The New York City Advisory Commission on Property Tax Reform released their report recently. The report provided 10 recommendations that would drastically change how property taxes are evaluated throughout the city.
The recommendations were designed to lower the tax burden for lower and intermediate income homeowners while shifting the burden to high income homeowners. One of the main changes in the recommendations is the taxing of condos, coops and buildings with 10 or lesser at the same amount as one to three family units. Properties in this category would be assessed based on the sales price and taxed on 100% of the market value. Presently property taxes on condo and coops are based on the potential gross annual income they would receive if rented. Also, property taxes on 1-3 family buildings are capped irregardless of whether the value of the home changes.
In a recent Forbes article, industry professionals weighed in on how this may affect the industry. Lindsay Barton Barrett who is a broker with Douglass Elliman says “If it does happen and we see real changes, I feel that it may result in many more properties on the market, as I do feel that there will be people who have been paying very low taxes in townhouses, may be or feel forced to sell as they have thus far been able to stay in homes for generations due to the low cost of ownership. It could also certainly have a chilling effect on purchases of townhouses with those low rates. Even the current discussion could do the same.”
The Commission’s recommendations are as follows:
1. The Commission recommends moving coops, condominiums and rental buildings with up to 10 units into a new residential class along with 1-3 family homes. The property tax system would continue to consist of four classes of property: residential, large rentals, utilities, and commercial.
2. The Commission recommends using a sales-based methodology to value all properties in the residential class.
3. The Commission recommends assessing every property in the residential class at its full market value.
4. The Commission recommends that annual market value changes in the new residential class be phased in over five years at a rate of 20% per year, and that Assessed Value Growth Caps should be eliminated.
5. The Commission recommends creating a partial homestead exemption for primary resident owners with income below a certain threshold. The exemption would be available to all eligible primary resident owners in the residential class and would replace the current Coop-Condo Tax Abatement.
6. The Commission recommends creating a circuit breaker within the property tax system to lower the property tax burden on low-income primary resident owners, based on the ratio of property tax paid to income.
7. The Commission recommends replacing the current class share system with a system that prioritizes predictable and transparent tax rates for property owners. The new system would freeze the relationship of tax rates among the tax classes for five-year periods, after which time the City would conduct a mandated study to analyze if adjustments need to be made to maintain consistency in the share of taxes relative to fair market value borne by each tax class.
8. The Commission recommends that current valuation methods should be maintained for properties not in the new residential class (rental buildings with more than 10 units, utilities, and commercial).
9. The Commission recommends a gradual transition to the new system for current owners, with an immediate transition into the new system whenever a property in the new residential class is sold.
10. The Commission recommends instituting comprehensive reviews of the property tax system every 10 years.
Mayor DeBlasio in an interview with WNYC believes that the recommendations are fair. He states “So the recommendations that have been put out so far will lead to me paying more in property taxes, period. And I believe that’s fair. The fact is that in Brownstone Brooklyn, there’s been an artificial dynamic in the way our property tax system is structured where even as properties have increased in value greatly, the property taxes have not aligned to that reality. That’s just not right. So we have to make change. And I think the basic principles that this commission has put forward are the right ideas. So look, I’m comfortable with fair is fair and if it means I pay more in property tax, that’s okay. It’s fair.”
BJD Property Management is a full service NYC property management company servicing the boroughs of Queens, Brooklyn, Manhattan and the Bronx. Whether it be a 1 bedroom condo or multi-family building we are able to assist our clients maximize their investments.