For far too many years, small homeowners, landlords and tenants in rental buildings, store and office owners have complained bitterly about the property taxes they pay. While acknowledging the important role property taxes play when it comes to funding schools, libraries, safe streets, garbage collection and a myriad of other essential services, owners have felt powerless to remedy the inherent and known inequities that have long plagued New York City’s property tax system.
Recognizing the urgency of these issues, Tax Equity Now New York (TENNY) filed a groundbreaking lawsuit challenging the legality and constitutionality of New York City’s property tax system. In a significant victory, the State’s highest court, the Court of Appeals validated TENNY’s claims. The decision made it clear that New York City has the power to take the first steps towards restoring some faith in the property tax for small homeowners, owners of modest cooperatives and condominiums, and tenants and landlords in rental buildings. The City can and must do something now.
While the property tax is complicated, there is a fundamental principle of fairness that is paramount and simple — properties with the same value should have the same assessment, a concept referred to as uniformity. The City Finance Department is solely responsible for assuring uniformity, it is enshrined in law; but the agency has refused claiming that they cannot carry out this fundamental responsibility because of other “conflicting” provisions in the law. However, the Court of Appeals ruled otherwise — the City must adopt uniform assessments.
Uniformity is a straightforward concept, if the City determines that a property is worth say $1 million and properties are uniformly assessed at say six percent of value, then the assessment ratio for those properties should be $60,000. This year, properties that the City valued at between $1 and $1.4 million, in the six zip codes representing Harlem, had assessment ratios that ranged from 1 to 5.3 percent of value. The average assessment ratio is about 3.5 percent. That means the resulting taxes for properties averaged $9,300 but ranged from as little as $2,300 to as much as $15,300. To comply with the law’s uniformity requirement, at a minimum, the City should lower the assessment for properties assessed at a ratio that is more than 3.5 percent. That means homes worth $1 million should be assessed at $35,000, not $60,000.
Make no mistake about it, the homes in the City with the highest assessment ratios are in working-class and racially diverse communities with more modest property values and include neighborhoods like Brownsville and Canarsie in Brooklyn, the Bronx, Staten Island, and Southeast Queens. Yet the City has allowed the rampant inequities to persist for years.
The Court of Appeals also clarified the law for the City when it comes to apartment buildings—homes to hundreds of thousands of tenants, rental building, co-op, and condo owners. Here the City has been valuing some of the most expensive co-op and condo apartments based on rents from regulated rental buildings. This practice significantly undervalues the most valuable and exclusive apartments in the City which results in higher taxes for rental buildings and middle-class co-op and condo owners in Manhattan and the boroughs. For rental buildings especially, that has led to higher taxes for landlords and increased rent burdens for tenants.
The Court’s ruling here was clear as well: while it might be appropriate to value co-op and condos that were converted from rental apartments based on regulated rents, the City need not value high-valued co-ops and condos that were never rental apartments or would not be regulated rentals today using regulated rents. That means the City can improve how it values the most expensive co-ops and condos using more appropriate rental comparables.
Over the years, this broken system has burdened tenants with unfair taxes, exacerbated racial disparities in housing, and entrenched the very inequities the City should seek to resolve. The inequities are not random. They follow a familiar and troubling pattern of racial and income disparity. Decades of redlining, discriminatory housing policies, and systemic disinvestment in low-income neighborhoods and communities of color have left fewer resources and opportunities saddling those least able to afford it with a disproportionate share of the city’s tax burden.
Notably, the Court agreed to remove the State of New York from the lawsuit, thereby sending clear message: New York City’s property tax system is broken, and fixing it is both necessary and achievable and these changes can and should start at the city level, where leaders have the tools to act decisively in the face of mounting disparities on its own.
The time to act is now. New York City cannot afford to wait any longer to start to fix its broken property tax system. It’s time to stand up for those who most need it and to confront the disparities head-on, and create a fairer, more inclusive future for all.
Justice delayed is justice denied, and the City has delayed long enough. The City has the power, they should use it.
Martha E. Stark, Esq., is Policy Director for Tax Equity Now New York (TENNY), a clinical professor at NYU, and a former Commissioner of the NYC Department of Finance. The views expressed in this column are solely those of the writer. The Urban Agenda is available on CSS’s website: www.cssny.org.