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A screwed up NYC Real Estate Tax System

March 2, 2016
By Corey Bearak, The Public Ought To Know

Queens, NY –  When I opened my New York Times Real Estate Section this past weekend, I looked as usual at the “Residential Sales” listings.  I often analyze the sales price and real estate taxes for one- and two-family home listings; that's Class One in New York City assessment parlance.  NYC currently, and for the last serval years, assesses Class One properties at 6% of market value.

A property at 28 Garden Place in Brooklyn that sold for $5.2 million grabbed my attention, in excess of the $4.7 million at which the city assessed the property.  The owners paid all of $16,194 in real estate taxes.   6% of the sales price makes for an assessed value of $312,000.  Multiply that assessed value by the 19.5554% tax rate yields $61,008.48 in taxes, nearly $45,000 more. In fact the state law governing how much the City can increase actual assessments limits that property to an assessed valuation of $85,994; that's $226,000 less than the City could assess if the state legislature reformed existing law.

For the fiscal year starting July 1, 2016, the City tentatively values the property at $6.1 million.  If that value holds at existing tax rates, the City could collect $71,567.64.

Contrast that calculus to a Bellerose Queens modest townhouse with market value estimated  at $421,000, assessed value at $23,036 and taxes after Basic STAR School Tax relief of $4,200. Both properties receive the same STAR benefit that reduces each property's real estate tax by $308.

The above example demonstrates how existing City assessment practices unfairly benefit wealthy New Yorkers who own expensive homes (and apartments).

The taxes on the modest Bellerose home works out to about 1% of its market value.  The Brooklyn luxury townhouse pays 0.3% of its market value in taxes.  Fair?  Justified?

So “Why Not Chance Some Real Property Tax Reform?”

*Corey Bearak can be reached at StrategicPublicPolicy.com.  Find his ebook, The Public Ought To Know, at Kindle, Nook and Apple iBooks.

 


 

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