Opinion: If New York City Council members truly want to tackle affordable housing, why not start by fixing our broken property tax system?
Here are some suggestions for addressing this ever-increasing property tax burden
Recently, a group of New York City Council members stormed the stage at a Rent Guidelines Board meeting, disrupted the proceedings and demanded lower rent increases. Their actions demonstrated how little they understand their legislative power to make housing more affordable. They can start by fixing the broken property tax system.
Property taxes are the main drivers for expenses for apartment buildings in New York City, and how the taxes are assessed is unfair, opaque, and illogical. Despite all of the furor over the need for affordable housing, the Council spends virtually no time exploring ways to reduce operating costs for rental buildings – costs which are eventually borne in large part by tenants. There are several things the Council could do:
First, every year, the City Council determines the amount that will be raised from property taxes. Since 2018, property taxes for rental apartment buildings have been increased by 23%. Using this current fiscal year as an example, the average taxes on a rental apartment are about $5,400 a year – that’s $1,000 more than five years ago. That means that on average, about $450 of a tenant's monthly rent goes towards paying for property taxes. In Manhattan, that number jumps to $740 per month.
Unlike the rest of New York state, where the amount of money that can be raised from property taxes is capped at a maximum of 2% annually, the city has increased property tax revenue pegged to overall assessment increases. That has meant an increase of almost 5% per year over the last five years; 21% since 2017.
To address the ever-increasing property tax burden, the Council should adopt Truth in Taxation principles. Jurisdictions that have abided by Truth in Taxation share with taxpayers the different ways the property tax levy can be calculated. For example, the first calculation would show the tax rates and average taxes if the levy was not increased. A second calculation would show the results if the levy was increased by say 2%, like the rest of New York state. Another calculation would show what happens when you increase the levy based on changes in the assessment roll. This process would help inform the public and, more importantly, the Council about property tax-related policy choices. And, New Yorkers would finally be able to hold those in power accountable for property tax increases.
Second, relying on assessments would be an acceptable mechanism except there is near consensus that the property tax system is broken. Nowhere is that more evident than apartment buildings where the way assessments are determined leads to owners and tenants subsidizing expensive co-ops and condos. This current law is so complex that the much-lauded final report from the New York City Advisory Commission on Property Tax Reform did not even include recommendations to address the high burden of taxes on apartment buildings and the renters who live there.
The Council should increase its oversight of the Department of Finance to ensure that assessments are fair and that property owners have a timely, effective, and efficient means to have their assessments corrected. Between the Tax Commission, the Law Department, and the courts, it takes years to resolve property tax cases, which creates massive uncertainty and undermines the financing for affordable rental housing.
Third, the city’s leaders should pay attention to the law. The New York State Constitution limits how much the city can raise the property tax for its expenses. Yet several times in the last decade, the Council has violated that limit, using a creative interpretation of the Constitution to raise hundreds of millions of dollars more in taxes from property owners than is allowed. Perhaps the city’s actions are justified, but at the very least, the Council should review this practice, and seek legal guidance from the state Attorney General about the legality of its interpretation.
Affordable rental apartments are vital to the city’s future, yet rather than using their legislative powers to fix a system that is severely broken, council members are disrupting government meetings and blaming Albany. Next month, the Council has an opportunity to take constructive actions that can help owners, tenants, and buildings when they vote on the property tax resolution as part of the City budget. If they’re so interested in theater – here’s a role they can play: that of elected leaders who use their power to do everything that can be done to keep rents affordable and the property tax system fair.
-Martha E. Stark is policy director of Tax Equity Now New York and a former commissioner of the New York City Department of Finance.
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