$6.5 Million in Tax Breaks Went to Ineligible Co-op and Condo Owners

New York City’s Department of Finance (DOF) mistakenly handed out $6.5 million in tax breaks to the ineligible owners of hundreds of co-op and condo units over the past five years, according to a new audit by the city comptroller’s office.

The Gothamist reports that auditors found the DOF granted the improper tax breaks through the Cooperative and Condominium Tax Abatement program, incorrectly waiving payments for owners of at least 678 condo and 42 co-op units who didn’t meet program requirements during the 2023 fiscal year. To qualify, owners must designate the unit as their primary residence and own no more than three units in the same building.

The city issued financial relief for nearly 300 condos and co-ops owned by limited liability companies or other businesses, and more than 200 designated for non-residential use — including 93 parking spots — according to Comptroller Brad Lander's office. Another 27 recipients also got the tax break for their condos and co-ops in other buildings, violating the primary residence requirement.

Lander said the audit revealed “serious holes” in the tax break system administered by the city’s finance department. “The Co-op/Condo Abatement is meant to help people who live and work in New York City achieve the elusive dream of homeownership, not to pad the profits of businesses,” he said in a statement. Dozens of other recipients were already benefiting from a separate abatement that was supposed to preclude them from the co-op and condo program, the audit found. The abatement cuts recipients’ tax bills by up to 28.1%, depending on the average assessed values of the homes in a building.

DOF spokesperson Ryan Lavis said the agency determined the causes for the mistaken abatements and “implemented measures to prevent similar occurrences in future fiscal years." But most of the people who received the tax breaks in error will get to keep the money. The DOF said it would recover only the money it waived for condos owned by businesses. The agency cited existing policy that it does not claw back abatements “granted due to errors in our processes.”

New York City’s property tax system is the subject of an ongoing lawsuit filed by homeowners and real estate trade groups known as Tax Equity Now New York, who say it violates the federal Fair Housing Act by imposing disproportionately higher tax rates on owners in lower-income communities.

Like countless mayors before him, Eric Adams pledged to overhaul the tax system during his 2021 campaign but has not yet pursued any reforms while in office. Adams now faces federal criminal charges that could make it difficult for him to push through big policy goals before his term expires at the end of 2025.

Lander is one of a half dozen Democrats challenging Adams in next year's primary.