Broad Citywide Coalition Convened by NYC Comptroller Brad Lander Calls for Comprehensive Property Tax Reform as 421-a Sunsets

 

Bipartisan group of elected officials and housing advocates say that the expiration of luxury tax giveaway creates opportunity to bring property tax fairness to NYC residents and supports new housing construction.

 A broad coalition of bipartisan elected officials and housing advocates–convened by NYC Comptroller Brad Lander–called for comprehensive property tax reform in the wake of the June 15 expiration of the 421-a tax break. New York’s broken, opaque, inequitable property tax system relies on a patchwork of exemptions and abatements, the largest of which was 421-a. Created in the 1970’s to spur development in an era of abandonment, 421-a became a multi-billion dollar tax giveaway for largely market-rate development. The coalition aims to address the underlying problem through comprehensive property tax reform.

“With the expiration of 421-a, we have a once-in-a-generation opportunity to build a fair and affordable property tax system that eliminates disparities between homeowners in different neighborhoods, facilitates new rental housing development, and focuses scarce public subsidies on genuinely affordable housing,” said Comptroller Brad Lander. “Our current system puts undue burden on homeowners in Southeast Queens, the Bronx, and Staten Island while under-taxing my home in brownstone Brooklyn, which is neither fair nor sustainable. Now is the time to fix it. At the same time, we must eliminate the high tax rate on new rental housing to enable the building of new rental units without massive subsidy. With the 421-a luxury boondoggle gone, we can target our affordable housing dollars where they’re truly needed.”

In March, Comptroller Lander released A Better Way Than 421-a: The High-Rising Costs of New York City’s Most Unaffordable Tax Exemption, an analysis of the 421-a program, which creates very few genuinely affordable units at an extremely high cost, and the need for structural property tax reform to address the issues 421-a purports to solve. The Comptroller’s office proposes structural changes to the property tax system, building on the recommendations of the New York City Advisory Commission on Property Tax Reform, and taking them further by addressing the disparity in taxation between condominium and rental buildings that constrains the development of multifamily rental housing. The median effective tax rate on rental buildings is roughly double that of condo buildings, a strong disincentive to developing rental housing. The Comptroller’s report finds that lower, uniformly, and broadly applied tax rates could largely eliminate the need for 421-a as a development incentive.

At the time, Comptroller Lander called on the State legislature to allow 421-a to expire as scheduled on June 15, 2022, and urged policymakers to set a deadline of the end of the calendar year to adopt a framework for comprehensive property tax reform. Now, following the expiration of 421-a, this coalition of elected officials and housing advocates kicked off a campaign for property tax reform that would:

1. Achieve tax fairness for homeowners by implementing the recommendations of the NYC Advisory Commission on Property Tax Reform (summarized below), along with targeted homeowner relief and deferral programs to protect vulnerable New Yorkers.
2. Level the tax playing field between new rental and condo development to eliminate the need for costly tax exemptions for market-rate development and support the creation of new multifamily rental housing.
3. Allow the NYC’s Department of Housing Preservation and Development to underwrite targeted tax incentives for buildings that match the benefit granted to the level needed to achieve the specific, genuine affordability, costs, and labor standards of the project without double-dipping or excessive subsidy.

The proposal builds on the work of the NYC Advisory Commission of Property Tax Reform, which released its proposal in December 2021, adding an additional targeted tax deferral program to insure that working- and middle-class homeowners in affected neighborhoods don’t lose their homes. Those recommendations include:

• Creating a new tax class for small residential property owners: 1-3 family homes, condos, coops, and 4-10 unit rental buildings, ensuring that rules are applied uniformly regardless of property type;
• Valuing property in this new residential class based on sales-based market value, thereby ending the statutory requirement to value coops and condos based on comparable rental buildings;
• Replacing the complicated class shares system with a simple, more transparent system where individual tax class rates are fixed for five-year periods, unless deliberately changed by the City Council and the Mayor;
• Removing assessed value (AV) growth caps, widely recognized as one of the primary drivers of inequity, and phasing in market value changes over five years instead;
• Creating targeted homeowner relief programs for “house-rich, cash-poor” homeowners and devising a targeted tax deferral program available to those with increased taxes but limited ability to pay.

“It’s time that we see real reform when it comes to property taxes in New York City that unfairly target homeowners in the Northeast Bronx and in Staten Island that currently pay the highest citywide. It’s a broken system and I applaud NYC Comptroller Brad Lander for making use of the June 15th expiration of 421-a — which provides tax giveaways to developers for the creation of affordable housing — to equalize taxation between new rentals and homeownership buildings, and to equalize taxation between homeowners and address the structural inequities that impact my constituents, as well as those in South Brooklyn, East Brooklyn, Southeast Queens, and Staten Island,” said Bronx Borough President Vanessa Gibson. 

“The expiration of 421-a marks an opportunity to create comprehensive property tax reform that is more equitable for tenants and all low-income New Yorkers.  Albany must act to equalize taxation between rentals and homeownership in new developments, as well as between existing homeowners in New York City. We look forward to working with the Comptroller and other advocates to bring about meaningful changes,” said Judith Goldiner, Attorney-in-Charge of the Civil Law Reform Unit at The Legal Aid Society. 

“New York City’s outdated property tax system is a driver of inequality, particularly for low- and moderate-income homeowners of color holding onto the generational wealth they earned. Instead of a tax giveaway for developments in gentrifying Harlem and Bed-Stuy, the city and state should fix the tax system that right now makes Black and brown residents in the Bronx and Southeast Queens pay more of their fair share in property taxes than other affluent, waterfront neighborhoods. There’s a trend across the country for America’s poorest neighborhoods to pay the highest effective tax rate compared to the richest neighborhoods who are paying the lowest, and at times nothing at all, and it’s time to end that uncivil practice here in New York City,” said Derek Perkinson, NYS Field Director at the National Action Network.

“We commend Comptroller Brad Lander for bringing together a diverse coalition calling for comprehensive tax reform by the State Legislature,” said Rabbi David Niederman, President of the UJO of Williamsburg and North Brooklyn. “The current system is unconscionable, up-adjusting valuations for low- and middle-income non-luxury condo families in Central Williamsburg and taxing them at much higher rates than their luxury neighbors – as much as $20,000 per condo. Condo owners are even denied requests for the data and formulas determining those adjustments. We join the coalition in calling for comprehensive tax reform and – in the interim –  the unjust adjustments must be corrected and the complete formulas and data used in property taxation must be released.”