changes should be fully outlined to New Yorkers in clear terms. Carol Kellerman explained that reformers should use “data and information to dispel” any associated fear of change on the part of taxpayers.
Commissioner Jiha’s message that Mayor Bill de Blasio intends to take on this issue is a welcome sign. The next step is for all stakeholders to inform themselves on how the system works and begin the difficult work of coming up with solutions.
The event’s moderator, Jessica Walker, president of the Manhattan Chamber of Commerce said, “the property tax affects all of us whether we are renters, home-owners or business owners; and it is the largest source of tax revenue for the city. Now is the time for reform to make it fairer and more transparent.”
The process of reforming New York’s property taxes will not be simple, and there will be bumps in the road. But last week’s panel discussion and the Mayor’s commitment to address this issue is evidence that the conversation about how to fix the system is underway – and that is reason for every New Yorker to cheer.