The condominium loophole is the New York state law equivalent of Rasputin.
Despite numerous calls through the past four decades to kill it off, the loophole — which gives tax breaks on large suburban homes by allowing them to be classified as condominiums — endures.
New York Gov. Kathy Hochul recently vetoed a bill, passed by the state legislature in June, that would have closed the loophole, Syracuse.com reported.
The loophole, the outlet reported, broadly defines what is considered a condominium, enabling developers to build large, single-family homes on large lots and still designate them as condos.
The measure requires municipalities to assess condominiums at a lower tax rate than single-family homes, regardless of their size. That places the tax burden on others to cover the shortfall in taxes flowing into government coffers.
Indeed, a 2018 report by Syracuse.com revealed tens of thousands of condominium owners in Upstate New York alone benefited from the loophole, which cost the state an estimated $330 million in tax revenue annually.
The bill vetoed by Hochul would have applied to newly built homes, and would have also permitted municipalities to determine whether to apply higher tax rates to homes designated as condominiums or co-ops, the outlet reported.
Hochel vetoed the bill out of concern that it would disincentivize the construction of new housing units during a housing crisis. She has said she
“At a time when New York state is in the midst of a statewide housing crisis, this would be an unacceptable outcome,” Syracuse.com reported Hochul writing in her veto message.
In early December, the governor promised a “bold and audacious” housing plan, to be revealed during her State of the State address Jan. 10. She set a goal of creating 800,000 new homes over the next decade.
But proponents of the vetoed bill — which contained an exemption for affordable housing, and exemptions for New York City and Nassau County, where affordable housing is most difficult to come by in the state — say it’s is more about closing an unfair tax loophole than housing.
“This is a good-government issue, and I will be engaging with the governor’s office to better understand their concerns so we can find a legislative path forward,” state Sen. John Mannion said in a statement reported by Syracuse.com.
— Ted Glanzer