Record-Breaking Tax Delinquency as New Yorkers Stop Paying

Co-op and condo residents in New York City have complained about high — and inequitable — property taxes for decades. Now a record number of New Yorkers have come up a solution: they've stopped paying their property taxes.

Overdue property taxes are forecast to reach the highest level ever, Fortune reports, jumping by over 30% to more than $880 million at the end of the fiscal year in June from three years ago, according to an offering document for a city general obligation bond sale. That means New York could be bringing in less tax revenue, which could put a squeeze on city services since property tax collections fund almost half of the city's budget.

The culprit? City officials lay the blame on the end of the tax-lien sales program, which was instituted in 1996 under Mayor Rudolph Giuliani to punish tax delinquents but was allowed to expire in 2022 during the depths of the COVID-19 pandemic. Another contributing factor is the overall vacancy rate for Manhattan office space, which stood at 22.5% in November, the highest on record, according to the city’s January financial plan.

“It’s not just the absolute dollar amount that I think should worry us all,” Finance Commissioner Preston Niblack said at a March 4 City Council finance committee hearing. It’s people realizing that “there are no consequences for not paying your property taxes. That just can’t be allowed to continue.”

Under the expired tax-lien sale plan, the city was authorized to sell liens on single-family homes and condos after three years of nonpayment, liens on other property types could be sold after one year. The city packaged its most marketable liens into securities for sale at a discount to a third-party trust, which borrows money from investors to pay the city upfront. The trust assumes responsibility for collecting the debt through servicers and add fees and interest payments. After investors are paid back, the city is entitled to collect additional revenue from interest payments and fees. Community activists and some elected officials criticized the program for unduly targeting low-income property owners.

The city’s Department of Finance says it is working on legislation that would reauthorize tax-lien sales that would ensure homeowners don’t face foreclosure or eviction.

As of March 8, single-family and condo owners made up a third of delinquencies while rentals comprised 28.5% and commercial property 38.2%, according to the Department of Finance.

The biggest scofflaw is 16-unit Cobble Hill, Brooklyn, rental building that owes $52.2 million. City Council Member Gale Brewer, a Democrat who represents the Upper West Side of Manhattan, says three buildings in her district each owe $1 million.

“We have to do something,” Brewer says. “People should pay their taxes.”