NYC Panel Proposes More Equity in Real Estate Tax Assessments
(Bloomberg) -- New York City’s real-estate tax program, unchanged for decades as skyrocketing property values favored owners of homes and apartments in gentrified neighborhoods, may be about to get more equitable.
The New York City Advisory Commission on Property Tax Reform, impaneled in May 2018 by Mayor Bill de Blasio and the City Council, issued a preliminary report recommending sweeping reforms. The changes would base taxation and assessments on fair-market value, not fractions or percentages depending on the type of housing being assessed.
Spiking prices of single- to three-family homes, co-ops and condominiums in parts of Brooklyn, Queens and Manhattan have combined with state assessment caps to give those residents lower taxes compared with home and apartment owners in stable-priced areas of Staten Island, the Bronx and other parts of Queens, the commission found.
De Blasio, a longtime owner of two homes in Brooklyn’s Park Slope, where prices have sharply appreciated, would pay more, said Marc Shaw, the panel’s chairman. The mayor, whose properties were assessed at about $3.7 million, paid just under $8,000 in real estate taxes last year, according to the city Finance Department.
Residents in neighborhoods where prices have held steady would see tax bills decrease, Shaw said.
“There are going to be winners and losers,” said Shaw, a former city budget director and deputy mayor. “At the end of the day, the property tax is a wealth tax.”
Real estate taxes are the only major levies controlled by the City Council, and produced about $26.5 billion in revenue last year, Shaw said. The new tax system would be “revenue neutral,” he said, meaning it wouldn’t raise or reduce the amount the city reaps from the levy.
Shaw said state approval would be necessary to achieve one of the panel’s key recommendations: allowing the city to eliminate or change the state’s cap on assessment increases, which are 6% a year and 20% over five years.
The panel’s recommendations are the first step in what city officials expect to be months of public hearings and debates. Officials expect a final plan by year-end.
The commission’s goal was to make the system more equitable, not to raise more tax revenue, said James Parrott, one of its 11 members and director of Economic and Fiscal Policies at The New School’s Center for New York City Affairs.
“Home values are out of whack with the taxes collected on them, so that affluent homeowners in gentrifying neighborhoods are paying comparatively less while those whose homes have experienced static or gradual appreciation are paying more than they should,” Parrott said.
In eliminating those caps on assessment increases, the panel would ease the shock to people paying higher taxes by spreading the added tax liability over five years. For example, an owner whose home value has increased 8% in a year would pay that extra 2% phased-in over five years.
Homeowners with fixed or modest incomes whose property has spiked in value would be protected by a so-called “circuit-breaker,” which would exempt them from paying drastically higher taxes. Resident owners of condominiums and co-ops would also get a partial break on their tax bill, while absentee owners of such apartments who rent them out as investments, or whose residences are outside the city, would not qualify for such exemptions.
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