Property Tax Post: Do New York City Homeowners Need More Property Tax Relief?

Proposed legislation in New York (S.B. 5673) would reinstate a New York City property tax rebate program, according to NY Daily News. But this proposed solution doesn’t address the root of the Big Apple’s property tax problem: the uneven tax treatment of commercial and residential property.

The proposed legislation would allow for a $500 property tax rebate on all New York City homes, condos, and co-opts for homeowners making up to $500,000. A similar program expired 5 years ago.

New York City already has the most unbalanced reliance on commercial to homestead property taxes in the country, with a ratio of 4.323:1, or 2.5 times the national average, according to the annual 50 State Property Tax Comparison Study, produced in partnership between the Lincoln Institute of Land Policy and the Minnesota Center for Fiscal Excellence. 

There are two main policy prescriptions that place cities at the top of this list. In some cities, it’s the extreme disparity in classification ratios between residential and commercial property, and in others, it’s the difference in tax rates and/or homestead exemptions or credits. It is the former in New York City’s case. The study points out, residential property is only assessed at 6 percent of value, while commercial property if assessed at 45 percent of value.

Moreover, the classification ratio of apartment versus homes is the highest of any city in the country at 5.197:1, 70 percent higher than the next most unequal city, and equating to a “subsidy provided to homeowners at the expense of renters,” according to the study. 

While New York City property tax ratios on commercial property and apartments versus residential are the highest in the country, urban homestead property taxes rank near the bottom of the list. The study concludes that, “Nationally, greater homeowner sensitivity to property tax prices appears to play a role in retarding overall property tax growth.”

It is not unreasonable for New York City homeowners to feel unduly burdened by property taxes, however. The net tax collected on homesteads in 2013 was the 7th highest in the country and the median home value was the highest.

All of this begs the question: Instead of further lowering the property tax burden on homeowners, should the the New York Senate should consider why property values are so high to begin with?

Continue the conversation on Bloomberg BNA’s State Tax Group’s LinkedIn page: Is it fair to further lower the property taxes on homesteads in New York City without lowering them on commercial and rental property? 

Sign up for a free trial of the Bloomberg BNA Premier State Tax Library and see a detailed discussion on state property taxes.