How the city government’s largest revenue source creates winners and losers
Thank you for writing this really informative article on New York City's property tax system. I learned a lot about the disparities in tax rates which seems like is calling for reform. It is really concerning that this hinders multi-unit housing construction. Do you know if there are proposals or policy changes that are being considered to rectify these inefficiencies in the city's property tax system?
I don’t understand how you wrote a whole article about property taxes but didn’t actually explain how condo/co-op property taxes are based on comparable rents and not market values, which in of itself is regressive because super expensive condos do not really have comparable rents, which means they end up paying taxes that end up being a much smaller fraction of the property value than a cheaper condo or co-op
Your analysis is premised on a mistaken conflation of assessed value and market value — but in NYC assessed value of coop and condo buildings is determined in a very strange and convoluted way that has nothing to do with what a building is worth.
First the city pretends the coop is really a rental building, then estimates the revenue then applies a capitalization rate and then multiplies it by an arbitrary number. (.45)
This means the assessed value of that 96 unit coop is far different (and much lower than) the market value of all the units added up. Indeed $6,000,000 divided by 96 units equals $68,000 a unit but as I’m sure you’re aware coop apartments in Jackson Heights sell for many multiples of that.
Excellent article, thank you for writing! Perhaps a silly question, but I am a little confused about your example. While it makes sense to me that the rate of change of the tax rates would differ (ultimately resulting in the Queens property paying more), in the chart I’m surprised by how different the rates are even at the start of the series (in 2010). Is that also the result of the different rate of growth in tax rates, just in the years prior to the beginning of the chart? Thanks again, really enjoy the content!
Detroit is implementing an LVT. As opposed to a property tax, a land value tax doesn't tax the value of buildings, only of the underlying land. This would be a much simpler and fairer system of taxation and wouldn't discourage construction at all. If I had my druthers, we'd raise an LVT high enough to get rid of the local income and sales taxes.