Sellers have to realize, that when taxes (the have a capped deduction - thanks GOP) and common charges go up, you are asking a buyer to assume your liability not buy an asset and prices need to adjust downward) for that to make sense.
Plus property prices need to fall for assessments to fall.
As someone who used to own on the Upper West Side, I have to say, these prices are probably normative to people living there today, but seem absolutely insane to me. We live in a huge nation and there are so many other places to move to that cost less and offer space and privacy. Upstate anybody?
1
SO tired of reading about the rich and their travails in living in NYC!
Poor things, having to pay TAXES (yes, taxes! ) on their million dollar and plus condos. The humanity!
9
Whenever I read about the real estate issues in New York City, I find myself wondering why people are living there. I am able to live in a 3500 sq ft. house with an outdoor deck and 1/2 acre lot and pay taxes of approximately 5k per year.
I get that there is great theater there and there are great restaurants there , but we have theater and excellent restaurants, too. And we can still take week long vacations to NYC and be still be far ahead financially.
I certainly hope the soft real estate market in NYC does not spread to the rest of the country.
7
@pajaritomt
If your high paying job is here, you live here. If you are a wealthy person from anywhere in the world, you can afford to invest in real estate here, or keep an apartment here for occasional visits.
1
@A. Brown So essentially no one but the super wealthy belongs in Manhattan.
How do all the people who work in regular jobs (teachers, deli countermen, super market cashiers, security guards, etc.) swing it? I guess they all live in the Bronx now?
Very interesting articler and well reported. Let's not forget that a lot of these condos were money-paundering schemes by foreign kleptocrats. They are willing to eat a loss because the money was embezzled to begin with and a transaction makes it "clean." They drove up prices too and are now pulling out to grab some value. This would be a good time to means test buyers and set property taxes accordingly, since doing so could help the housing crunch. And nonprofits can buy as well. If they are tax exempted they can then charge a more reasonable rent for people with fixed incomes.
11
This raises the issue of property tax classes and the deBlasio Property Tax Reform commission that seems to be running out the clock on the Administration’s second term without submitting any recommendations.
Let’s demand that we get to a system that treats apartments (owned and rented) and single family/two-family equitably — and transparently! No reliance on multipliers and “adjustment factors” for the different classes.
4
The taxman always cometh for everything
2
New York City property taxes are still a bargain compared with those in Westchester or Nassau Counties for the same priced dwelling. Are they too low in NYC or too high in suburban counties? And why?
4
@Donna Gray But NYC has the income tax that I believe is close to 4%
4
@fromnyctofll - But what does an income tax have to do with property taxes? Someone not working locally can own a residence and the pay no income tax. Why is NYC residential property taxed at such a low rate?
5
@Donna Gray NYC residents also pay NYC Income tax.
6
Some comments think that taxes should be tied to market value, especially citing neighborhoods that benefited from the giant runup in value from 2014 to 2016 (LES walkups suddenly selling at $2M? rehab notwithstanding that's a stiff price for a shoebox without an elevator. Fringe Brooklyn row houses selling at $4M? the goal used to be to move out and move up but now those neighborhoods are having a renaissance).
But marking taxes to market price would leave city and municipal budgets vulnerable in any downturn: if prices plummet, should the tax revenue plummet also? That is why one mechanism to make the tax burden more "fair" is a greater transfer tax at sale for properties over $1M. However, in today's declining market, the "millionaire transfer tax" effectively lowers many market values, when units that might have sold for $1.5M 2 years ago have begun listing at $995K today to avoid the extra tax on sale. That lowers other comps and pushes the price decline a little further overall.
Assessed value for taxes, like assessed value for insurance, is often far below market value which can fluctuate, especially during rising markets. A home bought for 550K and renovated for an additional 200K will probably be insured for 450K replacement value, not 750K. You hope it doesn't burn down.
@Aubrey
Many taxes in the US are regressive taxes... and one could include the property tax in some cases.
This becomes an interesting question. (And the 421-a was assigned to Hudson Yards as well as the foreign investment (500K) for green card status.
In a gentrified neighborhood where people had lived for a very long time, property taxes could be raised for the new people and the old residents left with a lower tax. We have multi-tier situations all the time in terms of things like wages -- young un paid less than old ones, new benefits.
Frankly, it's time to rein in ruthless capitalism.. There's lots of construction going on in NYC currently because of FECERAL gifts (taxwise) to developers-- I wonder why?
1
@Auntie Mame well without supply, prices will skyrocket further. So thank developers, don't blame them
It's about time.
However, I am shocked to see new condo buildings still touting 421 tax breaks in their ads. Why on earth are they still allowing new buildings to go up with these "incentives?" Incentives are needed to get people to build luxury housing in New York?
9
@ellienyc
The article stated several times that the program
ended in 2016.
4
I recall a friend who back in the late 80's was holding on to a Mitchell Lama apartment in what he described as a project. Once the building lost the tax abatement it was expected the rental would convert to a co-op and the price of the apartment would soar. I don't know if this article is describing the same subsidy / tax break but I can't help but chuckle that million dollar apartments that probably did not need a subsidy / tax break are losing value.
6
Developers sold those apartment for whatever the market would bear, to people who by and large didn't intend to be there 25 years down the road. Net result: better prices for the developers - who, now that the bill has come due, are long gone from the scene. A classic giveaway of taxpayer funds to the connected class.
22
"Created in 1971 to spur development in neglected neighborhoods of New York."
"Neglected" in the sense that developers weren't making enough money? Aside from a few units in East Harlem, those apartments are mostly targeted at professional-class high earners.
9
So how much more additional money will flow into the NYC treasury? I wish the article had taken a stab at that. Also, it's not "taxman," it is "tax person" or perhaps "taxer." The NYC Dep't of Finance employs many women; some have been that agency's Commissioner.
1
@Gary Marton It's a play on Eugene O'Neill's "The Iceman Cometh". You'll have to agitate for re-titling the play as "The Ice Person Cometh" - and succeed - before you get to tackle the title of this article.
25
I am much more interested in the negative pressure the softening market will play on Kushner and family..... since they are overloaded with debt, are cheating schemers, and are key beneficiaries of these tax abatements as they use it as a selling tactic for their real estate.
For homeowners.. this is really no different than baloon payments accepted on the back end of a mortgage.. or heavy discounts on a mortgage for the first few years.. and then BAM! If they did not plan for it.. that is on them.
10
@Chuck Kushner Inc. can count on their pals in Qatar to bail them out. (What are friends for, if not to be extorted by your father-in-law?)
9
There was never any reason for these tax abatements that cost the City millions of dollars.
All of these sites would have been developed, perhaps with cheaper prices, which would have meant lower eventual taxes.
By now, development is occurring by itself even in The Bronx. I hope no one ever puts back tax abatements.
Thank you Mayors Bloomberg and DeBlasio. :(
Bloomberg ought to reimburse the City for lost taxes out of his petty cash drawer. What's a hundred million to him?
17
@DanO I bought a coop at an insider price back in 1989, and a few years later bought another one in the same building. The building was built back in 1953. The building is located at the last residential block in Northern Manhattan (Inwood). How does this affect me??
1
Thank you for the schadenfreude to go with the morning coffee!
A person with a multi-million dollar property who can't afford another $10K in taxes could never afford the property in the first place.
29
There are glaring omissions of obvious journalistic relevance omitted from this analysis.
The omission of the adverse impact of the “10% tax cap,” is mentioned by many posters as well it should. DId the brokers really not want to remind the few potential buyers of that fact?
The tax cap subsidizes luxury developer interests over that of condo-primary resident owners. It does this through the back doors in the new tax code that enhances their depreciation take out, and supplements this with flexible valuation that also fails to touch all the artificial inflation in land values maintained so long as failure to develop is so supported.
The artificial stimulus that was being provided by VISA and phony 1031 tax exchange purchases have also been impacted because there are a lot of lower state environments like Florida that are will ing to far further out on a limb in supporting such schemes than NY.
Then there. Is the low hanging fruit of the corrupt NY system of building management scheming to find their fee in support fee driven charges piled onto condos such as “transaction fees” that amount to “flip taxes” and other creeping fees and restrictions that turn condos into coop condo hybrids in practice. The NY condo has degraded into a much harder property to buy into without paying lots of unexpected fees for everything from architectural reviews and approvals to time process imposes on impressive alteration agreements and restrictions at NYC inflated contractors.
9
I've never underestimate the ability of government to tax, and always planned for that eventuality. Pay the piper first, then buy luxuries.
8
These abatements were the equivalent of the exploding mortgages that ultimately buried the economy 11 years ago. The abatements are isolated enough to limit the damage, but they serve no purpose except to increase developer profits and shift tax burdens.
14
@Mary K
No, nothing like adjustable rate mortgages.
The tax abatement was clear, not dependent on
mysterious forces.
Interesting articles, but the bigger story is that the entire real estate market is crashing in NYC.
Crazy high taxes are driving higher income earners out and the foreign investors are gone.
3
@Tall Tree Now that Cuomo has ensured that anonymous LLC's can continue to pour dirty money into the market, those foreign "investors" may soon return. There are still many billions of rubles (and pesos) in need of laundering, and the skyline has room for many more dark towers.
5
I was born and raised in NYC and understand why people love living there-until they get out and into a place like mine where they can live in a 3200 square foot 100 year old house in a small city outside a big city and be in the outdoors all year round and pay taxes of $9,000 a year. I feel sorry for the lack of property tax deductions the vicious republican tax plan inflicted on us as well as all the other blue staters but why people are willing to pay the prices quoted in the real estate stories about NYC to live in walk-in closet sized apartments I cannot fathom. And having traveled back to my once home city in recent years, the noise level alone would drive me out. Sorry my once fellow New Yorkers, as high as property costs are here on the other coast, you are being ripped off.
11
Well, Hazel, people of all sorts -- young people from the Midwest and New England, immigrants from all over the world -- come to New York City for job opportunities. And they do get jobs and prosper; and if they do not prosper, their children do.
Some stay because they enjoy the "vibe."
Others of us, born here, live here because we always have, as did our parents and grandparents, and New York City is our beloved home.
How nice that you chose to leave and you're happy. Good for you.
13
I imagine a good portion of the buyers could care less. They buy and sell painlessly.
4
The biggest burden on carry costs at the moment is local law 11. Inspecting buildings every 5 years is the equivalent of a 25 mph speed limit on the highway.
4
@Brett and yet there are still examples of people being hit by debris.
3
Strange to see no mention of the impact of the new cap on deductibility of the RE tax.
12
I'm not a wealthy man and in some ways could sit back and be unsympathetic. But that is not the case here.
I think that these people are victims of the NYC council/mayor and the crazy property taxes being charged in the first place.
The amount these condo owners are getting hit with is insane given that the city is home to Wall Street and has an income and sales tax in place.
However, I think some of these condo owners--many left leaning residents of Williamsburg/Upper West Side--will get a wake up call when they start looking at how their inflated taxes really are being spent.
Obviously these taxes aren't paying to fix the roads. Instead much are going on irresponsible projects that legislators fund to win votes from select constituencies.
22
@Michael Murray I have never understood how most people living in NY afford it - period. Real estate in NY: the market at its finest or just capitalism run amok?
4
@Cathy Welker
Higher salaries for most jobs. Or family money.
4
@Cathy Welker It's an oligopoly, selling goods in very high demand and very short supply. (In the NYC real estate market, a "recession" is when prices don't rise as quickly as developers and speculators would like.)
4
It’s a known fact when you purchase the condo that a big tax bill awaits you. Denial is a real thing. I find the tax code unfair when you have homes in The boroughs that are private 2,500 sq ft to 6,000 sq. ft to pay taxes under a $3,000 to $5,000, respectively. When you have condo or co-op owners sharing a smaller carbon footprint paying way more.
15
@Moondance
I don;t know what average taxes and prices are like in the boroughs. But out in the suburbs, the tax bite is much more painful for homes of equivalent assessments. In part the under-taxation of Manhattan may have been a major part of pricing out many would be buyers (boosting the price because taxes were artificially low).
The taxes quoted for sizable homes seem unbelievably low . . .
4
My property taxes haven't been $3000 in twenty years. They have more than doubled, almost tripled. And it's a small house on a narrow plot.
7
Poor rich people.
10
“The Taxman Cometh”?
More like:
“The Candyman Raneth Outeth of Goodieseth.”
This was all a one-percenter’s game.
Maybe Trump will feel your pain.
13
You really need to compare the condo tax bills to coop tax burdens. Taxes on most coops are 50% of the maintenance which makes my tax bill roughly $15,000. There's no context in this article.
Taxes should never have bene or be abated on luxury condos. J51's started in 1972 when the city was bust. They should have ended at least 20 years ago. And foolish people who don't look ahead by more than 10 years.
32
The 421A Tax Abatement was a subsidization of developers because it allowed them to charge buyers higher prices due to the "reduced" monthly carrying costs of lower real estate taxes. This effectively meant that NYC's individual taxpayers were subsidizing NYC developer profits. Scandalous!
52
Does this also apply to co-ops or just to condos?
@JerryV New coops are essentially non-existent. Developers don't build coops.
5
@DanO, Yes but I live in a coop! I see now, however, that this applies to relatively new buildings. Thank you.
1
Poor little sellers! They knew what they were getting themselves into when they bought, that their tax abatements would expire one day. No sympathy out of me.
15
It’s too bad these buyers couldn’t see that the 421j tax abatement was nothing more than a giveaway to the developers. In this new gilded age, you really do need to be extra cautious and look out for yourself because the game is always rigged in favor of the big boys.
31
Well done Mr. Bloomberg! You told us this is the measure to fix the city after 9/11. Tax abatement for the new buildings, way higher taxes for pre war buildings _ someone has to pay taxes?!
You, personally created a problem for the future! Well not your cup of tea? When the last building will come out of your handed over tax abatement you will long be gone (30 years). And you say you can fix the environment? Uhhhh, I doubt that..
13
@Elsa The 421-a abatement is in a law passed in Albany. It's not the mayor of NYC who is to blame.
2
@Elsa He didn't personally create a problem. The end of the abatements was well known information. This is not a problem that sprung out of nowhere. It was a 10-25 year program that is expiring. No surprises.
The biggest real estate tax break goes to none other than.....Warren Wilhelm, best known these days as Bill De Blasio, mayor of New York.
This mayor who cares so deeply about taxation is the beneficiary of ultra-low real estate taxes for his two townhouses in Park Slope. Combined he pays under $8,000 per year in real estate taxes for real estate valued at around $3 million.
That is less than a single 1-bedroom condo pays in New York.
The 421-A was a huge scam: it tempted buyers with super-low taxes for 5 years, but after that as the taxes rose, they topped out at rates FAR higher than similarly valued, neighboring properties.
18
Very few if any 421 tax abatements were used to build affordable housing. The building known as One57 benefited as I understand did Hudson Yards although the program may have had a slightly different name the alleged purpose was the same. In the end tax abatements have been used by developers to ensure they make big profits and that multimillion dollar properties pay less taxes that the average one bedroom coop! They did help make sure that that no billionaire went unhoused!
I venture a guess that their will be a big push to end these abatements because it’s “so unfair”. The answer should be NO!
8
Cheers for the free market at work.
1
@GM you forgot the quotes around "free market".
5
@GM It's not a free market when Albany decides which areas get tax abatements and which do not. That is market distortion caused by connected developers or lobbyists. I think the "free market" could assume that the Upper East Side would always be an attractive place to live.
They never should have gotten those abatements for multimillion dollar apartments And certainly not for any owner who is not a nyc resident. It’s crazy how there are thousands of empty units that contribute nothing.
23
The writing style of this piece is far too sympathetic to these people. They’re looking for “relief” from the “burden” of paying their fair share of property taxes. “The tax man cometh.” Be real. These rich people (sometimes foreigners) got a huge tax break at everyone else’s expense for years, and now we’re supposed to feel bad that they’re finally going to pay what everyone else has always paid? This knee-jerk taxes-are-always-bad attitude shouldn’t be applied to rich condo investors.
42
@Elizabeth
Most 421-a owners are winners. Only the one's that have to sell into a bad socialist driven market are losers.
Trying to wrap my head around tax abatements for LUXURY HOUSING as some kind of good idea.... Nope, it isn't.
These tax laws that reward investor/rentier class have got to stop. It's welfare for rich people.
Not sorry for the fools who thought the gravy train would last and that they could make a buck on the public tax-deferred dole.
33
Repent ye sinners the end is near.
The big developers lenders will keep their billionaires but the upper middle class working stiffs who thought it was a great idea to buy will get burnt.
In Greenpoint here, they plan to build 15-20 towers circling the waterfront area here. They have built two and already see if they build another one, they will have trouble selling lux condoes/lux rentals.
There is already hi rent commercial blight here on Franklin St. because of the insane commercial rents demanded.
11
If you can afford a $5 million luxury condo, then you can afford a $28,000 tax bill.
30
@CV Danes
In my town that would be the approximate tax on a home selling at about 1/4 the price ....
6
So, let me see if I got this right: we’re supposed to worry about these folks that were ENTIRELY aware of breaks and that they would end and are now faced with paying their fare share of taxes rather than being subsidized by other NYCers. Lol.
27
Although this is about luxury housing, it underscores the need for media coverage - NY Times included - to be really vigilant and clear when reporting on housing/development/affordable housing etc issues.
So many reports, articles and discussions about development and "affordable" housing fail to mention if the "affordability" is limited (eg tax subsidy period of 20, 25 years) or in perpetuity - this gives a very misleading picture of the issues at hand.
11
The buyers knew what they were getting into when they bought these places. They knew this time would come. Live with it. Be thankful that you got a sizeable discount for so long. No sympathy out of me.
25
Its terrible but I am completely, utterly unsympathetic about this.
8
@Kevinizon it’s not terrible, enjoy your weekend.
3
@Kevinizon If I had purchased one of these tax-abated/deferred units, I would have considered the reduction a sacrifice of increased equity at the term's end. Insofar as I'm concerned it wouldn't matter as I intended to live in the unit "forever".
2
This is what happens when you live in jurisdictions like NY, NJ, CA, etc. controlled by liberal Democrats whose answer to everything is raise taxes. Sometimes these taxes are quite creative like Gov. Murphy's (NJ) proposed "rain tax". Is it any wonder why more and more people are moving out of these states?
4
Like Massachusetts, all states where there are lots of good jobs. I don’t want to live in a low tax, low cost of living red state full of people who will vote for Trump no matter what.
7
@Mike F. Blue-collar paradises like Mississippi and Alabama await your imminent arrival. Or are your kids still in school?
6
Well done Mr. Bloomberg! He used this law to temporarily fix (?) the city’s budget...
Well then, he more or less sold out the city _ for problems to come later...!?!
As I always say, he was looking out for 12 years but left out to care about the 13. year.. ( subway falling apart, streets, bridges, water system and on and on). Well done!
Capitalist Bloomberg. Take what you can.. and run with the money, or in your case, the glorified honor.... of it..
We! the people have to clean up the mess. With our additional tax money...
Thank you!
4
@Eva The 421-a abatement is set out in a law passed in Albany, not in NYC. The NYC mayor isn't responsible for this; instead, ask: who was the governor of NY?
4
@Gary Marton NYC developers wanted it, designed it, and got Bloomberg behind it. Albany was where it had to happen, so that's where they took it.
2
Is the whole process just finding a greater fool to pass the cost on to?
10
Come to South Florida and live. Our tax rate hovers around 2% of the assessed value and if you are a full time resident - you get a $50,000 homestead exemption and your taxes are practically locked for the lifetime you are living in the property. And, we have no City or State Income tax. Loving Miami.
5
@Darrell Burks
90 degrees; 90% humidity for almost 6 months of the year? No thanks.
Keep your head above water :)
7
@Darrell Burks
Wait until it all starts flooding 6 months of the year. Who is going to pay for your water abatement systems?
4
I. M. Pei designed an abatement? I thought he designed buildings!
10
It's a perfect example of that principle that the further away an unpleasant event is, the less likely the perception that it will actually occur. The purchasers who bought, knowing the tax abatement will eventually expire, pushed such ideas away; they just focused on their current monthly cost when deciding if they could afford the apartment, and imagined that in ten years (1) maybe their apt will increase in value so much, they'll just sell it and....., or (2) the City Council will do something to alleviate the burden on these homeowners---anything but calculate if they will really be able to afford the monthly nut when the tax abatement expires.
As others have mentioned, the developers are the ones who really benefited, b/c they were able to get higher sales prices when they originally built these apartments, by reducing the effective monthly nut for the purchasers b/c of the abatements.
The purchasers only have themselves to blame, if they are now being put into a position where they have to sell b/c they can't afford their new monthly nut.
NYC property taxes have never made any sense, and probably never will; it's such a mess.
11
And the rich get richer through manipulation of government. While the poor people in Mississippi Louisiana and Alabama think that the rich deserve to keep their tax cuts, even if Medicaid and Medicare are also cut.
17
All tax abatements should be cancelled for anyone who is not a resident of NYC.
80
@Bailey T. Dog
It's a contract. The state can't just cancel it.
3
How, you ask, did smart, sophisticated people get suckered into buying luxury condos when the offering documents clearly indicated that real estate taxes would substantially rise as the abatement phased out? Simple. The buyers assumed that over 10 years the market value of the units would continue to rise and rise to awesome levels and more than compensate for the slowly increasing tax liabilities. After all, this was -- wait for it -- Manhattan Real Estate!
26
@Gary E
They weren't suckered. They were smart.
This article is pointing out the obvious.
Of course these units are worth less without tax
abatements in a terrible housing crash.
It's as obvious as apples being red and oranges being orange.
421-a, "created in 1971 to spur development in neglected neighborhoods of New York" was used for condos built in the Upper West Side, Chelsea, Midtown East & West and Flatiron. None of which neighborhoods no real New Yorker would ever consider neglected in the first place. Midtown West would be the slightest reach as they've rezoned an empty commercial zone to mixed use over a rail yard to create the luxurious Emerald City. Great to see tax assistance helping those who can't the muster the extra 20k of taxes on a $1.5 million closet.
28
@Corbin Dallas You're forgetting what the city was like back then. People were leaving in droves.
6
@stache The 421-a scheme was created as an "incentive" to builders/developers because greed wins over altruism every time.
3
@stache
And the are again. AOC and her ilk are destroying NYC. It's barely the financial capital of the US anymore. Pretty soon it will be Detroit with a better park and good theater.
The 421a program only scratches the surface that is the lunacy of property taxes in NYC these days. Owners of $2M condos only paying a few thousand dollars a year in taxes gets your blood going? Try a typical three family brownstone in a prime Brooklyn neighborhood in walking distance from multiple train lines, parks, shopping, good schools, waterfront access, worth $3M, generates $120-$150K per year in income for its owner, $80-$100K even if they live there, pays 3-4K in taxes. While a single family house in a Queens transit desert with literally no local amenities pays 5-6K. That's pretty typical these days and, like the 421a program, the result of good intentions---in this case, a cap on annual increases---gone completely awry.
34
Would so appreciate an NYT look at how and why tax rates vary so much across the city. Also this article focuses on 421-a (were these incentives for including “affordable” units?) — also curious about the j-51 buildings and how that differs.
17
@Kerry O yes, please an article about the variations in tax rates, that is the real issue here.
@Kerry O One difference: J-51 was an NYC enactment, but 421-a was enacted in Albany.
@Kerry O
It's called corruption.
300 square foot apartments pay 15k/yr in property taxes while 3000 square foot private townhouses like De Blasio's pays $3500/yr.
2
“It’s almost this sense of unfairness — that the person who came before them got this benefit, and they’re not..."
Everyone's going in with eyes wide-open. It's a game of musical chair that they are all willing to play, but cry foul when they are left standing once the music stops. Don't expect the rest of us to cry them a river.
31
Property taxes in NYC are inequitable to the point of being offensive. For years we have heard that they cannot be substantially adjusted because of prohibitions in New York State law, controlled by the entire statewide legislature.
While taxes on new apartments like those now adjusting to market rate are fairly high, there are huge numbers of very expensive homes with ridiculously low tax bills. Another commenter here refers to one of the single family homes owned by the current mayor which has a market value of almost two million dollars with an annual tax of under four thousand dollars. The mayor is not the only one reaping this bargain. Homes not just in Park Slope, but in every gentrified neighborhood, pay taxes that may only be twenty percent as much as fully taxed properties. This is because State law prohibits increasing property taxes beyond a certain percentage each year. The result is that property tax increases cannot keep up with soaring home values in these gentrifying neighborhoods, so an owner in a four million dollar brownstone in Cobble Hill may be paying the same tax as a home worth less than half a million dollars in Laurelton Queens. Crazy, but true.
Add to the mix that multi-family homes are taxed at a higher rate than one and two family homes resulting in renters paying far more than homeowners.
Is there a single elected official who will speak the truth about these inequities? Even in liberal NYC, the rich don’t pay their fair share
48
@Kayemtee Make the mayor an offer on his house.
1
@Kayemtee 40 years ago, California voters (not the lawmakers) approved ballot Proposition 13 to arrest rapidly-rising property valuations and taxes. Only now is the glaring disparity between residential and commercial property being debated. Prop. 13 has done more good than bad for the state. It would never have happened if the state constitution didn't have the ballot initiative provision to hold legislators accountable. Unfortunately, virtually every state east of the Mississippi doesn't provide for this and it's too late to do anything about it.
1
@RdM
Seeing whom they elected President, I wouldn't trust most Americans with a proposition vote.
The real problem is the artificially low property taxes for single family homes in nyc. Mayor Bill de Blasio only paid $7,098 in property taxes on his 2 properties valued at over $3mm.
My taxes are $13k on my condo valued at under $1mm.
59
@AW
New York City makes much of its tax money from the imposition of its Resident Income Tax. You pay income tax to The City if you live there, regardless of where you work or how you made your money. As a result, the property tax is lower than in surrounding communities where they have no tax based upon residency.
7
@MIKEinNYC -
That does not explain the discrepancy between taxes on a single family home and a condo, both of which are in NYC.
19
@AW you guys think NYC have tax problems? I live in Tampa Bay area, lived in a house worth $400k ish my tax bill is $3600 because of save our home tax program. Just bought a rental house, last owner pay just $466 in tax per year but my new tax bill on the rental jump to $2200. So the poor guy have to pay higher rent. Btw the rental home is only worth $150k. Sad, poor people pay the most. Also wanted to trade my house and upgrade to $600ish but my new home tax bill would jump to over $9k, no thanks, not paying $800 per month in tax. Sad systems. Why do I have to pay higher tax just because I want to lives in a nicer neighborhood.
When we lived in Cornwall-on-Hudson, NY, the tax bill on our home grew to almost $2,000 per month (per month!). After we bought a similar-sized home in Greenville, SC, five years ago, our tax bill became $1,800 per year. You read that right--per year.
No, wait, it gets better. Since property taxes include our two cars, which get older every year, our taxes have gone down (down!) annually and now total $1,500 per year.
Come on down, y'all!
20
@Gramps South Carolina ranks 42nd overall on US News & World Report’s ranking of best states, including 43rd in education and 46th in crime. There’s a reason why low tax states are low tax... to convince enough people that it’s worth living there.
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@Gramps of course taxes are way lower in SC relative to NY. There is no comparison to the two with respect to a host of social services, education, etc. I am just north of you in Asheville, my property taxes are lower relative to Ann Arbor MI (where I moved from), and I am as far south as I will ever go. I would never live in SC for a slew of reasons, but only to visit Charleston and maybe downtown Greenville, which is very nice. The other commentator best said a few of the reasons.
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@Gramps A Russian friend of mine made the exact same argument when he moved from the US back to Russia. Low taxes in Russia! I told him, you get what you pay for.
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Well, it should come as no surprise. Such tax abatements, unless they are for blighted areas, are not a worthwhile endeavor for anyone. The sales numbers clearly show the past rate of accelerated sales only borrowed from those of today.
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I think buyers and sellers now and then can do the math on prices, condo fees, and taxes. And since these taxes are a matter of public record and not changing, they should be priced into the market.
But I suspect savvy buyers and sellers have a bit more information and opportunities: they can put together all the abatements and information about potential buyers to understand when they can buy or sell. Indeed, since most of these are owned by investors, and REIT's coordinate with each other, they can essentially plan how and when to hand over the bag. Most likely, one firm agrees to be last out in City A, in exchange for being first out in City B. These agreements are made as part of entering the market.
Both totalitarian governments and mafia know they can manipulate supposedly free markets simply by coordinating covertly. The wealthy are happy for their investments, but the future is funding them.
Welcome to Trump's world.
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@we Tp
Trump honestly campaigned on his statement that the system is rigged to favor the ruling elite. That is the mortal sin, violating the code of silence, that has resulted in establishment Democrats and Republicans engaging in their efforts to defeat his election and to remove him from office.
Every effort of Trump to support free market principles is resisted by the left.
Progressives live on a false narrative that their policies are designed to help the common man when in fact they are designed to favor the cronies.
Although it is hard to shed too many tears for someone who paid $1.6 million for a condo because it had property taxes under $1,000 and now the property is only worth $1.3 million, the reality is that the developer got 100% of the benefit of the tax abatement at the expense of the other taxpayers in the city would had to cover the tax abatement. Just because someone could finance $1.6 million in the past doesn't mean he was smart enough to understand that the premium he was paying to the developer was greater than the value of the tax abatement he was getting.
When the Democrat progressives are in charge, it is no longer anything close to capitalism or a free market.
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@ebmem :0 funny one....
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@ebmem Right on. Republican conservatives would never do this.
Oh wait...
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I guess this means NYC real estate is not as good of a money-laundering opportunity as it used to be. Have faith. New opportunities will arise.
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@WmC
It is still just as good for money laundering, except for the fact that the beneficial owners of LLCs have to be disclosed.
Foreign oligarchs, along with other criminals, who have dirty money to launder, are not particularly interested in making a profit on buying and selling assets. It's gravy if they do make a profit, but the objective of money laundering is to make illicitly obtained money look like it is legitimate.
Criminals can still roll in with a wheelbarrow of cash or a wire transfer from an offshore bank and buy an apartment.
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@ebmem
No, that was eliminated.
@ebmem Cuomo put the kibosh on that disclosure thing. For some reason that also goes undisclosed.
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Sorry, I have no pity for the folks in these condos. For the vast majority of us poor US citizens, we'll never even get the chance to dream of a multi-million dollar condos- but also never have to worry about $28000 tax bills. If you can afford to spend 1.3 million for an 851 square ft apartment, that's your choice, live with the taxes.
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@Mike K. A $28,000 tax bill on a $1.3 million condo seems on par or just a little over what a $132,000 condo pays in taxes ($2,000 + depending on the city) why have these abatements anyway. It's a huge subsidy for the well off and rich.
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A tax break since the 1970's, no tax break like a tax break for those that don't need it.
Welcome condo owners to the world of actually paying a bit of your fair share in taxes.
This week my sympathy goes to those Americans who will lose Snap assistance and go hungry. Not Americans living in condos valued above my lifetime earnings.
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@Heidi
You will be hard pressed to find a single American losing his food stamps who will go hungry.
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@ebmem - Evidence, please? Food pantries in my area are are increasingly used and many local college campuses are now creating food pantries.
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@ebmem Food pantries, church basements, tent cities, and GoFundMe as a health care system. Welcome to Republican America.
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The higher taxes are still lower than California property tax rates, which are way lower than New Jersey. In CA, property tax starts at 1% of purchase price, and that amount goes up just a little each year. So $4 million purchase is $40,000 annual tax, year 1, in California.
Predictable, calculable, controlled by buyers’ bids.
BUT! Prices are still out of line with incomes overall. I would never be able to purchase my own house in Del Mar today on my income today. Both have gone up, but disproportionately.
Whatever drives this imbalance — and I have no idea what it really is — is driving us off a cliff. (Or Coastal bluff? But they are eroding.)
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1% is actually dirt cheap and robs California citizens of much needed tax revenue. The problem I have with your post is that you mention a $4 million property carrying a $40k tax bill, which isn't much for someone paying that kind of money for a home. How many Californian's can afford to purchase a $4 million property? Truth is, according to the CA Real Estate Association, the average sale in the sate is for $440k, which means a very manageable $4,000 tax bill.
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@Marc Jordan The bigger issue here is Prop. 13 which grandfathers both commercial and private properties at a 2% a year increase since '77. It doesn't take an accountant to figure out after 40+ years those who held (or sold corp. shares for commercial) are the new landed gentry.
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@Mark ,
Yes, they are the new landed gentry. On my street, most households are Prop13. As we purchased in 2003, our property tax is approximately 6.5-7X theirs. The state and city revenues could be increased considerably if we all payed the same valuation. For the Prop13 crowd, this could be achieved with a 3-5 year phase- in. This would help fund the continued over the top pensions of firefighters and police.
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In this age of income inequality and rising homelessness, I question the morality of "poor" owners who cab buy $1 million plus condos, being given any kind of tax break. It seems that such tax breaks were also exploited by rich foreign investors of questionable source of money.
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Now where did I place my violin? I know it's around here someplace.
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And during the abated period, the low taxes were deductible as well. Now with Trump's new tax law the unabated taxes will not be deductible, hitting the owners doubly hard. As for Mr. Ngai, the potential buyer of his condo wIll always ask when his abatement ends and as the time becomes closer and closer, the offers will be less and less to account for the reckoning to come.
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@Tom First 10k is deductible.
A full city property tax reevaluation is required.
There are a large number of properties and entire areas that are undervalued for tax purposes. Compare a $1 million condo in Williamsburg with monthly taxes of $650 a month vs. 46 South 2nd Street paying abated taxes of $33 a month vs. 170 E 87th St. 1BR with monthly taxes of $1,310 -- ($15,720 annually) listed at $1.1 mil. All similar prices/valuations, but radically different taxes.This is grossly unfair.
Either all areas share the tax burden equally and/or the city is missing out on lost revenues and incurring extra debt and under educating our students, not keeping up our public housing stock.
We need a simpler and more equitable formula for property taxes and fewer exceptions for "special cases." For example, Mayor BIll de Blassio's Park Slope home with a market value of $1.9 million paying a 2017 ANNUAL tax bill of $3,581. ($298 monthly) (Crains NY)
We need a fairer system.
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@Jay
Without the abatement program, nothing would get built, because the numbers would not pencil. That would only exacerbate the housing supply crisis.
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@Andy Deckman
There are MANY projects currently being built without abatement programs. My point was fairer taxes for all -- STOP the games, the exceptions, the politics and the more than 30 lawyers doing certiorari work fighting tax bills in Queens. This is nuts. We need a FAIR tax system that works. Stop using property tax subsidies to fund affordable housing. This is an inefficient system full of exceptions, favoritism and "special deals".
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@Andy Deckman If you're referring to the "housing supply crisis" as it affects the $4MM apartments and overseas buyers, I have little sympathy.
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I am not sure the point of these tax breaks in a city where housing is scarce and developer profits are lush. And why are foreign investors that in many ways lead to our housing crisis afforded tax breaks the same way residents do?
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@Leo
The point of the tax breaks is to funnel more public money into developers and politicians pockets
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@Leo
"the solution to housing scarcity is taxing new supply" - people who slept through econ class
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@Andy Deckman
Because of high land and labor costs in Manhattan, every single apartment that gets built is for the rich, who do not have a housing scarcity.
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While the sale prices may go down, the overall monthly carrying cost for these properties remains the same. The problem is that the abatement created a bubble in the prices much in the same way that subprime mortgages drove up housing prices prior to the 2008 crash when access to easy capital and low interest rates inflated housing prices. If the owners had factored the full monthly carrying costs without subtracting the abatement, they would be fine, but instead many used the abatement as leverage to buy a property out of their price range.
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@ Matthew "If the owners had factored the full monthly carrying costs without subtracting the abatement, they would be fine.." Agree with this statement but not sure how one would go about doing so in NYC with a new development.
Back when these buildings were built, the real estate industry had such clout in Albany that these buyers were no doubt breezily assured by that the tax abatement would be renewed or "something" would happen that would stop the tax increases. In any case, no one was interested in looking too far into the future. Even at their reduced prices, these condos need to take another fall before they're in line with the market.
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They knew the deal going in unlike the mid class that bought ballon mortgages and were lied to. This will be a grind down on prices as well as declining wages where out sourcing, and so called productivity is cutting wages by 40%. But everyone wants to sell to the high income earner, who by the way already has a house to two.
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Abatements are thoroughly explained in the offering documents. The first two years is often a mini-tax and the full taxes are then phased in over a ten year period, sometimes longer. There's simply no excuse for the buyer not understanding the finances especially since they hire lawyers to help them go through the decision.
What's less understood is that the benefit of the abatement is not really enjoyed by the buyer but the seller who can obtain a higher purchase price than he otherwise would. In effect the purchase price is the present value of the discount more or less. As the abatement winds down the value of the real estate decreases by the amortized benefit.
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In spite of what the (dis-proven) trickle-down theory asserts, we would be much better off with LESS wealthy people and a more affordable city. Any lost earnings from luxury spending by the elite will be more than offset in lower costs of living.
We are far past due for a huge correction in the ridiculously inflated real estate market .. A correction that will bring affordability to most people.
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@Celeste Unfortunately, I don't think the correction, such as it might be, will bring housing anything near affordability for 99.9% of the population.
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@Margaret
Agreed. Nowhere near 99.9% ... But anything would be an improvement. Maybe it can bring affordability for 60% of the population? 70%?
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@Celeste With current construction commodities (i.e. labor, steel, concrete, equipment) priced at all time highs, affordable housing (even at break even) can be accessed by maybe 40% of the population. And that's generous. The only way to reduce the cost of housing is to build it in cheaper locales. The cost of building in NYC is just too high.
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The stage is set for a major real estate correction.... at the expense of all New Yorkers. The abatements have contributed to a huge state budget deficit of unrealized real estate tax collection. We cashed out of NY years ago....eventually the developers and real estate firms will come out on top again in this rigged game of Monopoly.
The question is how far will the bottom go based on supply/demand for all these units with full tax assessments?
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@Marie Walsh
Property taxes go to the city, not the state
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@Marie Walsh You can be sure it won't go low enough to make them affordable for 99.9% of New Yorkers.
@Marie Walsh
Condo/coop prices will drop 50% within a year.
Multifamily has already has dropped 50% since the new ultra left rent laws passed in June.
Condo/coop prices might even drop lower than multifamily.
These type of tax breaks benefit only the developer. The original sale price of the units incorporate the value of the reduced taxes over time. So all the tax benefits are realized by the developer up front. This is reflected in the lower prices of later resales.
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@Bob K.
Exactly!
1
These *permanent* buildings were built in neighborhoods the city wanted to develop. And the subsidy, which was *temporary*, ended.
The tradeoff worked as planned. No sympathy required, the buyers knew what they were getting.
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The end of so many abatement is just salt in the wound of trump’s tax bill ending deductibility for most of SALT (including real estate tax) and mortgage interest, and slso NY’s new “mansion tax” on prices over $1m. The run-up in prices through 2016, also fueled by foreign buyers, is now moving in the other direction - but not as a typical ‘cyclical softness”, rather as a change in fundamentals. Prices may not rebound. The expectation of huge gains at sale and easy selling timeframes is facing its new reality check. Being stuck with full carrying costs of $50k or $80k is no joke if a seller can’t really afford it.
While 10 years out (on remaining abatement) may seem far away, the psychological window starts to close at 5 years out as buyers weigh the upcoming carrying cost swing of no abatement or property tax reassessments. Sellers may not be able to get out very easily, even at deep price discounts.
Thank the politicians -and REBNY - for manipulating what used to be the safest appreciating asset in a family or person’s financial picture.
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As high as these non-abated taxes seem, it could be much worse. In some towns in Westchester, beautiful houses can’t even fetch $1 million as a selling price due, in part, to annual property taxes of $40,000.
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Consider it an annual education bill. But, yes, if you don’t have kids benefitting it doesn’t make sense.
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@Kayemtee
Those taxes are effectively tuition for Westchester schools. In NYC, with Carranza, you have no assurances where your kid will end up, no matter how much you pay.
10
But that covers the cost of great public schools.
4
Even without the abatements, the property taxes, as a percentage, seem to be awfully low.
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@Charlie - That is because the city has historically relied on city income tax, not property tax, for the bulk of its spending. High property taxes are a new thing in NYC.
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@Jonathan
Not true. Historically the bulk of city revenue has come from property taxes. As much as 95% in the 1920's and still over 50% through the 1980's. Currently property taxes account for about 45% of city revenue with personal income taxes accounting for about 20%.
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Well losses for some are opportunities for others. That is capitalism. In a way these tax breaks are a subsidy by all taxpayers. Maybe they should never be given for artificial prices are created. Subsidized by taxpayers. Look for auctions soon. Buyers should offer 25% less then ask.
In a completely different issue the city should use eminent domain on land that sits empty for 12 months. Solow has had empty land near the UN for years. There are many other real estate owners . If you knock down buildings and leave the site empty for 12 months simply seize it and build housing for the middle income and low income.
Don’t start a project unless you move forward within 12 months. 78th and first empty for years. 79 and 80th and first completely empty . Seize if they don’t build within 12 months. There are many others.
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@Ralph Petrillo
You use the words "eminent domain" and "sieze" - what exactly do you mean?
My guess is that UN parcel has a value of about $2 billion (4 million buildable sf x $500/bsf). Solow might be happy to sell - do you really think the City needs to become a land broker in a situation like this?
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@LHP
Not in eminent domain. With a new Mayor it is all over for the Big Shots in real estate. First of all luxury real estate is extremely under taxed in NYC.
I would use it as a leverage in negotiating to get more middle income housing built. Just a matter of time. The free ride is over.
1
This could be an opportunity to build housing for the homeless.
Looking at these numbers shows just how much these programs were designed to help the rich at the expense of the rest of us. This tremendous loss of tax revenue for the city was/is made up by increased taxes on the poor and middle class. Its a total disgrace that rich people from Colombia and Venezuela are made richer on the backs of working New Yorkers.
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@Thomas Renner
You are right on target and they don’t use the normal tax rates of today to build new middle and low income housing.
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@Thomas Renner, In large part, you're right. Yet, if the city has not allowed the tax abatement, how long more will it take for the rundown areas to sit and wait for the next round of facelift that is sorely needed? It's thus a price to pay (for the foregone tax dollars in the abatement, whether it's a fair price for the city and taxpayers, it's up for debate. Regardless, developers are the ones who are decidedly the winners; everybody else (buyers and sellers) are just playing a game of musical chair.
The only thing I wish it could be done better, is to have less luxury condos. I'm really tired of seeing nothing but luxury condos. It's so generic and soulless.
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@tiddle
are there any condos that aren't luxury?
A walk along the High Line last year I wondered if a developer could make a marketing splash by dropping 'luxury' from the signage.
Or if, 'luxury condo' was now one word, similar to what I was told during my first visit to China in 2004 when I said I was impressed that people routinely said 'corrupt local official' during conversation:
"We have no choice, it is now one word."
19
Quick and rough calculations show the taxes described vary between about half of one percent of the market value to two percent.
How is we possible have a system where one apartment pays only about A QUARTER of the rate that another does?
Should be based on market value as confirmed by sales price. Period.
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@Real Estate Tax Nonsense - The NYC tax assessments are based on a five-year rolling average, with a cap. That can produce anomalies.
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@Real Estate Tax Nonsense Take that up with the State legislature and governor. The property tax calculation in the State of NY is an absolute mess. It never made any sense. Property tax reform is a must, but the home owners (who's RE taxes are lower than rental properties) and real estate lobby run interference every time it comes up in the legislature.
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@Real Estate Tax Nonsense
Same with income tax—one consistent flat rate of tax on income taxing every dollar of income equally.
2
And don't fail to mention the Trump tax that only allows a $10k state and local tax deduction which was squarely aimed at blue states.
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@Alan High deductions that benefit only the wealthy are not a fair application of a tax.
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@Alan All of Trump's properties are likely held by a corporation, or LLC. If only we could see his taxes.
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@Alan
Blue states like to think of themselves as donor states, but they never offset that with their huge property tax advantages that they voted themselves to pocket huge amount so money and to keep their cities segregated.
"coming in 10 years down the road is very far-off for a lot of people,"
Yes. Such shortsightedness is what is keeping humanity from doing anything serious about global warming.
NYC has been here for almost 400 years. It will certainly be underwater before the next 400 years is up.
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@Don Wiss
only the first 400 feet or so....
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@Don Wiss
Bought a canoe in my apartment just in case. Lol!
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