FORMER FINANCE COMMISH SAYS CO-OP TAXES STILL CRAZY AFTER ALL THESE YEARS

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Using this convoluted and hard-to-explain method, New York City's market value estimate for my unit this year, roughly $90,000, finally equals the price I paid for it back in 1984.

Stage 3: Equity Achieved

The co-op and condo abatement was enacted to reduce the disparity in property taxation between small homes and co-op and condo owners. While that disparity was thought to be significant, it has certainly been reduced over the last 30 years.

Several small homes nearby sold in the last year for $600,000, the approximate value of my co-op unit. When you compare the assessments and taxes for these properties and my co-op unit, it is clear that the abatement has completely eliminated the disparity between the taxes that I pay and what a homeowner would pay. The effective tax rate for my co-op is 10 basis points lower than the average for the 15 homes that sold for $600,000 in the last year.

While my co-op has fared well, a fact I didn't even realize until I started writing this piece, there are also co-ops that will probably continue to pay significantly more taxes than similarly valued homes. Equally disturbing, those co-ops pay taxes at a higher rate than the most exclusive and expensive co-ops in New York City. Therein lies the rub. With a system so lacking in transparency, it is virtually impossible to determine what's fair and what's not.

Hopes for the Future

Given the significant benefits that most co-op owners have achieved over the last 30 years, it's hard to predict what will come next. My crystal ball suggests the future will bring six things:

1. The method for valuing co-op units for property tax purposes will change and should change. The sales price for co-op units and the city's estimated market value is too disconnected to continue to survive in the future. Reasonable people want to understand their market value to ensure that their taxes are fair. A system that obfuscates value compromises the goals of transparency required of government, especially in a digital age.

2. The co-op and condo abatement will not continue. It is extremely difficult to continue to provide relief, the goal of which was to reduce the disparity between small homeowners and co-op owners, when that disparity no longer exists for most co-ops, especially high-priced ones in Manhattan and other parts of the city like Park Slope. Any relief, if needed, should be targeted to co-op units paying the highest effective tax rates and toward renters who need the relief most.

3. All homes, vertical and horizontal, will be valued and taxed the same way — hopefully at full market value and without assessment caps.

4. The share of taxes paid by co-ops will increase.

5. The number of co-op units will not increase, as most new residential ownership opportunities will likely be condos.

6. Co-op owners and leaders will use their incredible political clout amassed over the last 30 years to advocate for a system of fair taxation, even if some members will be required to pay more.

So, that is my hope, my wish list. Unfortunately, as the saying often misattributed to Albert Einstein goes, "Insanity is doing the same thing over and over again and expecting a different result." I hope 30 years from now when Habitat turns 60, we'll be able to celebrate because for Habitat's 30th birthday co-op and condo owners committed themselves to paving the way to make New York City's property tax system the best in the world: fair, predictable and transparent.

From Habitat May 2012. For more, join our Archive >>