Single-Family Homes Could Be Big Losers in Tax Reform

An unlikely coalition called Tax Equity Now New York (TENNY) – made up of social justice organizations, civic groups, and major building owners – has filed a lawsuit asking the courts to step in and untangle the city’s byzantine property tax system. Not only is the system unfair, their lawsuit claims, but it’s also racially discriminatory. 

“No one is disputing that the system is inequitable and broken and needs to be fixed,” says Martha E. Stark, a former commissioner of the city’s Department of Finance and now a professor at NYU’s Wagner Graduate School of Public Service. “But no one’s done anything. It’s time for the court to provide guidance about what would make the system legal.” 

Should the court ultimately do just that – and that’s still a very big “if” – it’s likely that comprehensive reform will mean higher taxes for buildings in currently undervalued areas. The property owners likely to take the biggest hit – and a primary reason why politicians have avoided pursuing a fix – are owners of one-, two-, and three-family homes. 

“Owners in co-ops and condos pay multiple times what those homeowners pay,” says Mary Ann Rothman, the executive director of the Council of New York Cooperatives & Condominiums. 

Currently, those single and multi-family homes account for about 31 percent of market value but pay only 15 percent of the tax burden, according to 2016 testimony by George Sweeting, deputy director of the New York City Independent Budget Office, appearing before the state assembly’s Committee on Real Property Taxation. 

City and state lawyers, trying to forestall any court intervention, are seeking to have TENNY’s lawsuit dismissed. (A similar lawsuit filed in 2014 was thrown out after the court concluded the plaintiffs lacked standing.) Mayor Bill de Blasio has said he doesn’t believe the courts are the place to resolve the issue and has repeatedly promised to pursue an overhaul in his second term. “You’re going to hear some very specific actions soon,” he told Crain’s in January. He made similar promises during his first mayoral campaign in 2013.

James Parrott, the director of economic and fiscal policies for The New School’s Center for New York City Affairs, believes that the appointment of a representative body of civic leaders to work through the issue would be far preferable to a court-ordered solution. However, Parrott notes, because any major changes would have to be voted on in Albany, “leaders there would need to signal at the beginning of the process that they’ll defer to New York City leaders and ratify what they come up with.”