New York landlords have welcomed the city’s first attempt at property tax relief as a step in the right direction.
But they have said the City Council needs to do more to protect property owners whose rent revenue has been decimated during the COVID-19 pandemic.
“The City Council’s first attempt at property tax relief is notable, but we must do much more to provide relief to property owners facing staggering increases in expenses and loss of income like so many others during the pandemic,” said REBNY in a statement.
“Next steps should include reducing property tax interest penalties further and implementing payment plans for those experiencing financial hardships. It is important to note that last week a majority of City Council members spoke in support of the need for long overdue real property tax reform.”
Two bills – Intro 1974 sponsored by Public Advocate Jumaane Williams, and Intro 1964-A from Council Member Margaret Chin – are aimed at helping mom-and-pop legacy property owners in particular.
Intro 1964 would require the Department of Finance to offer July 1, 2020, real property tax deferments in two scenarios. First, to property owners whose property was occupied by an active business or trade on March 7, 2020 and was subject to Governor Cuomo’s executive order limiting seating, occupancy or on-premises service limitations. Second, if the property owner experienced an unexpected decline in income from March 1, 2020 through June 30, 2020. In both scenarios, the assessed property value must exceed $250,000.
The deferral agreement will require the taxpayer the pay 25 percent of the deferred taxes by October 1, 2020 and the remainder by May 1, 2021. The agreement would also require the property owner to provide their tenant, whether commercial, residential or institutional, an option for a forbearance on rent, and shall not charge the tenant an interest rate on late rent payments greater than 25 percent of the property owner’s own unpaid deferred taxes.
Intro 1974 provides property tax deferments, without interest or penalty, to property owners who have experienced hardship, have a combined annual income of $250,000, and whose assessed property value is $250,000 or less. The property must also be the taxpayer’s primary residence. The bill will defer the taxes due on July 1, 2020 until October 1, 2020.
The bill also increases the income threshold of the Department of Finance’s Extenuating Circumstances Income-Based installment agreement, from nearly $60,000 to $200,000.
While welcome, Frank Ricci, director of government relations of the Rent Stabilization Association, said the bills don’t go far enough.
“Just as the eviction moratorium buys more time for tenants struggling to pay their rent, the City Council’s interest rate debate should have been coupled with extending to September 30 the impending July 1 property tax payment. This would take some pressure off the largest providers of affordable housing,” said Ricci, whose organization represents 25,000 owners of the nearly one million rent-stabilized apartments in the five boroughs.
“Building owners want to meet their obligation of paying property taxes, but they just need more time. They know the importance of their tax revenue, which funds municipal services – things like education, sanitation and healthcare.”
New York has some of the highest property taxes in the nation, disproportionately hitting small properties in gentrifying neighborhoods.
Mom-and-pop legacy property owners have been calling for City intervention well in advance of the July 1 property tax deadline. Despite experiencing dramatic income loss, some property owners have proactively offered relief and flexibility, without any City incentive, to help their commercial tenants continue operations.
In a statement, Chin said, “These small property owners operate centuries-old tenement buildings that house longtime low-income residents who pay rent as low as $50. Yet they continue to suffer the consequences of a broken property tax assessment system.
“Now with commercial tenants having to close their doors practically overnight, we can’t allow the City to continue to ignore the needs of these property owners any longer or — worse — profit off of their vulnerability. This bill is a first step to pushing the City to being a stronger partner to this neglected constituency and get them on the road to recovery.”
While the City began to lift some restrictions on June 8, 2020, as part of the Governor’s Phase 1 reopening plan, many will be unable to make up loss incomes and revenues after rent collections tumbled.
During a public hearing on the tax relief, Jeffrey Shear, the Department of Finance’s Deputy Commissioner for Treasury and Payment Services, testified that property taxes are the City’s biggest revenue. Without that revenue, the City would have trouble paying many of its employees and vendors and providing many vital services.
Shear stated the Department and Banking Commission supported the Public Advocate’s bill, but expressed that the program should not be over-expanded.
The Department’s main qualms related to the bill offering deferrals to properties valued over $250,000, who experienced a decline in income during the COVID-19 months. Shear stated, “the properties in this category account for 70 percent of the $30 billion in property tax revenue,” pointing out that the vast majority of New York City businesses would qualify regardless of the size of the property and the amount of taxes due.
Shear said, “Even if a fraction of eligible businesses opted into this program, the City’s cash position would likely be severely affected.”