New York City’s notorious property tax system is a sham and desperately in need of a fix.
Property taxes on co-ops and condos (Class 2 properties) bear no relationship to their actual fair market values. In fact, crazy as it sounds, assessed valuations are based on the value of an entire co‑op development as if it were a rental property that an investor wanted to purchase.
Property tax calculations for co-ops and condominiums are riddled with so many assumptions, often incorrect, that they produce erroneous and inaccurate valuations. This byzantine system of taxation has produced property taxes that have dramatically risen, well in excess of inflation. These costs are driving out middle-class families and making co-ops -- often the last bastion of affordable housing -- unaffordable.
Under the current property tax system, co-ops and condominiums (Class 2 properties) are taxed at significantly higher rates than one-to-three family homes (Class 1 properties), despite the fact that they both are residential homes for individuals and families. The type of home one chooses should never affect the fairness of the property taxes that are paid.
To make matters worse, there are no caps to curtail exploding co-op tax assessments as there are in one-to-three family homes. Private homeowners receive an annual property tax assessment cap of 6 percent per year, or no more than 20 percent over five years. Co‑ops have no such caps and not too long ago, many working-class co‑ops in northeastern Queens were hit with single-year, double and triple‑digit assessment valuation increases that caused budgetary chaos.
Not surprisingly, the skyrocketing property taxes that ensued, have played havoc on co-op budgets and caused staggering monthly maintenance increases to owners, many of whom are seniors on fixed incomes.
The mayor, city comptroller, Department of Finance commissioner, New York State Assembly speaker, and many other elected officials all acknowledge that the property tax system is broken, unfair and inequitable. We know this because as co‑president and founder of the Presidents Co‑op & Condo Council, a think tank of board presidents from almost 100 New York City co-ops and condominiums, we have spoken with these elected officials to address this crisis.
Even our modest proposal to grant temporary relief through annual property tax caps that would still allow assessments to rise 8 percent per year, or 30 percent over five years, has been met with inaction. It’s infuriating that year after year, they remain unable to solve this problem.
The problems with the current tax framework are so systemic and the system so complicated that few understand it, which is why it has become virtually impossible to fix. Under pressure from a recent lawsuit and from groups such as the PCCC and others, the mayor and City Council speaker recently moved to create a Property Tax Panel to review the current system and find ways to fix it.
Last year at a town hall meeting the mayor discussed his yet to be created Tax Commission. He said that since he is term-limited and could not run for re-election, he would have greater flexibility in making tough decisions and tackling difficult choices that a tax panel might propose.
In response to my question, he assured me that all stakeholders would have a seat at the table of his commission. Unfortunately, that has not happened. Co-ops that are most affected by this inequitable and discriminatory system will have no representation on the newly announced Tax Panel. Not a single co-op board president or co-op representative will be seated on this panel. However, there are plenty of de Blasio contributors and political supporters sitting on the seven-member panel.
At the announcement of the panel, Council Speaker Corey Johnson said, “It is crucial that we work to bring clarity and fairness to this process, which has long perplexed the public and left many feeling hoodwinked by the city government tasked with representing them.”
Unfortunately, the public is again feeling “hoodwinked” by the very same city government officials tasked with fixing the problem.
Bob Friedrich is President of Glen Oaks Village, a Civic Leader and former City Council Candidate.