Thank you for writing this really informative article on New York City's property tax system. I learned a lot about the disparities in tax rates which seems like is calling for reform. It is really concerning that this hinders multi-unit housing construction. Do you know if there are proposals or policy changes that are being considered to rectify these inefficiencies in the city's property tax system?
I don’t understand how you wrote a whole article about property taxes but didn’t actually explain how condo/co-op property taxes are based on comparable rents and not market values, which in of itself is regressive because super expensive condos do not really have comparable rents, which means they end up paying taxes that end up being a much smaller fraction of the property value than a cheaper condo or co-op
Your analysis is premised on a mistaken conflation of assessed value and market value — but in NYC assessed value of coop and condo buildings is determined in a very strange and convoluted way that has nothing to do with what a building is worth.
First the city pretends the coop is really a rental building, then estimates the revenue then applies a capitalization rate and then multiplies it by an arbitrary number. (.45)
This means the assessed value of that 96 unit coop is far different (and much lower than) the market value of all the units added up. Indeed $6,000,000 divided by 96 units equals $68,000 a unit but as I’m sure you’re aware coop apartments in Jackson Heights sell for many multiples of that.
Excellent article, thank you for writing! Perhaps a silly question, but I am a little confused about your example. While it makes sense to me that the rate of change of the tax rates would differ (ultimately resulting in the Queens property paying more), in the chart I’m surprised by how different the rates are even at the start of the series (in 2010). Is that also the result of the different rate of growth in tax rates, just in the years prior to the beginning of the chart? Thanks again, really enjoy the content!
You are completely correct that at the start of the time series (2010) there is already huge divergence in these two properties' tax bills, despite both being valued similarly at the time at $3.4-$3.5 million. My assumption is that this difference is the result of many years of different growth in tax bills. Our current system has been in place since ~1981, and it's possible that upon the implementation of the 1981 system there may well have been some sort of grandfathering in of previous tax rates – but I don't have that information.
These are very old buildings! The Manhattan townhouse was constructed in 1899 and I've found photos of the Queens co-op from 1939 (and it is likely much older) (photo: https://nycma.lunaimaging.com/luna/servlet/s/lqwlp7).
So, this is a long-running problem, and every year that goes by the unfairness gets a little bit more unfair.
Thanks Sebastian, that makes sense! The more I thought the more I suspected that was the case, but I appreciate the clarification. As you said, it’s the cumulative effect of decades of different growths in the tax rates that had been building (pun not intended) even prior to 2010. Again, great article!
I think that land value taxes are very interesting. The approach that Detroit (and Pennsylvania) have taken to split-rate taxes seem like a feasible incremental approach. I’m working on an essay now on this exact topic!
Thank you for writing this really informative article on New York City's property tax system. I learned a lot about the disparities in tax rates which seems like is calling for reform. It is really concerning that this hinders multi-unit housing construction. Do you know if there are proposals or policy changes that are being considered to rectify these inefficiencies in the city's property tax system?
There has been a LOT of ink spent on ways to improve New York’s property tax system.
Here’s my follow-up piece that I just posted exploring the ways to build a fairer and more simple tax system — and why they’ve not had any impact: https://www.sidewalkchorus.com/p/property-tax-reform
I don’t understand how you wrote a whole article about property taxes but didn’t actually explain how condo/co-op property taxes are based on comparable rents and not market values, which in of itself is regressive because super expensive condos do not really have comparable rents, which means they end up paying taxes that end up being a much smaller fraction of the property value than a cheaper condo or co-op
Your analysis is premised on a mistaken conflation of assessed value and market value — but in NYC assessed value of coop and condo buildings is determined in a very strange and convoluted way that has nothing to do with what a building is worth.
First the city pretends the coop is really a rental building, then estimates the revenue then applies a capitalization rate and then multiplies it by an arbitrary number. (.45)
This means the assessed value of that 96 unit coop is far different (and much lower than) the market value of all the units added up. Indeed $6,000,000 divided by 96 units equals $68,000 a unit but as I’m sure you’re aware coop apartments in Jackson Heights sell for many multiples of that.
Excellent article, thank you for writing! Perhaps a silly question, but I am a little confused about your example. While it makes sense to me that the rate of change of the tax rates would differ (ultimately resulting in the Queens property paying more), in the chart I’m surprised by how different the rates are even at the start of the series (in 2010). Is that also the result of the different rate of growth in tax rates, just in the years prior to the beginning of the chart? Thanks again, really enjoy the content!
Thanks for reading!
You are completely correct that at the start of the time series (2010) there is already huge divergence in these two properties' tax bills, despite both being valued similarly at the time at $3.4-$3.5 million. My assumption is that this difference is the result of many years of different growth in tax bills. Our current system has been in place since ~1981, and it's possible that upon the implementation of the 1981 system there may well have been some sort of grandfathering in of previous tax rates – but I don't have that information.
These are very old buildings! The Manhattan townhouse was constructed in 1899 and I've found photos of the Queens co-op from 1939 (and it is likely much older) (photo: https://nycma.lunaimaging.com/luna/servlet/s/lqwlp7).
So, this is a long-running problem, and every year that goes by the unfairness gets a little bit more unfair.
Thanks Sebastian, that makes sense! The more I thought the more I suspected that was the case, but I appreciate the clarification. As you said, it’s the cumulative effect of decades of different growths in the tax rates that had been building (pun not intended) even prior to 2010. Again, great article!
I think that land value taxes are very interesting. The approach that Detroit (and Pennsylvania) have taken to split-rate taxes seem like a feasible incremental approach. I’m working on an essay now on this exact topic!