A New York City Property Tax Overhaul? It Could Finally Happen.

New York state’s highest court ruled in March that a lawsuit brought by a coalition of housing advocates challenging the legality of the city’s property tax system could move forward after a lower court dismissed the complaint in 2020. 

State laws largely control the city’s complex property tax system. But the court’s decision could empower the city to design a more equitable way to assess and tax different types of properties.  

“The big takeaway from the court’s decision is that the city has power to actually make some changes to property tax that will address some of the concerns we raised in our lawsuit,” said Martha Stark, a former city finance commissioner who is the policy director of Tax Equity Now New York, the plaintiff in the case. “It is our hope the city will take the court’s instructions seriously and do something to address homeowners who have been assessed more than they should have been and evaluate high-end condos.”

At stake is how much of New Yorkers’ paychecks go toward the tens of billions the city collects in property tax revenues each year. 

New York’s working- and middle-class residents have shouldered a higher tax burden than its wealthier ones, and communities of color are overassessed each year by an estimated $1.9 billion, the lawsuit contends. The city also taxes multifamily rental building owners at a higher rate than condos, forcing landlords to raise rents to keep up with their tax expenses.

The city’s property tax system dates from more than 40 years ago, a crime-ridden time when whole swaths of New York were not nearly as desirable as today. The system replaced one that relied on local property assessors for valuations. The city mounted a major comeback in the 1990s and 2000s, one underscored by the conversion of a wave of rental buildings into co-operatives and the development of thousands of luxury condos. The assessment system remained, however. 

It allows wealthy residents to receive shockingly small tax bills, since the city assesses high-end condos and co-ops as if they were rental buildings. And, thanks to state-mandated caps on how quickly the assessed values of one- to three-family properties can increase, homeowners in working-class communities such as Canarsie, Brooklyn, end up paying triple the rate that owners of similar properties in the borough’s tonier Park Slope pay.

In its March ruling, the Court of Appeals supported some of the advocates’ claims that the property tax system is regressive and discriminatory, and sent the case back to the state Supreme Court.

The city denied multiple allegations in the lawsuit and said maintaining its property tax system is a “faithful execution of the law” in a court filing in June. But officials in Mayor Eric Adams’s administration also acknowledged that property taxes as they are currently constituted are “unfair for Black and Brown homeowners” and should be altered.

Housing advocates are preparing for more court hearings this fall, which means little chance of any changes ahead of the tax payments for 2025. Stark wants the city to begin plotting out how it would make assessments more uniform and change how they would value co-ops and condos. Other real estate leaders say it’s a difficult process no matter what they choose to do.

“You can do it but you have to get under the hood of the property tax system and really mess around with it,” Jordan Barowitz, a principal at Barowitz Advisory, said. “If you’re going to fix the system, you would presumably help people who have been overtaxed for decades and lower a whole bunch of people’s taxes who have been paying too much while then raising a bunch of people’s taxes who are paying too little.”

Property tax reform hasn’t succeeded in New York for several reasons, but the most significant (and obvious) may be that no one wants to pay more in taxes.

Any overhaul aimed at helping middle-class homeowners and seniors on fixed incomes will likely result in wealthier, politically connected owners of Manhattan condos and Brooklyn brownstones paying a higher rate of property taxes than they have in the past.

That absence of change hasn’t been due to a lack of effort. The last time the city altered its property tax system significantly was in 2006, when Stark, then finance commissioner under Mayor Michael Bloomberg, lowered the equalization rate (or a property’s assessed value divided by its market value) from 45 to 15 percent for buildings with 10 or fewer units. But some owners, whose buildings were located in rapidly gentrifying neighborhoods and contained between four and 10 units, still complained that high property tax bills forced them to raise rents.

A dozen years later, Mayor Bill de Blasio announced a commission to modernize and simplify the system without altering the total amount of revenue the city collects each year. The pandemic delayed the panel’s work, and it didn’t release its final recommendations until three days before de Blasio left office. They included measures such as creating a new tax class for small property owners and relief for homeowners who are primary residents through circuit breakers and homestead exemptions.

Adams pledged to solve property tax inequities in his first year in office during his mayoral campaign, as de Blasio’s panel put the final touches on its report. But Adams took almost no steps to address the imbalance before he and his finance and budget commissioners met with City Comptroller Brad Lander, City Council Minority Leader Joe Borelli, and Bronx Councilman Kevin Riley in December 2022. And Adams has made little mention of the commission’s work or led any public outreach on tax reform since then.

Both Borelli and Lander want the mayor to propose legislation based on the property tax advisory commission’s recommendations. Adams spokesperson Liz Garcia said the court ruling did not order the city to take any specific steps but the Adams administration would work with other stakeholders in the future.

“The city is committed to meaningful legislative reform that is comprehensive and carefully considers the needs of working-class New Yorkers — not temporary changes that create dramatic tax increases and negatively impact city funding,” Garcia said.

At this point, the problem areas of the property tax system are well known, but officials disagree about the best way to tackle them.

Plaintiffs in the property tax lawsuit against the city and the state want the city to establish a uniform assessment ratio for smaller homes, regardless of the state’s assessment caps, so that homeowners in a working-class neighborhood aren’t paying a higher tax bill than those in well-to-do areas.

They also argue the city should stop assessing the value of condo and co-op units by comparing them to rent-stabilized properties and instead determine their value based on similar market-rate properties. That would provide tax relief to small landlords and lower rents for their tenants, while giving owners of high-end condos and co-ops a higher tax bill. More modestly priced co-ops and condos would still be evaluated as rent-regulated buildings, plaintiffs argued, and some units in the outer boroughs and upper Manhattan could even see their taxes go down as a result.

“The way property taxes work is like slices of pizza pie,” Stark said. “If eight of us have a slice of pizza pie but one of us eats half that pie, that leaves the rest of the seven splitting half the pie. Right now, the pie is split almost evenly with high-end co-ops and condos paying half the taxes, but they should be paying a higher share of that pie.”

The city comptroller’s office also published two reports that address the implications of lowering the assessment ratio for one- to three-family homes and alternatives for assessing the market values of co-ops and condos via comparable rental units. The first report ran several scenarios to show how much owners of different properties would pay in taxes as the assessment ratio and tax rates changed.

But Lander and his colleagues insist that any action the city takes must be accompanied by state legislation that removes state-
mandated caps on assessed values. And the city must also provide tax relief to homeowners on fixed incomes or phase in changes over time so their properties won’t go into foreclosure if their taxes jump unexpectedly.

“Building a broad coalition for change that has winners and losers is challenging,” said Lander, a Park Slope resident who is challenging fellow Democrat Adams in the 2025 mayor’s race. “Everyone paying the same percentage of the value of their property in taxes is part of having a fair city. For folks like myself who are paying a lower effective tax rate, that means we shift to paying a higher tax rate over time. That’s a critical part of mayoral courage that is needed.”