A recent report from a mayoral commission in New York City made recommendations about major changes to residential property tax in all five boroughs. Essentially, the NYC Advisory Commission On Property Tax Reform recommended that the tax burden be lessened for lower-income people and those who make a moderate income, while being raised for people who live in neighborhoods that are wealthier. New York City property tax has been a contentious issue for some time, and the voices of those who feel they are overpaying to live there are starting to grow louder than ever before.
Single-family homes are currently being taxed on the value of their sales, but condos and co-ops are grouped with rental buildings and assessed on gross annual income potential from rent. That means single-family homeowners are bearing the brunt of the cost for property tax, and the assessments on larger properties are often not as high as they should be. Additionally, the way the tax has been capped means property taxes might be the same on two different homes, even though the value of the homes themselves are far apart.
The proposal from the commission involves taxing rentals, co-ops, and condos that have under 10 units in the same way as single-family homes. That means the tax would be on 100 percent of the market value, and assessed on the sales price. The changes make sense, according to many people in the real estate industry, but the market is already soft and there are concerns that the changes will only make that worse. The feeling is that many more properties will come on the market, and there may be people forced to sell because of the changes to their tax rate and overall cost of ownership.
Homeowners will move out of the city, and look to the suburbs and surrounding areas where it’s less expensive to live. Only the people who have a lot of money and can afford to stay in the city will do so, which some are calling class warfare. Middle-class homeowners already struggle with high sales and income taxes, along with rising costs of energy and increases in insurance rates. Raising their property taxes on top of that could simply be too much for them to bear.
People who may want to move into the city will reconsider the cost of buying a home, and rental buildings will see higher rents because of the increased taxes the owners have to pay. Changes do need to be made to the current New York City property tax structure, but the changes proposed by the commission may not be the right ones. Instead, they could drive more people out of the city and make it much harder for people who want to stay there to be able to afford to do so.
