Owners of multi-million dollar co-ops and condos in New York City would have to pay property tax at full market value under a recently released proposal to overhaul the current system. The city’s Advisory Commission on Property Tax Reform on Thursday unveiled its long-awaited report detailing reforms of the complex system that would tax properties of similar values at equitable rates. Currently, homebuyers pay property tax based on assessed value, rather than the market rate, which puts a bigger tax burden on low- and middle-income homeowners.
City officials have long tried to improve the outdated system, but the complexity of the issue and pushback from opponents stalled any changes. During Mayor Bill de Blasio’s first year in office, he announced plans to seek changes to the system after a lawsuit was filed in 2014 challenging its fairness. But it wasn’t until 2018 that the mayor, along with City Council Speaker Corey Johnson created the advisory commission to study the tax system and find ways to make it more fair and transparent, without displacing residents. The report was originally due last July.
“The property’s tax remains the City’s most important single revenue source, representing almost half of all the City’s annual tax revenues,” Marc Shaw, the commission’s chairman, said in a press release. “The work undertaken by the Commission, first and foremost, reflects our collective desire to protect the City’s fisc, while at the same time making the system more fair, predictable, and transparent.”
The report’s 10 preliminary recommendations include assessing co-ops and condo units, which are typically more expensive, at full market value. This change would redistribute the amount of taxes paid by homeowners, but not lower the total revenue brought into the city. Currently, as the New York Times explains, the owner of an $8 million five-bedroom brownstone in Park Slope pays an annual tax bill of $20,165. A ranch-style home in the Bronx neighborhood of Fieldston worth about $2 million pays roughly the same amount.
Under the proposed changes, even the mayor would see an increase in his property tax bill for the two Park Slope homes he owns. He paid just under $8,000 in property taxes last year on the two properties valued at more than $3 million. “I’m comfortable with fair is fair,” de Blasio said in an interview Friday with WNYC’s Brian Lehrer. “If it means I pay more in property tax, that’s ok.”
The annual market value changes would be phased in over five years at 20 percent per year, with the assessed value growth caps eliminated, under the commission’s recommendations. To protect low-income homeowners, the commission is backing a partial homestead exemption that would shield these homeowners from increased taxes from the removal of the assessed value cap. And the commission is also calling for a “circuit breaker” that would limit property tax bills for qualifying owners to a percentage of household income.
The commission will announce additional public hearings in each borough before issuing its final report later this year. Any reforms require the approval from the Council, mayor, the state legislature, and the governor.
[Via NY Times]
- NYC Council members propose ‘gentrification tax’ for new homebuyers
- State budget director says a pied-à-terre tax could help fund MTA
- Why Ken Griffin’s $238M condo is taxed like it’s worth $9.4 million