Unpaid property taxes in New York City are soaring as homeowners struggle and the pandemic recession slashes the rents landlords are collecting from both commercial and residential tenants, The City reports. The property tax arrears rose to $1.3 billion in February – 4.5% of the almost $30 billion due, according to figures released by city Comptroller Scott Stringer.
Meanwhile, many co-ops and condos with commercial space in their buildings have suffered a pandemic-induced loss of rental income from their commercial tenants, yet relatively few co-ops or condos have seen sharp increases in arrears on residents’ monthly maintenance or common charges – or on their buildings’ property tax payments.
“At the co-ops and condos we manage, arrears have actually trended lower during the pandemic,” says Peter von Simson, chief executive at New Bedford Management. “I can’t explain why, but I’ve found that people in co-ops and condos are very understanding that the buildings have to pay their bills. The operating budget was set on the assumption that everyone is going to pay their fair share. Shareholders and unit-owners don’t want to have a problem with their primary residence, and they’re concerned that the co-op or condominium might take a hit if they don’t pay.”
Commercial properties account for just over half the unpaid taxes. Meanwhile, the percentage of all residential properties that are in arrears on their property taxes – apartment buildings, co-ops, condos and one- to three-family homes – is 4.9%.
City officials and some real estate experts are divided on whether unpaid property taxes will increase in the months to come amid an eviction moratorium that goes through at least May 1 coupled with widespread economic suffering among New Yorkers. Von Simson says he is hearing “a lot of chatter” that renters are withholding rent payments in the hope that the government will come to their rescue with rent subsidies or some other form of aid before the eviction moratorium expires. Co-op and condo residents, he adds, are harboring no such hopes.
Building owners who are struggling to pay their property taxes find themselves in a double bind: the city imposes a stiff 18% penalty on unpaid taxes. The Real Estate Board of New York (REBNY) is pushing for passage of a bill in the state Legislature to reduce the penalty to 3%, given the impact of the pandemic. The Hotel Association of New York is asking for no penalties on taxes owed by its members.
“In normal circumstances you need a big enough stick to make sure people pay their bills,” said Paimaan Lodhi, senior vice-president at REBNY. “But these are unprecedented times, the 18% interest rate is onerous and punitive.”
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