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LEGAL/FINANCIAL

HOW LEGAL/FINANCIAL PROBLEMS ARE SOLVED BY NYC CO-OPS AND CONDOS

Fight to Reform City’s Property Taxes Lands in Court

Lisa Prevost in Legal/Financial on May 1, 2018

New York City

Tax Tussle
May 1, 2018

Five years ago, 50 high-priced co-op and condo units in Manhattan and Brooklyn won dubious notoriety as some of the city’s most grossly undertaxed properties. The Furman Center, at New York University (NYU), published a list of the apartments to highlight the severe inequities in the city’s property tax system. Every unit had recently sold for more – and often many times more – than the city’s estimated value of the entire building in which it was located. 

In one of the more egregious examples, a co-op in a 13-unit building on the Upper East Side had sold for $50 million, while the building as a whole was valued at less than $16 million. The undervaluation translated to a hefty property tax savings for the very wealthy owners. 

Those findings added yet more weight to an already substantial body of evidence that New York City’s property tax system is unfair, irrational, and in dire need of reform. Yet not since the administration of Mayor David Dinkins, in the 1990s, has there been any serious effort at overhauling the system. As the inequities have only worsened over decades of inertia, a coalition called Tax Equity Now New York (TENNY) is finally suing both city and state leaders, hoping to force them to act. 

Their lawsuit, filed last year in state supreme court, claims that the city’s property tax system violates state constitutional and statutory mandates requiring taxes to be imposed uniformly on like properties, and to be based on realistic valuations. Further, it claims that the inequities place a disproportionate tax burden on racial minorities, in violation of the Fair Housing Act. Among the suit’s many criticisms of the system is what it calls the “pervasive undervaluing” of co-ops and condos relative to rental buildings, which, it says, essentially shifts a disproportionate share of the tax burden onto the backs of renters. Meanwhile, co-op and condo advocates charge that the most undervalued properties in the city are one-, two-, and three-family homes

TENNY is an unlikely coalition. Its members range from social justice organizations such as the Black Institute to civic groups such as the Citizens Budget Commission to major building owners and operators such as The Durst Organization. Heading up the group is Martha E. Stark, a former New York City Department of Finance commissioner. 

“No one is disputing that the system is inequitable and broken and needs to be fixed,” says Stark, who is now a professor at NYU’s Wagner Graduate School of Public Service. “But no one’s done anything. It’s time for the court to provide guidance about what would make the system legal.” 

One person who disagrees is Mayor Bill de Blasio, who promised to tackle property tax reform during his initial campaign in 2013 and again in his re-election campaign last year. Tired of hearing empty promises, TENNY went to court.

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