Paula Chin in Legal/Financial on July 9, 2021
This just in. On June 30, the New York City Council and the Mayor’s office announced the property tax rates for the 2021-22 fiscal year, and there was good news for co-ops and condominiums: a decrease in the tax rate for Class 2 properties, which include co-ops, condos and rental buildings.
By the numbers. The Class 2 tax rate declined by 0.3%, while the rate for Class 1 properties – residential buildings of up to three units – dropped 5.1%. (The rate for Class 3 utility properties also saw a sharp decline of 4.2%, while Class 4 commercial properties saw a modest rise of 0.6%.)
The new rates came as a welcome surprise. “Many industry professionals, myself included, expected a large increase to offset the sharp drop in property tax assessments due to the pandemic,” says Brett Gottlieb, special counsel at the law firm Herrick Feinstein. Tax assessments for 2021-22 declined by their largest margin in over 25 years, and there was an overall market value decline of 5.2%.
Bottom line. For co-ops and condos, the 0.3% property tax rate decrease doesn’t necessarily mean that their final 2021-22 tax bill – which is determined by multiplying a building’s assessed valuation by the tax rate – will be smaller. “The new tax rate is virtually the same as last year,” says Paul Korngold, a partner at the law firm Korngold Powers. “So it all depends on whether a building gets a reduction in its taxable assessed value from the prior tax year.”
Boards would also be wise to curb their enthusiasm for 2022-23. “Now that we’re coming out of the pandemic, I expect significant increases in assessed property values,” Korngold predicts.
Gottlieb concurs. “Condos and coops are taxed as comparably situated rental buildings,” he says, “and therefore are directly impacted by vacancy rates and rent reductions. As vaccinations increase and employer mandates to return to work rise, vacancy rates should subside. If they drop sharply, it’s a good assumption that assessed values will resume their upward trajectory.”
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