Does New York City’s property tax system undervalue homes in wealthy neighborhoods, while overvaluing properties in poorer ones?
Some argue yes, that the current system violates the federal Fair Housing Act because it disproportionately burdens communities of color.
In 2017, the real estate industry-backed group Tax Equity Now New York filed a lawsuit claiming that aspects of the city’s property tax system resulted in discrimination.
The suit was thrown out by a judge in 2020, but TENNY appealed, and in 2022, the state’s highest court agreed to hear the case. Two years later, the Court of Appeals ruled that TENNY’s claims against the city should proceed.
But the bill seeking to rectify those alleged inequalities is stuck amid political negotiations in Albany.
Last month, Assembly member Jenifer Rajkumar introduced the “Five Borough Fair Property Tax Act,” which called for an overhaul of the system, following recommendations laid out in a 2021 city commission report.
Yet just a few weeks after it was referred to the Assembly’s Real Property Taxation Committee, the bill was dead. Rajkumar, the sole sponsor and one of the mayor’s strongest allies in the state legislature, had pulled her support.
When asked about the bill last week, a City Hall spokesperson said the administration has been clear that the tax system is unfair, especially to homeowners of color, and that it needs reform.
“The best way to do that is through meaningful legislative reforms that carefully consider the needs of working-class New Yorkers — not temporary changes that create dramatic tax increases and negatively impact city funding,” the spokesperson said in a statement.
But Rajkumar has now pulled back on her enthusiasm for the bill. “We developed an initial draft but want to speak to all stakeholders before introducing a final bill for consideration,” she said in a statement.
The Assembly member, who is reportedly eying a run for city comptroller, noted that she is “proud to be a leading voice in Albany for a top-to-bottom overhaul of New York City’s fundamentally broken property tax system.”
TENNY viewed the court’s recent decision to revive its lawsuit as not only a victory, but as a clear directive to the city to take action on its own — instead of waiting for the state legislature to take up the cause. The court indicated that the state’s Real Property Tax Law requires the city to fix the unequal taxation of properties that results from caps on increases to assessments. The court also found that TENNY compellingly argued that condo and co-op buildings should no longer be taxed at a similar rate as rent-stabilized apartments.
“The City can and should act now to address the inequities in the property tax system, and they have had a lot of time to do it,” Martha Stark, policy director for TENNY, said in a statement.
“Instead, they continue to delay and try to punt this to the State.”
But the city does not share the view that the decision was a mandate to take action.
Rajkumar said that since the decision, her team “has been working day and night to forge the most ambitious and comprehensive property tax reform bill in history.”
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The bill sought to eliminate the class share system, which assigns a portion of the overall property tax burden to each of the four property classes. That “share” takes the form of an assessment rate that is multiplied by a property’s estimated market value, to determine the taxable value. That value is then reduced by caps and abatements.
Rajkumar’s bill would also repeal the section of state law that allows condos and co-ops to be assessed as if they were rent-stabilized buildings. It would also add a new class of properties, class one-A, that would include one-, two- and three-family properties and owner-occupied mobile homes.
Under the proposed bill, new property tax rates would be phased in and assessments would be based on 100 percent of the fair market value. It would also create an up-to $10,000 abatement for owners whose tax liability is 10 or more percent higher than their household income.