A new analysis by Citizens Budget Commission has pointed out one of the more glaring reasons why New York City needs to reform its system of property taxation: homeowners in Staten Island and the Bronx pay the highest effective property tax rates in the city, even though their properties are worth far less than those in Manhattan and northern Brooklyn.
The report focused on one- to three-family homes and condos up to three stories, which are known as Class 1 properties and together make up nearly half of the market value of taxable properties in the five boroughs, Crain’s reports. From that data, the commission found that Staten Island and Bronx homeowners paid more than 1 percent of the value of their homes in taxes each year. In Manhattan and Brooklyn, where median home prices are hundreds of thousands of dollars more, the typical homeowner paid 0.4 percent and 0.7 percent of their property value in taxes. (Rental buildings and larger co-op and condo buildings are Class 2 properties.)
"One of the basic principles of good tax policy is equity: similarly situated taxpayers should have similarly sized tax bills," the report's authors, Jenna Davis and Ana Champeny, write. "New York City’s property tax system does not comport with this principle."
The reason behind the disparities is how the Department of Finance determines a property's taxable value. State rules prevent assessed property values from rapid increases, even in neighborhoods where real-life home prices are growing dramatically. The idea behind the cap was to protect homeowners from huge spikes in their bills. But the long-term effect was to shift the tax burden to lower-value areas of the city such as Staten Island and the Bronx, the report argues. Homes there are now assessed at a much higher percentage of their market value than their peers in pricey areas.
In 2017, a group called Tax Equity Now New York filed a lawsuit charging that the system is racially biased. And this spring, Mayor Bill de Blasio convened a commission to study property tax reform. The commission held its first meeting earlier this week.
"One of the items at the top of the commission’s agenda should be addressing the inequities in the Class 1 property tax by restructuring or eliminating caps on assessment growth," the new report says.
Thinking of buying a co-op or condo? Already bought, and not sure how co-op/condo life and rules work? Learn all about purchasing a place and living in your new community. It's not like renting, and its not like owning a house. What's it like?