New York home owners could be “screaming bloody murder” if a plan to shake up property taxes takes hold.
Housing attorney Martin Heistein said the proposals just released by the mayor’s Advisory Commission On Property Tax Reform could force longterm owners out of their homes.
And instead of helping low- and moderate-income homeowners by lessening their tax burden, it could end up hurting them.
Under the current assessment system, single-family homes are taxed on their sales value. Co-ops and condos are grouped together with rental buildings and assessed based on the potential gross annual rental income.
The Commission also recommends scrapping caps on assessed value of 1-3 family homes.
It’s this system that has kept taxes from skyrocketing for longtime residents of gentrified neighborhoods, but has seen them spike for newcomers to the area.
“I obviously don’t hear from clients who are paying very minimal amounts of taxes, but it seems obvious, there’s basic inequality,” said Heistein, a partner at Belkin Burden Goldman.
He explained, “If someone bought a house 20-30 years ago for $100,000 in Park Slope and now it’s worth $4 or $5 million, the assessed value wouldn’t be $4 or $5 million, it would be incremental increases based on the purchase price. You could be paying $4,000 to $5,000 in taxes while an identical home could be paying $20-to-$25,000.
“How do you correct that inequality? How do you overcome the politics of equalizing the numbers? Home owners would be screaming bloody murder. It’s an unfair system.”
Belkin Burden partner Craig L. Price said a sudden spike in taxes could force longterm owners out of areas that are now affluent becuase they themselves aren’t necessarily affluent.
“Their incomes don’t necessarily allow them to make those payments and they will be forced to sell,” said Price.
“On paper they’re wealthy because they’re believed to have an asset, but they can’t carry the costs and they will be forced to sell. There will be case of haves and have-nots. From my perspective, this will be an impediment to the people the mayor is trying to accommodate in allowing average New Yorkers to still live in New York.
“The mayor said he’d be happy to pay more, but that’s easy for a mayor who thinks he’s going to write a book to say, but not for the average New Yorker.”
Following the release of the report, there will be more hearings held, one in each borough, according to a spokesperson for City Hall.
After hearing from the public at these events, in addition to meeting with local elected officials and other stakeholders, the commission will issue a final set of recommendations later this year.
As for the concerns from the real estate industry, mayoral spokesperson Laura Feyer said, “The plan creates equity between neighborhoods, and has measures in place to prevent displacement of low-income homeowners who have lived in their neighborhoods for a long time. We do not expect this plan to cause a mass exodus from New York City.”
Residential brokers are worried though. Lindsay Barton, an agent with Douglas Elliman, said, “There will be people who have been paying very low taxes on townhouses and able to stay in homes for generations due to the low cost of ownership.
“In simple Econ 101 terms, this obviously results in much more supply of product with a higher cost of ownership, which is very likely to drive down prices. It could also certainly have a chilling effect on purchases of townhouses with those low rates. Even the current discussion could do the same.”
Warburg agent Catherine Silver Smith added, “It’s naive to believe that everyone living in a condo or co-op near Central Park are high-income net worth homeowners and capable of covering an increased real estate tax burden.
“Hitting 90 percent of homeowners would actually hurt more households than expected. This also doesn’t encourage upwardly mobile households to invest in New York City real estate. If enacted, this could destabilize the market and could effectively be a financial crisis for New York City co-ops and condos.”
