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The Days of NYC’s Stupefyingly Bad, Maddeningly Unequal Property Tax System May Be Numbered

A crash course on our FUBAR property tax system and more links for your Wednesday.

East River at twilight.

(joiseyshowaa / Flickr)

On Tuesday, New York's highest court took a swing at one of New York City's stupidest, most consequential traditions: our property tax system.

In a 4-3 decision, New York's Court of Appeals ruled that a years-long lawsuit challenging the way property taxes are assessed could proceed, and that the whole dang thing might just be unconstitutional. 

You might be reading this in the bathtub in the kitchen of your $1,800/month rental apartment and think, why should I care? Read on, because this epic battle between landlords and homeowners might have major implications for politics in New York—not to mention your rent.

New York City gets most of its revenue from property taxes—more than 40 percent in a given year. Yet the system that levies these taxes has for decades been deeply unfair, and cartoonishly, maddeningly complicated. As a former deputy commissioner for the Department of Finance once put it, "There is no basis for equity in real estate taxes in the City of New York." And he was the guy responsible for collecting the taxes!

To put it very, very simply, the system artificially favors people who own small homes over those who own large apartment buildings, which are taxed at a rate that is five times higher. A landmark IBO report at the turn of the 21st century sums up the reality we still live in: "While one, two, and three-family homes comprise 41 percent of the market value of property in the city, these homes generate 14 percent of the total property tax levy; commercial property comprises 16 percent of market value and generates 43 percent of the tax levy." Landlords pass their massive real estate tax bills to you, the renter.

And there are more layers of unfairness: Homes in "up and coming" neighborhoods like Brownsville (where more Black and brown New Yorkers live) are taxed at a higher rate than homes in neighborhoods like Park Slope (where lots of white people live), because property values in Brownsville see a slow and steady rise. Places like Park Slope, where real estate prices are already stupefyingly high, benefit from property tax caps that keep their bills relatively low. Also: Fancy old co-ops have lower tax bills because they're somehow treated like ancient rent-stabilized apartments. We could go on. None of this makes any fucking sense!

Except it does, when you think about why our lawmakers set it up this way. Most taxable parcels of land in New York City are small homes—some 65 percent. These homeowners receive their property tax bills directly in the mail, and they vote accordingly. While lawmakers in Albany have the power to change the system, New York City decides how much to levy in taxes in a given year.

In 2017, a disparate group of real estate interests, screwed-over homeowners, and entities like the Citizens Budget Commission and the NAACP, called Tax Equity Now New York (TENNY), sued the City and the state, alleging that the system needed to be overhauled. A lower court dismissed the suit, but Tuesday's Court of Appeals decision now sends it back to the State Supreme Court for argument.

In theory, the Adams administration could keep the mayor's campaign promise and make changes to the system, pointing to the Court of Appeals decision as a basis for doing so, one real estate attorney told the Real Deal. But at the mayor's weekly press conference, the City's top lawyer, Sylvia Hinds-Radix, said they were going to let the lawsuit play out in the courts.

The Court of Appeals decision that breathed life into the suit was written by Chief Judge Rowan Wilson, who only got his position after progressives lobbied hard against Governor Kathy Hochul's first choice. Politics!

Some more equitable links for your Wednesday:

And finally: Here's what 1,000 housing advocates storming the capitol building in Albany demanding Good Cause Eviction looks like.

Top photo: joiseyshowaa / Flickr

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