Down market? What down market? In the wake of one of the biggest housing declines since the Great Depression, some New Yorkers saw the values of their homes rise last year — on the city’s tax records.
Townhouse prices in Manhattan were down 32 percent in 2009 from 2008, according to data from Miller Samuel. And yet the city’s Department of Finance hiked the market values of some townhomes in Upper Manhattan by as much as 20 percent. (Co-ops, as a class, were up 1.8 percent on average.)
In the eyes of the city Department of Finance, the market value on Meghan Beard’s two-family Harlem townhouse increased from $1.15 million to $1.32 million in the last year, which will apply to the tax year beginning on July 1. Alan Wang’s one-family, meanwhile, rose from $1.05 million to $1.2 million.
Market values — which have risen by 10 to 15 percent a year for much of the last decade — are important because they are used to derive assessed values, which directly drive a homeowner’s property tax bill. Currently, a homeowner’s assessed value can rise and rise until it gets to the point where it is a certain percentage of the property’s market value — a level called the “equalization rate.”
For properties in Class 1, a class that includes one- to three-family houses, that equalization rate is 6 percent. So under current standards, a $1 million townhouse can have an assessed value of $60,000. A $2 million townhouse can have an assessed value of $120,000.
The extent to which assessed values can spike at any given time is capped — currently at 6 percent annually. Homeowners worry, however, about what might happen to their assessed values if their market values are high and that cap is suddenly removed. What’s more, market values for Class 1 houses are calculated by using comparable sales data.
“I think it’s pretty incredible, and I don’t quite understand how it’s even mathematically possible that my property went up 15 percent in perhaps the worst real estate downturn in New York history,” Wang said. “I understand that they calculate it by using comparables, but what time frame are they looking at?”
As for his current taxes, they’ve gone up from $5,481 last year to $6,214 for the upcoming year.
The average townhouse sale price in Manhattan fell from $7.37 million in 2008 to $5.01 million in 2009, according to a new report by Prudential Douglas Elliman, which was prepared by Miller Samuel. An analysis of the city’s own rolling sales data by The Real Deal shows that one-family homes in Central Harlem, specifically, fell from an average of $1.46 million to $954,566 in the last year.
When queried, Owen Stone, a spokesperson for the city’s Department of Finance, noted that “by and large, most people saw their values decrease in Class 1, but it’s not unreasonable that some people saw an increase.”
According to Stone, the market value on the average Class 1 property (which includes not only small homes but most buildings of three units or less, such as offices with one or two apartments attached) is $556,900, a drop of $16,000, or 2.8 percent, over last year.
However, averages are made up of many individual data points, a point that Stone made when he continued, “I think it would be rare, indeed, if every single property in the city saw a decline.”
That’s not the homeowner perspective. Noah Caplin, who owns a two-family home in Central Harlem, saw his taxes rise from $10,200 to $11,115 — but seems more flabbergasted by the fact that his market value went from $1.4 million to $1.6 million.
“Everyone’s house went down in value. Not just my house. Your house. Everyone’s house. We’re living in a crisis,” Caplin said. “The idea of raising values like that in a year when real estate values are plummeting is absolutely ludicrous.”
The idea that the city has ratcheted up the value of their homes — on the city’s books — at a time when they know their homes are clearly worth less has some homeowners in Harlem so angry, they’re considering legal action.
“There is a lot of indignation from many owners,” said David Basche, who opened his “Notice of Value” letter from the city last month to find the city had hiked the market value on his Harlem home by 15 percent. His taxes have risen from $5,998 to $6,826, but Basche said that’s not his complaint.
“Look, I have no problem paying fair taxes,” he said. His disagreement is with the market value increases, which he noted are being calculated in “the opposite direction” from the performance of the economy.
Luigi Rosabianca, a Manhattan-based real estate attorney, recommends homeowners at least contest those market values — something they don’t even need a lawyer to do. They can commence the process by filling out a form on the Department of Finance’s Web site.
“When the NYC DOF calculates market value, they look at comparables of similar properties, and I think it’s safe to say that in the last three years, we’ve been in a little bit of a downturn,” Rosabianca said. “You can’t lay down and take the increase, because it’s not reflective of reality. I would recommend they contest it.”