NYC Commission Recommends Property Tax Reforms

The New York City Advisory Commission on Property Tax Reform recently released its preliminary report with an analysis of the city’s property tax system and a set of 10 initial recommendations for system reforms. The report marks the first review of the property tax system by a government-appointed commission since 1993. The report can be found here.

Mayor Bill de Blasio and Council Speaker Corey Johnson announced the formation of the Commission in May of 2018. The Commission was charged with developing recommendations to reform the existing property tax system to make it simpler, clearer, and fairer, while ensuring that there is no reduction in revenue used to fund essential city services.

Since its creation, the Commission conducted public hearings across the city for members of the public to testify on their view of the challenges with the existing property tax system, as well as for experts to share insights on specific issues such as mechanisms to provide relief to homeowners. In total, the Commission sponsored 10 public events, including these hearings and two public meetings where overviews of the system were presented by expert staff at the Department of Finance and City Council Finance Division. The Commission will hold additional public hearings in each borough to solicit public input before issuing its final recommendations.

The Commission reached consensus on 10 initial recommendations:

  1. The Commission recommends moving co-ops, condominiums, and rental buildings with up to 10 units into a new residential class along with one- to three-family homes. The property tax system would continue to consist of four classes of property: residential, large rentals, utilities, and commercial.
  2. The Commission recommends using a sales-based methodology to value all properties in the residential class.
  3. The Commission recommends assessing every property in the residential class at its full market value.
  4. The Commission recommends that annual market value changes in the new residential class be phased in over five years at a rate of 20 percent per year, and that Assessed Value Growth Caps should be eliminated.  
  5. The Commission recommends creating a partial homestead exemption for primary resident owners with income below a certain threshold. The exemption would be available to all eligible primary resident owners in the residential class and would replace the current Coop-Condo Tax Abatement.
  6. The Commission recommends creating a circuit breaker within the property tax system to lower the property tax burden on low-income primary resident owners, based on the ratio of property tax paid to income.
  7. The Commission recommends replacing the current class share system with a system that prioritizes predictable and transparent tax rates for property owners. The new system would freeze the relationship of tax rates among the tax classes for five-year periods, after which time the city would conduct a mandated study to analyze if adjustments need to be made to maintain consistency in the share of taxes relative to fair market value borne by each tax class.
  8. The Commission recommends that current valuation methods be maintained for properties not in the new residential class (rental buildings with more than 10 units, utilities, and commercial).
  9. The Commission recommends a gradual transition to the new system for current owners, with an immediate transition into the new system whenever a property in the new residential class is sold.
  10. The Commission recommends instituting comprehensive reviews of the property tax system every 10 years.