Property Tax Reform in NYC

David Goldsmith

All Powerful Moderator
Staff member
Everybody wants tax reform as long as that means someone else pays more.

Don’t Price Us Out, New Yorkers Plead Amid Property Tax Overhaul​

Residents, and their political representatives, decried in a series of public hearings how the city’s arcane property tax system has unfairly burdened low- and moderate income workers, former civil servants, seniors and retirees living on fixed income, teachers, and landlords. Those residents have watched their property taxes increase at a far more rapid clip then the wealthy people living in luxury buildings across the street in their own neighborhoods, as the values of their homes grew exponentially and their incomes barely budged.


David Goldsmith

All Powerful Moderator
Staff member

Luxe condo owners benefit from city’s flawed property-valuation process​

Uneven property assessments, distorted capitalization rates skew taxes​

Wealthy condo owners benefit from New York City’s flawed property-valuation process, in which officials use arbitrary calculations and shift the majority of tax burdens to lower-priced properties and rentals, according to a new Bloomberg News investigation.
Authorities have blamed imbalances in tax bills on Section 581 of the New York Real Property Tax Law, which has been interpreted to mean that assessors determine taxable value based on the hypothetical incomes co-ops and condos would generate. Since they don’t, the values create a hypothetical guessing game and ample room for variation.

Assessors use comparables for determining hypothetical incomes, but they all appear to use different values to determine the number. For some buildings, the income number was changed hundreds of times for different comparisons, skewing the capitalization rate, which is determined by dividing net income from a property’s market value.

Officials appear to be reducing taxable values on expensive condos by increasing capitalization rate to be much higher than what the real market dictates, leading to lower property values than the market suggests and a bigger tax break. For less expensive condos, assessed values are more true to market value, diminishing any tax benefit.

City officials wouldn’t reveal much to Bloomberg about how the capitalization rate was determined, but did find that an estimated effective tax rate of at least 5 percent is added onto the cap rate to account for a prior year’s tax payments, grossly overstating the estimate.
Bloomberg reports that taxable value on tens of thousands of condos has decreased by an average of about 80 percent due to the flaws in the property-valuation process.

One study reviewed by Bloomberg shows that annual property taxes shifted about $292 million from the top 10 percent to the lower 90 percent in New York. Another study showed an even greater shift of approximately $450 million.
Bloomberg cited 163 cases, based on sales and tax records for 2017 through 2019, where the assessment of an entire condo building came in at less than the sales price of a unit within the building, highlighting the flaws in the assessment system.

Mayor Bill de Blasio three years ago announced a panel to review and overhaul the system. In February, de Blasio pledged to revive the administration’s initiatives concerning property tax reform and cited a delay of the preliminary report on the pandemic.
Amid the sluggish turn towards confronting the inequality, Tax Equity Now New York, a local tax reform group, in a May letter asked the Department of Justice to challenge the city’s tax structure under the Fair Housing Act.

The Real Deal previously reported the TENNY policy director Martha Stark cited the department’s challenge of Nassau County property tax laws on the basis that higher rates in Black and Latino neighborhoods violated the act.
In the letter, Stark argued residents of color are taxed at higher rates through a “dizzying array of valuation methods, caps, adjustments, abatements, and other features.”

David Goldsmith

All Powerful Moderator
Staff member

City Council to raise J-51 from the dead​

Committee votes to advance bill reviving tax break for multifamily repairs​

A tax break for residential renovations that has been dead for more than a year is now one step from being revived.
The City Council Committee on Housing and Buildings on Tuesday approved the renewal of the J-51 abatement and exemption program for the next six months. The program expired last year, prompting calls from the real estate industry to restore it.

In June, the state legislature passed a measure that authorized the city to bring back the tax break, so long as it did so by the end of this year. The City Council is poised to beat the deadline by a little more than two weeks.

The measure would revive the tax break through June 30, 2022, and apply it retroactively to projects that missed out on the program when it lapsed in June 2020. The full City Council will vote on the bill Wednesday, at its final meeting of the year.
Under the program, participants are exempted for 14 or 34 years from taxes on increased valuations resulting from renovation or conversion work. They also receive an abatement for between 50 percent and 150 percent of the “reasonable” cost of work.

Property owners have called for changes to the program, citing that the city’s estimations of “reasonable” costs for certain repair work are outdated. Tenant advocates have also criticized the tax break, saying that the city and state have not adequately enforced requirements that apartments remain rent-stabilized as a condition of the incentive.

Council member Helen Rosenthal, who represents the Upper West Side, cast what she referred to as a “ceremonial” vote against renewing the program.
“This is a no vote to send a message to the next Council and New York state legislature that we really need to amend J-51 so that it can do more to ensure that apartments are built for low-income New Yorkers,” she said.

Council member Barry Grodenchik, one of the bill’s sponsors, noted the importance of the program to co-op owners in his district in Eastern Queens. Co-op groups have argued that J-51 helps pay for necessary repairs, the cost of which would otherwise fall squarely on residents.
Garodenchik noted that he hopes the problems with J-51 are addressed before the program expires again in six months.

The committee also approved a resolution urging the state legislature to pass good cause eviction, which would effectively bar rent increases of 3 percent, or 150 percent of the region’s Consumer Price Index, whichever is higher. Several localities in the state have passed their own versions of the measure, building momentum for tenant advocates’ fight to apply the policy statewide.

David Goldsmith

All Powerful Moderator
Staff member
On close to his last day in office the long promised Real Property Tax reform arrives in the form of nothing but a headache for the the next Mayor (just like is said it would).

NYC Advisory Commission on Property Tax Reform Releases Final Report​

December 29, 2021
Report recommends the most significant changes to New York City’s property tax system in 40 years
NEW YORK – The New York City Advisory Commission on Property Tax Reform today released its final report with recommendations to create a simpler, clearer and fairer property tax system. The final report, entitled “The Road to Reform: A Blueprint for Modernizing and Simplifying New York City’s
Property Tax System,” recommends sweeping changes to the current system, with a particular emphasis on smaller residential properties which the public and subject matter experts most often cite as having the greatest inequalities.

The final report expands on the initial recommendations released on January 31, 2020 and details targeted owner relief programs that will help low- and moderate-income homeowners better afford their tax bills. The report marks the first top-down review of the property tax system by a government-appointed commission since 1993. It can be found here.

“I am pleased to present the final report of the Advisory Commission tasked with reforming the City's property tax system. I would like to thank the members of the commission who spent the last three years diligently working through the myriad issues involved. Hopefully, this report will serve as a blueprint for the state and city legislative bodies to take this long needed reform to enactment,” said Commission Chair Marc Shaw.

The Commission’s work was temporarily disrupted by the pandemic, but it resumed in 2021 with an additional five public hearings to solicit input on the 10 recommendations in the preliminary report. The public’s feedback was instructive for the Commission in developing its final recommendations, which involved stripping the system of the features that lead to inequities and reconstructing it to align with a set of basic principles that prioritize targeted relief for primary resident owners.

The Commission’s strategic approach centered on first establishing the right mix of structural changes to achieve horizontal equity, the principle that similar properties should be taxed similarly, and then layering on owner relief programs consistent with the longstanding ability-to-pay principle. The result is a system design that will help ensure low- and moderate-income owners have affordable tax bills and primary residents are not displaced from neighborhoods that they have called home.

The Final Report includes structural changes that would make the system more equitable and understandable by:

  • Creating a new tax class for small residential property owners: 1-3 family homes, condos, coops, and 4-10 unit rental buildings, ensuring that rules are applied uniformly regardless of property type;
  • Valuing property in this new residential class based on sales-based market value, thereby ending the statutory requirement to value coops and condos based on comparable rental buildings;
  • Ending fractional assessments which differ by property class and confuse property owners;
  • Removing assessed value (AV) growth caps, widely recognized as one of the primary drivers of inequity, and phasing in market value changes over five years instead;
  • Replacing the complicated class shares system with a simple, more transparent system where individual tax class rates are fixed for five-year periods, unless deliberately changed by the City Council and the Mayor.
Recommendations also include targeted relief for primary resident owners to help them better afford their tax bills, including:

Homestead Exemption
: A flat rate or graduated rate partial exemption is recommended.

  • Flat Rate Exemption: Primary residents with incomes below $375,000 would receive a 20% property tax exemption based on sales-based market value. Those with incomes between $375,000 and $500,000 would receive exemptions between 4% and 16%.
  • Graduated Marginal Rate Exemption: Primary residents with incomes below $375,000 would receive an exemption of up to 30% based on their home’s sales-based market value. The exemption would decrease for higher-valued homes and, for those with incomes between $375,000 and $500,000, the exemption would be further reduced.
Circuit Breaker: In addition to the homestead exemption, a tax abatement for those who are tax-burdened, with incomes below $90,550, is recommended.

  • Primary residents with incomes below $90,550 who pay more than 10% of their income in property taxes would receive a tax abatement for the amount in excess of 10% of their income, up to a limit of $10,000; for those with incomes between $58,000 and $90,550, the benefit would be gradually reduced as income rises.
“While New York City’s property tax system has resisted reform for forty years, this comprehensive package of proposals offers a realistic path forward that addresses deep inequities and responds to the realities of vast differences in ability to pay. I urge the City's State legislators to champion these reforms in Albany and show all taxpayers that government works in their interests,” said Commission Member James Parrott.

“The work of this temporary commission draws a roadmap toward real estate tax equity in New York’s property tax system, which has treated too many New Yorkers unfairly for decades. What frightens me the most, is that if government doesn’t take the steps towards fairness and transparency now, the inequity between homeowners is going to grow more and more disparate each and every year to come,” said Commission Member Allen Cappelli.

"Over the past three years, the Commission has worked diligently to find solutions and/or recommendations to make our current property tax system more efficient, understandable and transparent. I believe the recommendations in our final report make real and substantial progress towards realizing those goals. Accordingly, I want to thank my Commission colleagues, as well as the invaluable support staff from the New York City Council, the Mayor’s Office, the Department of Finance, and the Office of Management and Budget for their hard work and dedication to our mission," said Commission Member Kenneth J. Knuckles.

“New Yorkers deserve a fairer property tax system than what we have, which is getting more unfair with each year. The Commission presents a road map for a fairer and simpler system. Our elected officials need to follow that road soon,” said Commission Member Carol O'Cleireacain.

"The Commission was asked to develop recommendations to make the property tax system fairer, simpler and more transparent. The recommendations in this report will do just that and, if enacted, benefit residents who have been taxed unfairly for far too long," said Commission Member Elizabeth Velez.

David Goldsmith

All Powerful Moderator
Staff member
Comptroller Brad Lander comes out against Governor Hochul's revamp of 421a abatement.

Statement from Comptroller Brad Lander on Governor Hochul’s Proposed 421-a Reforms​

January 20, 2022
(New York, NY) — NYC Comptroller Brad Lander issued the following statement in a response to Governor Hochul’s proposed reforms to the 421-a tax abatement program:
“The 421-a program is an obscene tax giveaway for market rate housing in the name of affordability, and slightly altering its numbers and letters won’t change that,” said Comptroller Brad Lander. “It makes sense to offer tax incentives for affordable units, but providing full 25-year tax breaks to four luxury units for every one affordable unit, without an underwriting analysis to see if it’s even needed, results in tax giveaways that are far too large.
“The new outer-borough condo option is especially concerning. It would provide a full, 40-year tax exemption for housing that’s only affordable to households earning 130% of the area-median income, which is $155,090 for a family of four. Not one single unit in these developments would be affordable to the approximately 75% of New York City households who make less than that.
“There is a better way forward. First, we should end 421-a.
“Second, we should reform our property tax system to create parity between rentals and condo developments. Developers are right that our current system strongly disincentivizes new, multi-family rental development in New York City – we can and should fix that. But the new outer-borough condo option actually makes that problem much worse.
“Third, we should scale affordable housing tax benefits to match the actual affordability provided. That way, we’ll be getting our money’s worth in depth and length of affordability.
“The new proposal also contains a Trojan horse for workers,” continued Comptroller Lander. “The current 421-a program requires that building service workers be paid the prevailing wage in any building with more than 30 units — but the new proposal would increase that ten-fold to 300 units, dramatically reducing the number of buildings which would be covered.
“Many of the prevailing wage cases brought to the Comptroller’s office in recent years are on behalf of building service workers in buildings with fewer than 300 units. We’ve been able to investigate and win recourse for them when they’ve been underpaid. The new proposal would deny the vast majority of them any recourse.”
UPDATE (1/20/22, 8:00 PM) — The Comptroller’s office was informed by the Governor’s office that changes to prevailing wage requirements from buildings with over 30 to over 300 units were a drafting error and will be corrected in the 30-day amendments.

David Goldsmith

All Powerful Moderator
Staff member

Last Stand: Property tax reformers recruit Lander to lawsuit​

It’s been a rough five years for Tax Equity Now New York.
Since 2017, the group has pursued a legal challenge to upend the city’s property tax system.
So far, no luck.
First, the city and state, both defendants in the suit, got a court to reject the claim that the system violates the state constitution. TENNY appealed, only to have the state’s highest court decline to hear the suit, ruling that it did not pose a “substantial constitutional question.”

But TENNY had kept some powder dry. It went back to the lower courts with a new argument: that the system violates state and federal fair housing laws.
That, too, was shot down, but last month the group appealed, hoping the state’s highest court will agree that the issue is crucial and the court must act, rather than leave it to politicians to fix the problem.

This is TENNY’s last stand. If the court says no, the group has no obvious place to go.
To boost its shot at success, the group is taking a new approach: imploring city officials who support reform to endorse the suit. Its first target is a longtime progressive and former affordable housing builder, Brad Lander.

This month, TENNY’s policy director Martha Stark, a former city finance commissioner, wrote to the newly elected city comptroller, who had just released a statement supporting reforms proposed by the city’s Property Tax Commission. She opened by applauding Lander for declaring the city’s property tax system “regressive and opaque and in need of reform during your first week as comptroller.”
“We know that having the largest source of revenue for the city unfairly burden working-class neighborhoods and communities of color is something you will not allow to continue,” Stark wrote. “By joining us, you can help to address the glaring structural issues and racial injustices pervading New York City’s property tax system.”

Among the commission’s recommendations were to create a tax class for small home owners and give breaks to those making less than $90,550 a year whose property taxes are more than 10 percent their income.
TENNY, which had panned a preliminary report by the commission, didn’t have much love for the final version, either. The group’s spokesperson told Bloomberg that the recommendations “are basically the same as what the Dinkins administration released 30 years ago.”

The group expressed hope that Mayor Eric Adams might “pursue meaningful legislation” or “abide by any court determination.”
The latter is what TENNY is gunning for and where the comptroller’s support would come in. TENNY’s lawsuit seeks to fast-track reform rather than keep waiting for lawmakers to do something they have avoided for three decades. Stark said the court should also “provide some guidance about priorities.”

Having a city official sign on could endear the courts to TENNY’s suit, prompting it to send the case back to the lower courts for arguments.
“The comptroller has a limited role when it comes to property tax policy, but by joining the lawsuit he will signal to the court the importance of the issue to the city’s fiscal health and viability,” Stark said.

But two weeks after sending the letter, TENNY said the comptroller had yet to respond.
Chloe Chik, a press secretary for Lander, said the comptroller is eager to work with the group to achieve reforms and would be “scheduling a follow-up conversation with TENNY about how we can best support that goal.”

TENNY’s spokesperson said Thursday that Lander’s office had offered to meet with the coalition.
Whether Lander is legally able to join the suit is another matter.
When five City Council members tried in 2017 to file amicus briefs in support of TENNY’s suit to “ensure a non-discriminatory tax system for their constituents,” a judge ruled that the City Charter did not allow city officials or agencies in their official capacity to hire an outside lawyer to represent them. As the Law Department was already representing the city, they were blocked from joining.

A spokesperson for TENNY acknowledged that Lander would probably not be able to join the suit. But the group just wants him to publicly support its goal of court intervention. Bill de Blasio, who once held the same Brooklyn City Council seat that Lander did until this month, took the position as mayor that the court should leave reforms to lawmakers.

Mayor Eric Adams has vowed to craft a “fairer system” and resolve inequities within the property tax system “within the first year,” Bloomberg reported. He has also voiced support for TENNY. But comprehensive reform of the system can only be made by state legislation; Adams’ primary role would be to advocate for that in Albany.

A spokesperson for Adams told Bloomberg last month that “if the final product out of this court process is not sufficient, [the mayor] will take steps to further reform” the property tax system.

David Goldsmith

All Powerful Moderator
Staff member

Progressives and Hochul Battle Over Fate of $1.7B Developer Tax Break​

Every year, the city comptroller issues a report listing all the tax breaks the city hands out. And every year, the 421-a abatement that provides decades of property tax exemptions to rental housing tops the list.

In the year ending last June, 421-a accounted for $1.73 billion in foregone revenue, up from $1.6 billion the year before. Now, with the program expiring at the end of June, lines are being drawn over whether to renew the abatement.

On one side are Gov. Kathy Hochul, who included a renamed version in her budget that makes only modest changes to the current plan, and the real estate industry, which claims that very little new housing will be built without it.

On the other side are progressive politicians — especially City Comptroller Brad Lander — and housing activists who denounce it as an unneeded subsidy to wealthy real estate developers that costs the city much-needed tax dollars.

The issue has become intertwined with the state’s leftward shift in Albany, the diminished clout of the real estate industry and the June primaries for governor and the legislature. But the stakes couldn’t be higher since New York City’s future depends on building much more housing.

“We need more housing supply, the program that’s providing that supply needs to be updated, and that update needs to equitably serve New Yorkers,” said Matt Murphy, executive director of the NYU Furman Center, which on Wednesday issued a report documenting how important the tax break is to the city.

But renewing it will be an uphill struggle for the governor.

“My concern with the Hochul proposal is that it is just minor changes,” said Sen. Michael Gianaris (D-Queens), the influential Democratic deputy majority leader in the state Senate, on the Brian Lehrer show Tuesday.

He added: “421-a is a boondoggle. We need more than modest changes. We need to end it and start over.”

Half-Century Legacy​

The 421-a tax exemption was first enacted in 1971, with the city’s economy in its most severe post-war economic downturn, to spur developers to build housing. It has continued in various iterations since with occasional periods when the program lapsed amid disputes over its requirements.

It now accounts for the vast majority of new housing. In the 10 years ending in 2020, 421-a accounted for 68% of all new units in buildings with at least four units, Furman reported. Another related program accounted for an additional 21% — meaning nine out of every 10 new units benefited from some kind of tax break.

And half of all affordable units since 2014 have been built under 421-a and a locally administered Article XI tax break, according to data from the city.

Historically, the affordable units — required in Manhattan and a few other areas — were targeted to people with modest incomes. But when the state legislature tweaked the program in 2016 — renamed Affordable New York — developers were alternatively allowed to set aside affordable units for people earning 130% of the median income in the region — more than $155,300 for a family of four.

While intended to create housing for middle-class workers, the decision remains controversial as the housing needs of the lowest-income city residents, including homeless people, become ever more pressing.

Furman highlights another inequity in the program as currently crafted: It estimates half of all affordable studios were targeted to the lowest income groups, but only a quarter of two-bedroom units were available to those renters.

The 2016 revisions also effectively eliminated the ability of condos and coops to qualify for the tax break.

The Hochul plan targets both these issues.

Her proposal, tagged Affordable Neighborhoods for New Yorkers, would continue the 35-year property tax exemption for developers who set aside a percentage of units as affordable — but target those to lower incomes.

The middle-income program is gone, while any project with 30 or more units would be required to provide 10% of units to households earning 40% or less of area median income, 10% for those at 60% or less AMI and 5% at 80% or less AMI.

The units must remain affordable even after the tax break expires, a significant change.

Hochul also proposed that condos and coops would again qualify for the tax break if all the units were restricted to New Yorkers earning up to 130% AMI for the full 40 years the tax break is provided.

The condo provision originated not with real estate groups but with legislators outside Manhattan, especially in The Bronx, who want to provide a path to homeownership for their constituents, insiders say.

Condo Controversy​

Lander is vehemently opposed to the change, which he claims will encourage developers to build condominiums instead of rental units in much of the city.

He projects condos costing $600,000 with $4,000 a month payments could qualify under the program.

“The proposal trades a small amount of more deeply affordable rental units in Manhattan and brownstone Brooklyn for more market rate condos in the rest of the city,” he said.
Real estate industry players say that scenario likely won’t happen — because making a condo development work is likely be too onerous.

Anyone pursuing a condo project would have to get approval from the city’s Department of Housing Preservation and Development, is likely to want to line up financing from a city or state program, and will need go through the arduous process of filing reams of documents with the state attorney general’s office, said Erica Buckley, a partner at the law firm Nixon Peabody specializing in such deals.

“Affordable home ownership deals are really complicated and difficult. We will be lucky if three or four of every 10 potential developers use it,” she added.
Lander is pushing a plan to link the
expiration of the tax break to property tax reform. The city keeps property taxes extremely low compared to the suburbs for single-family homes, coops and condos but levies high taxes on rental buildings that now take on average 30% of a landlord’s operating income.

He says Mayor Eric Adams and the governor should establish a deadline of the end of the year to push through reform to lower rental taxes. If such a plan fails, he said, would reconsider his opposition to some sort of tax break.

Other experts note that property tax reform has been talked about for decades without any action. Taxes also aren’t the only problem in building rental units, notes Martha Stark, the former city finance commissioner who has been a leader in the fight for property tax reform. She ticks off the high cost of land and construction, which lead to apartments costing more than many New Yorkers can afford.

In any event, the Furman report notes, the current 421-a tax breaks will remain in effect until they expire, the cost is unlikely to change through at least 2030 even if the program ends, and the city will see only small increases in tax revenue for years.

‘Good Cause’ Factor​

No one disputes that the city needs more housing. “We want more product and I am in favor of more market rate development,” Lander said.

The city needs 560,000 new units of housing by 2030 to make up the deficit in new construction over the past decade and accommodate expected population and job growth in the post-pandemic city, according to a study by the consulting firm AKRF commissioned by the Real Estate Board of New York.

Insiders say the real estate industry won the first battle by convincing the governor to include her proposal in the budget, a move that came after they emerged as a key contributor to her election campaign. (People would discuss the politics of the tax abatement only on a not-for attribution basis.)
Doing so means the legislators opposed to the tax break will have to decide between eliminating it and other programs they want the governor to support. If voted on alone, the tax break would not pass the legislature, the sources say.

The condo tax break is likely to be shelved, the insiders say, calling it a placeholder for a more extensive homeownership program the governor envisions to meet the needs of the boroughs outside Manhattan.

Other real estate groups with less of a stake in the tax abatement fear a tradeoff where the legislature renews the tax break but passes a “good cause’ eviction bill.

The current good cause proposal would extend a type of rent control to currently market-rate housing, although it is likely to be watered down before passage.

Some insiders put the odds of 421-a’s renewal at 50-50 and say the building trade unions will need to support the plan. The unions seek to expand a provision that currently requires specific wages for construction and building service workers on projects in Manhattan and some waterfront sections of Brooklyn.

An endorsement from Adams will also be crucial, and insiders note the mayor and governor are trying very hard to be on the same side of important issues.

A statement from City Hall said the mayor has not taken a position:

“New York City needs more housing that is more affordable in more neighborhoods, and the administration is absolutely committed to using every tool in our toolbox to achieve that. We are currently reviewing the governor’s proposal and look forward to participating actively in any discussion about affordable housing in the city.”

David Goldsmith

All Powerful Moderator
Staff member
Tax season is always interesting in NYC. This year especially so because all the same people who used higher appraisals to cash out refi and have been crowing out how robust the market is and prices are only going up will be filing tax appeals and arguing their hardships because of how much the market has gone down to get their tax assessments lowered.

Commercial buildings retained almost all of pre-pandemic value, NYC budget says​

Estimated value for properties in sector is nearly $301B​

The pandemic unleashed unprecedented threats to New York City’s commercial properties, but the latest estimate from the city suggests the buildings have weathered the storm.
Mayor Eric Adams’ preliminary budget includes an estimate of nearly $301 billion for the city’s commercial properties for the 2022-23 fiscal year, Crain’s reported. While that’s below the estimated $326 billion pre-pandemic value, it still marks a retaining of 92.3 percent of their value.

The estimate is also a sizable boost from last year’s of only $269 billion for the 2021-22 fiscal year, 11.7 percent below the latest estimate.

“The city’s overall property valuations have come in above pre-pandemic highs three years sooner than expected,” said Rahul Jain, deputy state comptroller, speaking of all property values to Crain’s. “By any measure, I think that’s a sign of optimism.”
Not every commercial real estate sector experienced the same boost of positivity in estimated values. Offices, retail properties and hotels still struggled to hang on to their value against the weight of the pandemic.

The preliminary budget shows office properties have lost 7 percent of their value in the last two years, dropping from $172 billion to $160 billion, according to Crain’s. Retail properties have declined 11.9 percent, from $63.8 billion to $56.2 billion.

Hotels were hardest-hit as many were forced to shutter after tourism dried up in the early days of the pandemic. The properties still have a long road to recovery ahead, as their estimated value declined a whopping 19.6 percent, from $32.7 billion to $26.3 billion.
Joy Construction principal Eli Weiss is among the skeptics of the commercial property values in the preliminary budget.

“It’s hard for me to believe with where occupancy rates are for office and hotels and retail that 92% is the correct number, but it’s also a question of where you’re looking at it,” Weiss told Crain’s.
Overall, all properties in the city were valued at $1.4 trillion, 2.1 percent above pre-pandemic levels. Tax revenue growth was projected at $726 million based on higher-than-expected property tax values.

David Goldsmith

All Powerful Moderator
Staff member
I've been making the same argument (that without 421a developers will just pay less per buildable square foot) for decades. Remember the original reason for 421a was the City was trying to sell vacant lots for $1 and still couldn't get developers to build on them, so at that point 421a really was necessary.

As far as building affordable housing the solution is zoning. Rather than giving developers free buildable SF in upzonings, they could upzone affordable housing only: i.e. under current zoning you build what you want (free market) but if you build 100% affordable you get 5X FAR (or what multiplier is suitable to get buildings built). It's possible to build affordable housing with zero land cost because you got free FAR.

The truth about 421a​

Here’s what fans and foes of the $1.8B tax break are hiding​

By now, you’re probably sick of reading about 421a. Really, what’s left to say about this property tax break?​

A lot, actually.

Until now, we’ve been drubbed by supporters and opponents’ tiresome narratives about the abatement, which forsakes nearly $1.8 billion in taxes annually from apartments in the city.
Backers say without 421a, developing rental buildings in New York City wouldn’t be profitable. All we’d get are luxury condos, and the housing crisis would get even worse.
Progressives say without 421a, developers would still develop and New York state could spend that lost tax revenue on truly affordable housing.
The spin is dizzying. It’s time someone cut through it.
First, the obligatory context. The tax break, renamed Affordable New York in 2017, will expire June 15. Gov. Kathy Hochul has proposed a replacement (“485w” or “Affordable Neighborhoods for New Yorkers”). The industry likes it, but 421a haters call it more of the same.
Legislators declined to include it in the budget, so they would have to pass a standalone bill to keep 421a going. Politically, that’s harder. There’s talk of an extension while lawmakers negotiate a revision.
Both sides are being deceptive, willfully ignorant or both. Here’s what they are not telling you.

First, developers routinely omit that 421a raises the prices they must pay for development sites. That means a chunk of the tax break enriches owners of those sites rather than subsidizing affordable apartments.
Don’t believe it? Think it through. Not having to pay property taxes for 25 years, then getting a discount for another 10, means developers can bid more for the site and still make a profit. If they had to pay property taxes, they would bid less for development sites.
I confronted the Real Estate Board of New York’s leaders with this fact when they were pushing my previous employer’s editorial board in 2015 to support 421a’s renewal. Their response was, “What? No!”
But I persisted. Eventually they amended their rebuttal. “Okay, maybe so,” they said. “But if we lose 421a, owners will not reduce land prices.”
I was dubious. “Landowners will sit on underperforming property rather than make millions of dollars?” I asked. “What kind of capitalists are they?”
And REBNY said, “Yes, landowners in this city are very patient. They would wait for years until the tax break was restored.”
It’s true that some would wait. That’s why if state lawmakers want to trash 421a, they must make clear that it’s not coming back. The last time it lapsed, negotiations for a replacement continued, so developers waited rather than starting projects.
But not everyone would wait. Some landowners would continue to sell sites even if they had to lower prices to account for the lost tax break. Rent-stabilized buildings were devalued by the 2019 rent law, but have continued to sell.
“There might be a freeze period where developers don’t build because they’re waiting for a tax break to come back,” said Housing Justice for All’s Cea Weaver, an opponent of 421a. But ultimately, they would do what builders do. “I find it hard to believe that developers will simply not build,” Weaver said.
Opponents of 421a, however, omit crucial facts from their campaigns against it. One is that all new housing, even if it’s market-rate or restricted to middle-income folks, helps affordability now and in the future. Supply absorbs demand, and the “luxury apartments” of today become the affordable housing of tomorrow.
“We know that adding housing supply does help lower housing costs in the long term,” said Matthew Murphy, executive director of New York University’s Furman Center, a real estate think tank.
Another fact understated by opponents of 421a is that without it, property taxes would be too high on newly built rentals, so developers would build condos or commercial buildings instead.
The lack of new rentals would constrain supply, allowing owners of existing rental properties to jack up rents. Opponents’ answer to that is to regulate all rents, but that would cause a bunch of other problems and trigger an endless cycle of regulation. Policymakers need to stop tipping the scales in favor of rentals or condos and just let the market provide the mix of property types that New Yorkers want.
Even Weaver acknowledged that “421a does, in some respects, lower the property tax bill” on rentals. “But a better thing to do,” she said, “would be to overhaul the tax system, which is incredibly fucked up.”
Hochul and the state legislature, unfortunately, have not proposed an overhaul, because it would involve raising some people’s property taxes — something few lawmakers are willing to do, especially in an election year.
Politically, it is much easier for them to tinker with 421a, and that’s what REBNY is asking for. One could say the trade group is recognizing the political reality. But to an extent, it is also creating it.
To be fair, the industry is pushing for property tax reform: It funds a group called TENNY, which sued to force changes. But the lawsuit is now all but dead.
TENNY did attempt to recruit a leading 421a opponent, City Comptroller Brad Lander, to its lawsuit. Lander hasn’t joined it, although he, like Weaver, supports property tax reform.
But until the industry and its critics lobby together for a comprehensive solution, Albany will not do the right thing: reset the property tax system rather than patch it with complicated programs, allow more residential development and use the power of markets to ensure we get enough housing at all price levels.
Dogs and cats are not about to start playing together. The politicians, meanwhile, will keep catering to narrow constituencies. Legislators on the left will kick and scream to end 421a. Moderate Democrats will negotiate a revision similar to Hochul’s, adding wage benefits for labor unions. Lip service about property tax reform will continue, as will the housing crisis.
And when the next version of 421a expires, we will do it all again.

David Goldsmith

All Powerful Moderator
Staff member

High court rescues near-dead property tax challenge​

Industry-backed Tax Equity Now New York can continue its lawsuit​

An industry-backed quest to overhaul New York’s property tax system has received new life.
The state’s highest court on Thursday granted Tax Equity Now New York permission to continue its legal challenge to the city’s property tax system. In a lawsuit against the city and state, TENNY argues that the system undervalues homes in affluent neighborhoods and disportionately burdens communities of color.

A mid-level appeals court tossed TENNY’s lawsuit in February 2020, citing the legislature’s right to fix the system — or leave it. The court’s consensus left the group without an automatic right to appeal to the state’s highest court, which granted it that option Thursday.

The Court of Appeals’ approval is a major and unlikely win after a series of defeats for the group. The state’s highest court is famously selective about hearing cases that it doesn’t have to. Last year, it received 801 such motions and only granted 33, according to the latest annual report by the court. The year before it approved 32 of 870, and in 2019 it accepted 18 of 843.

While the de Blasio administration supported the idea of reforming property taxes, it opposed TENNY’s lawsuit, maintaining that change should be done by state lawmakers, not the courts. Mayor Eric Adams has said that he supported previous efforts to litigate the city’s property tax system.
But a spokesperson for City Hall on Thursday indicated that while the administration is committed to reforms,
“changes to the property tax system should be pursued through the legislature, not the courts.” The spokesperson subsequently retracted the statement, pending another, but a replacement was never sent. Representatives for the state declined to comment.
TENNY, which has received funding from major residential developers, was encouraged that the state’s highest court did not seem to restrict what issues it would consider on appeal.

Previously, Martha Stark, a former city finance commissioner and now policy director for TENNY, told The Real Deal that victory could ultimately take a few different forms: The court could kick the lawsuit back to the lower courts for consideration or, in what would be an even bigger win for the plaintiffs, it could rule that the city’s property tax system violates state law and the federal Fair Housing Act.
“We filed this suit because the political will to fix the property tax system cannot overcome years of inertia in the state legislature or City Council, and court action is the only viable path to reform,” Stark said in a statement Thursday. “Today’s decision allows the fight for a fairer, more equitable property tax system to continue.”

David Goldsmith

All Powerful Moderator
Staff member

Council backs off sabotage of 421a​

As mayor, unions push for renewal, city lawmakers sought to undermine them​

As the mayor makes a last-minute push to save an affordable housing tax break, City Council members planned to rally for its demise.​

With seven working days left in the state’s legislative session, Mayor Eric Adams is traveling to Albany to make his case for a replacement for 421a. Meanwhile, the City Council’s Committee on Housing and Buildings planned a hearing Tuesday on a resolution calling on the state to let it die.
But the Council canceled the hearing without explanation. A spokesperson said it was deferred and has not been rescheduled.

One possibility is that the Adams administration, which sources said plans to release its housing plan soon, prevailed on Council leaders to back off. [Editor’s note: A Council leader said Tuesday evening that the hearing was pushed back to allow state legislators, who were in session Tuesday, to participate.]
The Council resolution argues that the June 15 expiration of 421a “creates an opportunity for the New York State Legislature to review problems with New York City’s property tax system and finally make long overdue changes.”

The hearing was also supposed to focus on a state bill to implement good cause eviction statewide. The measure would give tenants a defense against eviction if their rent were raised by more than 3 percent or 1.5 times the regional inflation rate, whichever is higher.
It will ultimately be up to state lawmakers to renew or replace the tax break. But since a replacement program proposed by Gov. Kathy Hochul, dubbed 485w, was dropped from the state budget, the issue has failed to gain traction among lawmakers. The chances of a resolution before the end of the session, slated for June 2, seem slim.

“I’m not overly optimistic,” said Gary LaBarbera, president of the state and city chapters of the Building and Construction Trades Council.
“There’s no one championing it. We’re on this merry-go-round,” he said, adding that lawmakers want affordable housing, but not to subsidize or incentivize it. “When we say, ‘What would you like?’ there is uncertainty.”

LaBarbera has lobbied for 485w, joining forces with the Real Estate Board of New York. The two were on opposite sides the last time the tax break expired, with LaBarbera fighting for prevailing wage requirements on all projects that receive the exemption. It lapsed for more than a year, until the parties reached an agreement that included some of the wage rules sought by the unions.

Developers argue that without the program, no multifamily construction will move forward in the city. Financing for projects that cannot beat the June 15 deadline has already come to a halt.
The governor’s replacement program calls for deeper and permanent affordability, but critics of 421a say it is much like its predecessor.

Developers maintain that the 35-year tax abatement is critical to housing construction in the city, given the high property taxes and other costs facing rental projects. A recent report by New York University’s Furman Center found that a majority of multifamily units built between 2010 and 2020 were beneficiaries of 421a.

In testimony prepared for Tuesday’s canceled hearing, the Real Estate Board of New York argues that the city and state cannot match the level of investment that the private sector contributes to the creation of affordable housing.
The trade group also planned to testify against good cause eviction, saying that it “will ensure a cycle of disinvestment, will discourage new supply, and makes the debate over 421a moot.”

Tenant advocates and elected officials plan to rally in Albany to demand passage of good cause eviction legislation before the end of the legislative session. An earlier effort failed to persuade lawmakers to pass the bill before the eviction moratorium expired Jan. 15.
When asked last week about the property tax break, Manhattan Sen. Brian Kavanagh, who chairs the Senate’s housing committee, said he did not know “if or when we’ll be revisiting that.” Although 421a is a complex issue and intertwined with other complicated topics such as property tax reform and Mandatory Inclusionary Housing, the senator noted that in past years, major policy issues have been worked out in the final days of the session.

David Goldsmith

All Powerful Moderator
Staff member
This article pretty much confirms my previous assertion that not matter what happens with assessed values, taxes will still go up if NYC government decides it need more income.

Habitat Magazine



JUNE 01, 2022
Co-op and Condo Tax Assessments Rebound to Pre-Pandemic Levels

By Bill Morris​

The city’s Department of Finance (DOF) has released the final property tax assessments for the coming 2022-23 fiscal year, and for residents of co-ops and condominiums the news is neither welcome nor surprising: after a brief lull during the depths of the COVID-19 pandemic, assessments have rebounded to their pre-pandemic levels.

It remains to be seen if final tax bills will rise, decline or remain steady. The City Council will approve its new budget later this month and will set the tax rate, the number that’s used in the formula, along with assessments, to calculate final tax bills.

“During the 2021-22 fiscal year, the DOF reduced co-op and condo assessments by about 10%,” says Ben Williams, head of the property tax department at the law firm Rosenberg & Estis. “Now they’re trying to bring assessments back to pre-pandemic levels. I think they’ve increased assessments too much.”​

In its Jan. 18 announcement of the tentative assessments for the coming fiscal year, the DOF noted that Class 2 properties — co-ops, condos and rental buildings — are expected to see an 8.7% increase in market value. During the previous fiscal year, market value fell by 8.2%. (Assessed value is a fraction of the market value. Co-ops and condos are assessed based on comparable rental properties — not on their market value.) So, given the city’s arcane system of computing property taxes, the widely reported rebound of rents is fueling the rise in assessments for co-ops and condos.

Williams expects the City Council will lower the tax rate to compensate for the 10% rise in assessments, which could mean that final tax bills will be roughly equal to last year’s. If that happens, boards that were expecting pandemic-related tax relief will be in for an unpleasant surprise.

“Boards prepared their 2022 budgets last year,” Williams says. “I have about 50 co-op and condo clients, and they won’t be surprised because this is what I was expecting. But some people are going to be surprised.”​

Brett Gottlieb will not be among them. A special counsel at the law firm Herrick Feinstein, Gottlieb offered a prescient prediction to Habitat exactly one year ago: “Condos and coops are taxed as comparably situated rental buildings and therefore are directly impacted by vacancy rates and rent reductions. As vaccinations increase and employer mandates to return to work rise, vacancy rates should subside. If they drop sharply, it’s a good assumption that assessed values will resume their upward trajectory.”

Gottlieb doesn’t claim to be clairvoyant. “It was logic more than anything else,” he says about the accuracy of his prediction. “It took all the way into the 2021-22 tax year for the pandemic declines in tax assessments and rental values. Now, in 2022, vacancy has declined, rents have precipitously risen, and the city has returned assessments very close to pre-pandemic levels.”

For most co-op and condo boards, property taxes are their biggest expense. This year it appears unlikely there will be any rest for the weary.

The 2022-23 final property roll is now available online at The final roll includes all property assessments in New York City and incorporates changes in assessments made since January’s publication of the tentative roll. The new assessments will be reflected in the property tax bills due July​

David Goldsmith

All Powerful Moderator
Staff member

A Brooklyn Pol's Frustrating Dive Into the Mystery of Property Valuations
A Brooklyn Pol's Frustrating Dive Into the Mystery of Property Valuations

Department of Finance declines to reveal computer model used to adjust valuations.

Emily Gallagher, who represents the north Brooklyn neighborhoods of Williamsburg and Greenpoint in the New York State Assembly, recently set out on a heroic, if not quixotic, mission. In an effort to untangle discrepancies in property valuations in New York City, Gallagher filed a Freedom of Information Law (FOIL) request with the city's Department of Finance (DOF), the Riverdale Press reports. Gallagher asked for a copy of the computer model the DOF uses to adjust the incomes and expenses of comparable rental properties that are used to establish the valuations of condos and co-ops, a key element in computing property taxes. (Class 2 properties include all rental buildings, condos, and co-ops, which together makeup 83% of the residential properties on which New York City collects taxes.)

The DOF declined to share a copy of the computer model. The department's website states: "State law requires us to value residential cooperative and condominium buildings as if they were rental apartment buildings. This means that we look at the income and expense statements of rental buildings with similar characteristics to determine your condo or co-op building's market value. Comparable properties are chosen based on the number of units, size, age, distance and number of stories. There is never a perfect match. To account for any differences, adjustments are made to the income and expense of the rental buildings used as comparables for your property. For example, if your co-op is older than the rental building that is the best comparable match in your neighborhood, we use a computer model to adjust the rental comparable to produce a more accurate value for your building.”

Last October, Bloomberg reporter Jason Grotto took a deep dive into Class 2 property taxes in New York City, seeking to find out how far the final assessed value of a co-op or condo might stray from its comparable rental property. His analysis found that “in any given year, the department derived as many as 100 different net operating incomes from the same comparable rental building,” and that on average these values differed “as much as 130% in any given year.”

At first the DOF extended its time to answer Gallagher's request, then extended it four more times over six months. Finally, on June 1 the department denied the request. It gave two reasons: "because the records you requested are exempt from disclosure under FOIL," and "after a diligent search of our records we do not have any items responsive to memoranda, directives or reports, as described in your request."

Gallagher appealed the decision on June 21. “I’ve heard numerous complaints from constituents about inexplicable inconsistencies in property tax bills across my district,” Gallagher says. “Taxpayers have a right to know how their tax rates are determined. And state lawmakers need access to critical information to provide oversight.”

John Paraskevopoulos, Gallagher's legislative director, tells Habitat: "I think the DOF doesn't want any transparency of the method by which it assesses co-ops and condos. It's a chaotic system. There's no excuse for such delays, and there should be more transparency."

The DOF has 10 days to respond to Gallagher's appeal.

David Goldsmith

All Powerful Moderator
Staff member

Mayor Adams Misses Campaign Promise to ‘Immediately' Take On Property Tax Inequities

When he was running for mayor in 2021, then-Brooklyn Borough President Eric Adams promised that, if elected, in his first year he would "finally" tackle a particularly thorny area of city finance that impacts all New Yorkers: property taxes. As he takes the stage to deliver his second State of the City address on Thursday, the mayor has made no apparent progress on this significant campaign promise.
Virtually everyone agrees New York City's property tax system is irrational and unfair, that it places the heaviest burden on low-income homeowners and renters, and that it exacerbates and is exacerbated by gentrification. Owners of some of the priciest co-ops pay rates far lower than homeowners in underserved areas of the city, while similarly situated properties often pay vastly different amounts for no discernible reason.
"Mayor after mayor has promised to tackle property tax reform, but struggling homeowners continue to wait and pay unfair bills under a fundamentally unfair and overly complicated system," Adams wrote in policy platform material posted on his campaign website.
"I’m going to immediately put in place a committee to look at these tax laws and come up with real solutions to alleviate co-ops and condominiums and shift the tax burden off of renters and homeowners in less affluent areas to the owners of pricey apartments in wealthy areas," Adams’ platform continued. "Billionaires are not paying their share of taxes."
"This will be fairly examined within our first year, with a robust outreach effort that gets maximum input from impacted New Yorkers," Adams wrote about potentially becoming mayor.
But there has been no public mention of a property tax committee or outreach efforts to date. Adams' campaign website was removed shortly after his election (the contents have been republished by Gotham Gazette). A spokesperson for the mayor said the administration was drafting recommendations for reform, much of which would have to take place in Albany through the State Legislature.
“Mayor Adams believes our property tax system is in need of long-overdue reform," wrote Jonah Allon, a mayoral spokesperson, in an email. "Low- and middle-income homeowners deserve relief, especially as the city continues to recover from the pandemic."
"While we are still in the process of developing our own updated recommendations and analysis, we look forward to working with our partners in government and advocates to ensure the system is simpler and more equitable for all,” Allon added.
Asked whether either the committee or the outreach took place, Allon referred Gotham Gazette to his previous statement.
In 2020, an advisory commission established by then-Mayor Bill de Blasio and City Council Speaker Corey Johnson published a series of recommendations. While de Blasio and Johnson never converted those recommendations into firm policy proposals, economists and tax experts agreed the commission had moved in the right direction. It recommended a number of changes, including taxing co-ops and condominiums on their market value like other small homes; instituting "circuit breakers," or tax breaks, for low-income homeowners in rapidly appreciating neighborhoods; and getting rid of a so-called "fractional assessment" method that adds layers of obscurity to the tax formula.
Those steps would require changes to state tax law. State lawmakers, including those who support reform, have said they are waiting for city leaders to take the lead. Any major changes could be felt, for better or worse, by every city resident and impact a full third of the city's revenue stream. So far there are no comprehensive legislative packages on the table, though there is an ongoing lawsuit seeking to force changes to the property tax system.
Last fall, City Comptroller Brad Lander and City Council Members Joe Borelli and Kevin Riley began mustering forces to reinvigorate the debate, bringing together a larger coalition and calling on state lawmakers to pick up the commission's recommendations and also provide relief to rental properties, which hadn't been addressed. The group met with Adams in December to get him on board.
"Fixing our opaque and inequitable #propertytax system isn't easy, but it’s imperative," Lander wrote in a tweet after the meeting. "Thank you @NYCMayor for listening to our broad coalition, including hundreds of New Yorkers who signed our petition. Look forward to working together to ensure tax fairness across NYC."
Allon, the mayor's spokesperson, would not say whether property tax reform is a priority for the administration this state legislative session.
"If we do any property tax, we have to be thoughtful, look after those small homeowners when we think this through and we want to get this resolved during this fiscal year," Adams told reporters earlier this month as part of a larger response about calls to raise taxes on wealthy New Yorkers.
Adams is expected to unveil his state agenda over the coming weeks, some of which could be included in his State of the City address, which he will deliver on Thursday in Queens.

David Goldsmith

All Powerful Moderator
Staff member

Council, Adams administration clash on office-to-resi affordability​

Progressive members say proposal ignores low-income communities
City Council members locked horns with the Adams administration Tuesday over the affordability requirements of a state-proposed tax break for office-to-residential conversions.
At a committee meeting, progressive lawmakers charged that the proposed affordability bands weren’t deep enough. But city officials didn’t budge in their support of Gov. Kathy Hochul’s proposal to require that 20 percent of apartments in conversions be permanently affordable to New Yorkers making an average of 70 percent of the area median income.

Only 5 percent of those units would go to households making 40 percent of the AMI, and the highest income band for affordable units would be 100 percent of AMI. That drew the ire of Land Use Committee Chair Rafael Salamanca Jr.
“Do you agree that 100 percent AMI is not affordable and if so, what income bands does the administration recommend?” he asked City Planning Commissioner Dan Garodnick, chair of the task force whose recommendations informed Hochul’s proposal.

Garodnick noted a “slight error in the premise of the question,” apparently referring to the fact that the 100 percent AMI band was the maximum, not the average, affordability band. He then punted the question to the city’s Department of Housing Preservation and Development.
“We believe that the [affordability] mix is a good mix for these kinds of projects,” said Brendan McLaughlin, HPD’s deputy commissioner for policy.
Salamanca tried another angle, asking, “Does the administration support the state’s tax proposal to incentivize the inclusion of affordable housing and office conversions?”
“We do,” Mclaughlin said.
As it often is for Council members, the rub is the level of affordability.

“Every single time that there is a major citywide proposal that leaves my community out, I’m starting on the offensive,” said northwest Bronx Council member Pierina Sanchez, adding that her district’s median household makes less than 30 percent of AMI. For a family of two, that’s $32,000, or about what a full-time minimum-wage worker earns.
“I hope that the administration will join in pushing the state to change these considerations,” Sanchez said. “Will you support me and my community?”
McLaughlin would only say that the program offered “a good mix of affordability for the benefit that’s being given.”

Neither side was inclined to mention the two elephants in the room: Requiring more affordability without providing more subsidy would render some projects economically infeasible, and keeping the status quo — no rezoning, subsidy or affordability requirement — would mean fewer conversions and only market-rate apartments.

Mark Willis, an economist at the NYU Furman Center for Real Estate and Urban Policy and former HPD deputy commissioner, said history has shown conversions of offices to market-rate housing can pencil out without subsidies.
But he said the state should pair an affordability mandate with a tax break, because doing nothing “would be a terrible waste of what is really a once-in-a-generation opportunity to provide affordable housing in neighborhoods that now offer very little affordability.”
Garodnick echoed that urgency.
“We do think it’s important for us to incentivize, because of its difficulty, the creation of affordable housing,” he said. “Here we have an opportunity to do it. We should do it.”
Another question is who should do it. The city could rezone areas with obsolete office buildings and high demand for housing, such as the Garment District, but it would take a year or more to go through the city’s land-use review and would trigger its Mandatory Inclusionary Housing law, which carries an affordability mandate but no subsidy.

The state, however, has the power to facilitate and subsidize conversions by merely passing a bill, which it can do in a matter of days, if politics allow. That’s a big if, given the number of left-wing senators who view property tax breaks not as a housing subsidy but as a giveaway to developers.
And not everyone thinks an end-run by Albany is a good idea.
“The state could authorize conversions in such a way … that would undermine the city’s carefully crafted Mandatory Inclusionary Housing program and undercut the city and City Council’s role in critical land-use decisions,” Willis said.