A New York Issue That Unites Landlords and the N.A.A.C.P.

No one seems to realize how many working-class and lower-income homeowners are out here in Brooklyn. Why doesn't The New York Times send a reporter to Kings Highway from, say, East 25th Street going east towards the Jackie Robinson and see how many little brick houses there are; or along Foster going East towards the Terminal Market from Ocean Avenue; or to Brooklyn Avenue or Clarendon; or over along Bay Parkway and Bath. Look at all those avenues and all the side streets radiating out from them. Or to any number of neighborhoods. Raise property taxes on these people and you'll kill them. Do some real investigating. Tell the truth about Brooklyn homeowners and who they really are. Raise my property tax much more, or that of many of my neighbors who like me stuck out the bad days because we were born here and Brooklyn's our home -- . How about some real old-fashioned reporting?

@Howard Hecht Given that homeowners can borrow against the value of their home, they do benefit from rising values.

Borrowing on your home is a good way to lose it. The "they can always borrow" crowd -- .

@South Of Albany No such things as 'commercial residential'. If renters think their rents will be reduced if Class-2 (apartment buildings) property taxes are lowered then they are dreaming. If anything property taxes on Class-2 properties should increase. Apartment buildings have large rent rolls and are essentially businesses. Class-1 (1,2,3 fam homes) are private homes where the rents are used to maintain the property and pay off the mortgage. Big difference.

@South Of Albany Here's the NYC Comptroller's take on fairness and property taxation: https://www.citylandnyc.org/comptroller-report-property-taxes-are-increasingly-hurting-low-income-new-yorkers/

However you would like to word it - taxes for multiple dwelling buildings are directly related to monthly maintenance fees for coops and condos and rents for rental units. The elephant in the room is that Class 1 buildings are highly inefficient from a affordable housing perspective (whether or not you agree with it). The historic preservation of brownstones is the most extreme in perversity of zoning for land use in 2020. No matter how you look at it - the windfall of equity for the owners of these buildings is staggering.

Wrong. You can own a brownstone as an LLC. Rental properties are not necessarily and most times not housing transients (which is beside the point) so their higher tax rates just push up rents (paid by tenants). So, in fact, renters are making up the tax difference for equity millionaire homeowners.

Actually, that’s what market rate renters do have in NYC - landlords can do whatever they please with increases. Welcome to the renter’s life.

@SS Yes, the rental legislation passed in Albany last year codified "preferential rent" as the new legal rent for tenants. What is property tax, other than the rent a homeowner pays to the City? More than just the homeowner's finances are predicated on their long history of property tax payments under the current system; their tenants are affected as well. It's possible that some of the impact on low income homeowners could be mitigated by a rational system of homestead and circuit breaker programs; but the Commission has proposed neither - presumably leaving those details to the tender mercies of the City Council after a "framework" is passed. And the Council has historically favored developers....who have the most to gain from this proposal. Hint: is there any guarantee in the TENNY litigation that presumptive savings by landlords of large rental buildings underwriting that litigation would be quantified and passed on to their tenants? Any discussion of refunds? Not to the best of my knowledge.

“Preferential rents” only apply to stabilized tenants. Landlords would never refund tenants if they’re property tax rates went down. But, it would create greater price competition. Taxes are the single greatest operating expense of multiple unit buildings.

@David That's part of what the commission isn't disclosing (if it has even thought about it, but one would assume it probably has). The proposal just indicates that coops and condos would be valued at Market Value based on sale prices, rather than on potential rental income. So there's plenty of missing information that makes it impossible to quantify the ultimate impact on all properties involved in the proposal.

@lucky13 The tree root damage benefits apply only to houses and not to apartment buildings. Those of us who cannot afford a house again end up with more expenses.

Be careful what you wish for. Nycha residents don’t have responsibility for any of the things you listed, and that’s exactly the problem.

@Eric But there are plenty of brownstone owners who do not have high incomes, in areas that are referred to as "gentrifying." They can afford their homes based on the current property tax system. And they're sometimes referred to by those harassing them to sell as "leftovers." This proposal has the potential to get rid of them...which may be what those advocating it want. A couple of elected officials in the State legislature have already declared the proposal "dead on arrival," based on their perception of what it would do to the communities they represent.

@Sagalovich It's dead on arrival because homeowners vote. The Council will get nooooo where with this. A lawsuit...maybe

@Matt D- According to Senator Warren's tax plan (and presumably Senator's Sanders although he won't release details) a wealth is needed to pay for universal healthcare. And this new wealth tax will be on the appreciation of assets, even before they are sold. $2 million homes are worth enough to be included. The government will compute the value yearly and figure the bill.

of course they benefit. they have a 2M dollar asset that can be sold, excluding much or all capital gains from income taxes, with some of the profits spent on a less expensive home within their means, and the rest put away for retirement. that is the essence of wealth taxation. not just income, but wealth, is subject to redistribution. being cash poor and house rich is not being poor.

That’s not just in paper. They sell, they make 2 million. No crying for newly minted millionaires.

@EME Property tax goes to maintaining the area that collect those taxes. All benefit from that. Understand the thinking that an owner that purchased a house years ago for a modest amount has not 'realized' the dollar increase in value in that they don't have money in their pocket. However, the value has increased and when they sell, they make a fortune. Should they then have to pay the tax accrued over the years of under-payment? I think so; they have not been paying their share over the years, have benefited from a huge selling price, and should now have to pay for that value. This wouldn't be true if the tax had been applied in increments, and paid in real time. Sounds like NYC has proposition 13 type tax laws. Not working well for CA, or NYC. Question: As the value of a home increases over time, do the residents receive more value/more services from their local government? No. So, maybe the question should be why are property taxes tied to home values and why does the government always spend more than it collects?

@Jonathan Katz The current system is byzantine and largely inexplicable to outsiders. The basic problem with 1-3 family homes is that there is a limit to how much property taxes can rise relative to the market price used for assessment purposes, which results in taxes falling behind assessed market values in neighborhoods with tremendous price appreciation. The basic problem with co-ops and condos is that they are assessed by reference to comparable rental property, but there is no true analogue to the ultraluxe co-op and conodo market and the rental market has distortions like rent regulation that can feed through to co-op assessment. There are, to my understanding, currently no concrete and calculable changes being advocated. Advocates are afraid that any change a mid-market homeowner can actually analyze will horrify and galvanize resistance. So the issue is discussed in terms of frameworks and principles. But since the mind abhors a vacuum, mid-market homeowners are completely freaking out.

@berber The critical missing information is what the new tax rate would be for the newly created Class 1. That's unknowable, as in addition to moving those properties (condos, coops and rental buildings of 4-10 units) into Class 1, the proposal wants to CHANGE the methodology for calculating MV for the moving properties, prior to dumping them into Class 1. Right now, those moving properties are taxed based on their Taxable Value, which is much lower than MV. Since the entire package is supposed to be "revenue neutral," and they're not changing how Classes 3 and 4 are taxed, that presumably means it has to be "revenue neutral" between Class 1 and Class 2, after the fact. The MV and TV data on all current Class 1 and Class 2 properties is available on the Finance Dept website, so one CAN calculate what the new total MV of the new Class 1 would be, IF those moving properties were NOT revalued. But the Commission is providing NO information about what the new MV of the moving properties would be, and thus, it's impossible to tease out what would be the new tax rate for Class 1properties in the "reformed" system. At the moment, the tax rate for Class 1 properties is .21167; the tax rate for Class 2 properties is .12473; and those rates are multiplied by Taxable Value (NOT MV) to find your annual property tax. So the Commission, and the Mayor, are apparently trying to push through a pig in a poke, with no way to analyze outcomes until it's too late.

@dr. c.c. https://www.citylandnyc.org/comptroller-report-property-taxes-are-increasingly-hurting-low-income-new-yorkers/ The notion that all property owners are wealthy is being pushed by developers underwriting the TENNY litigation. Read the article above, by the City Comptroller. In 2018, homeowners earning less than $100,000 made up roughly half of all NYC property tax filers. The fact that many of them bought long ago when their houses were affordable to them on their then-incomes doesn't mean their incomes kept pace with the City's evaluations of Market Value, or their ever-increasing property taxes. It's these homeowners, per Stringer's calculations, that need property tax credits, in order to be able to keep their homes.

Market price is what price someone or some entity will pay for the property. If the market price for a park slope townhouse is 6 million, why would the taxes not reflect that?

@south of Albany because why should someone pay taxes on an evaluation rather than their income or what they purchased the home for?! Do you want to tax an elderly couple living in a brownstone with fixed income so to force them to sell? For new buyers, it’s a fair game. The higher the taxes the more likely the prices will go down. The city and the state for that matter should focus on cleaning their finances and giving us a better value of services before trying to ask for more.

I was just stating the facts, not reinventing the concept of property taxes.

@MrL The city tried that before. It is unconstitutional because you are discriminating against new owners. All property in a tax class must be equitably assessed. You can and are supposed to use those sales to estimate market value for similar properties in the same class.

@dfsavgny So discriminating against rich new owners is unconstitutional, while clear discrimination against long term property owners in areas not subject to gentrification is constitutional.

@Fairness Or just have a 3-5 year transition period like Nassau county. Any change always has winners and losers. You can't stop positive change to protect a few people. I wonder how any citizen (or politician) can actually defend having different neighborhood-based property tax rates. The only fair system is a single flat rate across the entire city.

@Ifid I'm afraid I disagree with you. To me there is something fundamentally unfair about buying a property at a high price based on a particular set of clear rules (low taxes on that property), and then having the value of that property demolished because the government changes the rules out from under you. The developers who support such a change do so because it will provide them an unearned windfall. they will have bought properties that were priced cheaply under one set of government rules (high taxes) and then see the value of their properties shoot up as the government benefits them by changing the rules. Just not fair. Confiscating windfall profits and distributing them to those who suffer windfall losses will allow both a resetting of the tax system to a rational basis, while ensuring nobody is worse or better off than they were when they bought their property based on the prior regime.

@Ifid Part of the problem in NYC is that you're not talking about protecting "a few people." It's a great many people who could potentially be forced to sell at depressed prices, or go into foreclosure - affecting tenants as well. And given their numbers, administering a "circuit breaker" program for low income homeowners could be a social services nightmare, as people would have to be notified, apply, provide proof of income, etc. Many would fall through the cracks. In a city with an acknowledged housing crisis, rendering more homeless seems not just unfair but, shall we say, a little counterproductive? The city would have to raise property taxes even higher to pay for more services required by those losing their homes. Remember, tenants would be affected as well as homeowners.

@Andy Deckman https://www.citylandnyc.org/comptroller-report-property-taxes-are-increasingly-hurting-low-income-new-yorkers/ Read the comptroller's report. The proposal is NOT "progressive tax policy." It would create a situation in which property taxes would continue to disproportionately impact senior and low income homeowners. It wouldn't be "winners and losers," it would be "victors" (i.e., developers) and "victims" (those forced to sell at steep discounts and leave NYC).

@Donna Gray, totally agree, as long as the suburbaner start paying commuter tax again.

@Donna Gray NYC residents pay an income tax.

@M - What if the Westchester resident is retired or doesn't work in NYC? What has the city income tax have to due with them. They use no NYC services.

@JLMS It will, without question.

Being forced to sell for millions of dollars has no equivalence to renters being displaced.

@South Of Albany You keep assuming that a single homeowner gets "millions of dollars." Those homes are frequently occupied by extended families, members of whom can't afford individually to pay rent in NYC. They're certainly analogous to renters being displaced...whoever legally owns the home won't be able to replace the space, to be occupied by the same number of people, in NYC. If this proposal passes, a lot of people will be forced out into the unregulated rental market, which they won't be able to afford...and yet, on a monthly basis, after it passes, annual rents will actually be lower than the expenses, mortgage, and property taxes on what was an affordable family home. This "property owners are rich" stuff doesn't begin to acknowledge that half those paying property tax in NYC earn under $100G/yr, but may be providing accommodations in that home for many more. https://www.citylandnyc.org/comptroller-report-property-taxes-are-increasingly-hurting-low-income-new-yorkers/

@Will. Under current law you cannot reflect coop or condominium value. Coops and condos are assessed as rental units.

@dfsavgny Will is talking about the re-sale value of co-ops/condos, not about their assessed unit values. He is saying that the market would nose dive.

@dfsavgny Yes, but the Reform Commission proposal would first revalue coops and condos based on a new formula for their Market Value, based on resale prices, and THEN dump them into the new Class 1, along with one to three family homes. So yes, the taxes on those condos and coops would rise.

@Ifid But "value" isn't fixed. When property taxes on a brownstone purchased 30 years ago for $300,000 jump from $6,300 a year to $31,000 a year, the $2,500,000 "market value" that the City now slaps on that property will drop precipitously....while at the same time, it's planning to "phase in" the new property tax burden based on that now-illusory valuation over five years. No potential buyer will pay $2,500,000 for a property that just accrued an additional $24K in annual costs. And a resident homeowner with one garden apartment to rent cannot simply pass on an additional 24K in annual tax burden to a tenant. The result will be a mass exodus from owner occupied one to three family properties - while their values are dropping. The economic illiteracy is astonishing. A homeowner already pays property taxes, insurance, utilities....may be housing extended or disabled family members and small children, etc. For all of them, that house IS affordable housing. The potential displacement could be massive, with disproportionate impact on seniors and communities of color. And the $75,000 income "circuitbreaker" proposed by Malliotakis in the last round of hearings is laughable. On an $80,000 annual income, after federal, and state taxes, food, property insurance, health insurance, and monthly mortgage payments, what's left? The principal beneficiaries would be developers snapping up vacated properties at depressed prices to renovate them into unregulated rental apartments.

@Sagalovich Determining market value for property tax purposes is not a new science or beyond the abilities of an assessor. Most parts of the country have this figured out and if the homeowner thinks the market value is off, there's an appeal process to get to a better approximation. The initial point is sold. A home with a much lower market value should not be taxed greater than a home many times greater in value. The burden of that disparity is disproportionately carried by people of color and lower-income New Yorkers. Tax reform is necessary and it should be phased in slowly so there's no significant disruption. The city should continue to offer seniors, disabled and vets with a discount (but exclude clergy, ugh) and streamline that entitlement process. The focus should be entirely on residential properties and not commercial. The lack of legislative efforts is entirely political cowardice.

@Sagalovich Your arguments have no merit. Of course higher property taxes will affect value. Higher mortgage rates affect value too. There's nothing wrong with that. Are you trying to prop up values or minimize taxes? You can't do both. Once again, how do you justify a new rich owner who just paid $6MM for a renovated townhouse to pay less property taxes than a small studio? Hint: you can't.