Fixing New York City's flawed property tax system
Fixing New York City's flawed property tax system
Why broad consensus for reform hasn't yet translated into action — and what we can do about it.
I recently explained New York’s unfair property tax system and how it suppresses housing construction — especially of large apartment buildings.
Since then, I’ve been researching efforts to reform the way New York taxes land and buildings. Here’s the breakdown:
There are obvious reforms to New York’s property tax system that would make it fairer and more transparent — while making most households better off.
There's broad consensus among politicians and advocacy groups in favor of reform.
Reform never actually happens because of legislative complexity and lack of awareness among voters.
Oh, and I have a plan to do something about it! Let’s dig in.
This post assumes you have at least a basic understanding of how New York’s property tax system works. If you’d like a refresher, check out my previous post:
The case for property tax reform
New York’s property tax system is a very effective way of funding our city’s government — it collected $33.8 billion last year.1 However, it raises these funds in a way that is complex, unfair, and regressive. The main problems with the current system are:
The tax formula is really complicated, and it’s difficult for property owners to understand how their bills are calculated.
The City’s estimates of property values are often inaccurate and don’t reflect how much a property would actually sell for.
Similar properties are regularly taxed at wildly different rates, mostly based on how quickly their value has increased in recent years.
These problems harm New Yorkers’ wellbeing by:
Regressively taxing less wealthy New Yorkers at higher effective rates than the more well-off. Homes worth $10 million are typically taxed at half the rate of homes worth $1 million, for example. This is antithetical to the principle that wealthier people should contribute more to fund government services.
Stifling housing construction (especially for large rental buildings), which would otherwise be home to more New Yorkers and reduce housing costs.
Burdening commercial properties and utilities (like electricity distribution) with especially high tax rates, which get passed on to customers through higher costs of goods and services — including electricity and gas.
In 2018 then-Mayor Bill de Blasio and then-Speaker of the City Council Corey Johnson established a commission to review the city’s property tax system. After three years of analysis and hearings, on the penultimate day of de Blasio’s term, the commission proposed a set of reforms to make New York’s property tax system more fair, simple, and transparent:
To radically simplify the system and transparently tax all properties in the same tax class at an annually-set percentage of their estimated market value. This would abolish the system of fractional assessments that obscure the effective tax rates of different types of property.
To end the special treatment of 1-3 family homes and instead tax all residential buildings identically – except for rental buildings with more than 10 units, which would remain in their own tax class.
To abolish the assessed value growth caps that artificially suppress the tax bills of 1-3 family homes and instead phase in tax increases based on changes in properties’ market values evenly over five years.
The City’s Department of Finance modeled that the impact of these reforms would be to:
Reduce tax bills for most New Yorkers. 63% of single-family homes, co-ops, condos, and small rental buildings would see a tax cut. The median reduction would be $1,500, a 30% savings. However, 28% would face a tax hike of over 5%, primarily affecting single-family homes that have appreciated significantly.
Make the tax rates of similarly valued buildings more similar. Post-reform, the effective tax rate for half of all owner-occupied homes would sit between 0.57% and 0.75%, compared to the current much wider range of 0.6% to 1.0%. This makes the system more fair.
Make the tax system more progressive. Most households with incomes below $500,000 would benefit from reduced taxes. Conversely, higher-income households, particularly those in single-family homes, would likely see an increase.
Housing abundance requires tax reform. There’s no other way around it.
Everyone agrees that reform is needed
There's broad agreement that New York City's property tax system needs an overhaul—a sentiment echoed consistently since at least 1993 when a Mayoral commission declared the system "unfair".2 Fast forward to today, city and state leaders, including the mayor, the speaker of the city council, and the comptroller, have publicly endorsed tax reform measures.3 Key civil society organizations and business groups have also published extensive pro-reform reports.4 Even prominent Republicans are onboard!5 This level of consensus on any topic is unusual.
Notably, a legal challenge to the tax system is currently making its way through the courts. Filed by a former Finance Department commissioner, the suit alleges that the existing system violates federal law by disproportionately burdening low-income residents and minorities. While the case may seem like a long-shot, there's historical precedent for legal action provoking significant reform—in 1975, a lawsuit forced the restructuring of all property tax assessments, and in 1989, a Supreme Court case reshaped the entire structure of the city's government. The court moves slowly, so we’ll have to wait and see what happens.
More broadly, I’ve been unable to find any politician or advocacy group that publicly opposes reform of New York’s property tax system.
Reform remains elusive
And yet, the status quo persists. Property tax is governed by the state’s Real Property Tax law, so reform requires the state legislature to act. Despite the apparent alliance of politicians in favor of change, large-scale reform is nowhere on the agenda of the state Assembly’s property tax committee.6
Given this consensus, why isn’t reform happening? My assessment is that few politicians are willing to apply the sustained effort needed to accomplish property tax reform because it’s difficult and few voters are asking for it.
Lawmaking is hard
Rewriting New York’s property tax law is a substantial legislative effort. The text itself is around 500,000 words – similar in length to the entire Lord of the Rings trilogy.7 Implementing the proposed reforms wouldn’t necessarily require rewriting the entire law, but it at least requires legislators to understand the whole thing. And there are genuinely difficult trade-offs — how exactly should exemptions for low-income homeowners be designed, and how should the system be crafted to best support renters?
Despite being the domain of state law, property taxes are collected by New York’s municipalities. Reforming property tax therefore requires coordination between state legislators and the city’s government. Senior state legislators have even said they believe property tax reform should be driven by city government leaders.8
The timing of elections in recent years has meant that there was little chance for a city-led effort to find a receptive audience in Albany. The city and state’s elections are on offset schedules, which has meant that since 2016, every year except 2019 has featured an election of either our city council or the state legislature.9 A politician on the campaign trail has little time to analyze the minutiae of tax law.
Public awareness of tax issues is low
Beyond the challenges of legislating, reform isn't high on most voters' priorities, likely because most New Yorkers never personally deal with property tax. 69% of households are renters whose landlords are responsible for their property taxes, and 8% of households are co-op owners who pay via their co-op board. Only 23% of NYC households receive a tax bill directly.10 For most New Yorkers, property tax is invisible.
Even among New Yorkers who know that property tax exists, the opacity and complexity of the system makes it hard to realize how unfair it is. All property tax data is public, but comparing properties’ effective tax rates requires digging through government websites one property at a time and manually dividing tax bills from one PDF by estimated property values from another PDF.
Do you know how much tax you (or your landlord) paid on your home last year? How does that compare to your neighbors? What about your local bagel shop? Without this basic knowledge, most New Yorkers don't realize the system's flaws. I’m working to build a user-friendly map visualization of the effective tax rates on every property in the city. This certainly won’t solve everything, but we plan to least improve public awareness of the issues. See more here:
If more New Yorkers understood their property taxes — and how unevenly distributed the tax burden is — then far more of us would be lobbying our elected representatives to fix the system. And more politicians would be willing to attempt the difficult task of property tax reform if their constituents were proactively asking for a simpler and fairer property tax system. While louder public calls for reform don’t simplify the legislative task, they do create pressure for change. My goal is to tip the scales so that legislators feel incentivized to build us a fairer and simpler tax system that enables housing abundance for all New Yorkers.
Annual Report of the New York City Real Property Tax for 2023, page 7, The City of New York Department of Finance.
NYC Residential Property Taxes, Regional Plan Association.
See reports from the city’s Independent Budget Office, the Citizens Budget Commission, the Regional Plan Association, and The Partnership for New York.
Outlook for 2023, New York State Assembly Standing Committee on Real Property Tax. See also the list of bills introduced into that committee.
The printed edition of the Real Property Tax law is 730 pages long, with an average of 700 words per page.
New York’s state assembly and senate were up for election in 2016, 2018, 2020, and 2022. New York’s city council was up for election in 2017, 2021, and 2023.