New York Budget Slashes Mitchell-Lama Property Tax Burden by Half

The newly passed New York State budget contains a rare ray of good news for affordable Mitchell-Lama co-ops and rental properties. The budget slices in half — from 10% to 5% — the percentage of shelter rent that Mitchell-Lamas must pay as property taxes.

With many Mitchell-Lamas squeezed by rising building maintenance, insurance, utility and other costs, the tax relief comes as welcome news.

"Shelter rent" is defined as the total income from monthly maintenance or rents (including any rental subsidies) received from the residents of the project, minus the cost of providing electricity, gas, heat and other utilities.

"The goal of this reduction is to ease financial burdens on affordable housing providers, allowing them to invest more in building maintenance and repairs, thereby preserving long-term affordability for residents," says Carl Cesarano, a principal at the accounting firm Cesarano & Khan.He adds: "Further legislative efforts are also in progress. Senate Bill S7123, introduced in April 2025, proposes a reduction of the Shelter Rent Tax to 0% for Mitchell-Lama developments in New York City, with an option for other municipalities to opt in. If passed, this would align Mitchell-Lama housing with other affordable housing programs currently exempt from property taxes and would significantly improve financial sustainability for these developments."

In a statement released with the new budget, New York State said: "The current (10%) tax abatement is often insufficient to address escalating increases in insurance, utility, and taxes that endanger building quality and the financial health of this critical supply of affordable housing. To provide much needed relief, Gov. Kathy Hochul’s budget agreement includes legislation that will reduce Mitchell-Lama shelter rent taxes by at least half in New York City and allow for the same by local opt-in in the rest of the state."

Born in the 1950s, the Mitchell-Lama program now supports 105,000 units of housing in New York City that are affordable to low- and middle-income families.

"This real property tax relief will aid many Mitchell-Lama properties to address needs without having to charge residents more rent," the law firm Nixon Peabody states in a client advisory. "Mitchell-Lama housing (has)...suffered from inflationary pressures, most particularly in regards to insurance and utilities, while at the same time confronting challenges with collecting on rent arrears. These combined challenges — increased costs and constraints on revenue — have resulted in some owners struggling to keep up with the needs of properties and have led to deferred maintenance and in some cases deterioration of property conditions."

A case study of these challenges is unfolding at Rochdale Village co-op in southeast Queens, a sprawling 5,860-unit complex. This co-op is facing headwinds shared by other Mitchell-Lama developments across the city, including hefty debt payments, rising insurance rates and delayed upkeep that has only grown more costly.

Rochdale Village is bracing for an $11.4 million shortfall next year, according to the co-op’s records, Gothamist reports. To make up the difference, its board of directors approved a 22.3% hike in monthly costs for residents in January. That decision is still pending approval from the state’s housing agency, which could force the co-op board to go even higher.

“This is happening in many [Mitchell-Lama] co-ops,” says Adele Niederman, president of the citywide organization Cooperators United for Mitchell-Lama. “Carrying charges are not going up 2% or 3% or 5%. They're going up 20%, 30% or 40%.”

Given those numbers, many Mitchell-Lama residents will embrace this rare ray of good news that their property taxes are being cut in half to just 5%. And they're surely hoping that the number soon drops to 0%.