Gotham Gazette

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Could 2023 Finally See Movement on New York City Property Tax Reform?

Housing (photo: Edwin J. Torres/Mayoral Photography Office)

It’s been well over a year since Mayor Eric Adams promised, on the campaign trail, to “immediately” form a committee to "come up with real solutions" to make New York's property tax system more fair and equitable. But Adams never formed the committee and he has not made property tax reform a priority in his first 13 months as mayor.

After 40 years of lawsuits, commissions, and half-hearted efforts at property tax reform, there is limited optimism for wholesale change, but there are signs that another push is percolating.

Though Adams has not formed his promised committee or championed the changes offered by the commission empanelled by his predecessor, the Democratic mayor did meet with City Comptroller Brad Lander and City Council Members Kevin Riley and Joe Borelli in December to discuss the bipartisan trio's desire for a legislative package to recalibrate and rationalize the antiquated property tax system.

In January, Adams said "if we do any property tax [reform]," he would want it accomplished in the upcoming fiscal year, which begins in July.

Lander, who put out a plan in November, says his group is backed by a broad and growing coalition of city and state legislators and organizations that want to fix the broken system once and for all. But there are no comprehensive legislative proposals and no apparent leader of the push in Albany, where many of the reforms would need to take place, in conjunction with New York City Hall.

Most believe any successful drive must come from the mayor, though every city-led effort of the past 40 years has failed to launch. An ongoing lawsuit challenging the tax code for the disproportionate burden it places on people of color induced the last one, an advisory commission empaneled by Mayor Bill de Blasio and City Council Speaker Corey Johnson, but their administrations ended without taking action on the body's recommendations.

At its core, the property tax conundrum stems from the confusing logic by which different types of real estate are classified and taxed under state law; and the compounded consequences of years of patches, caps, and abatements intended to appease various constituencies. At the city level, uneven assessment and levy practices contribute to the asymmetry. The result is taxes that are rarely reflective of true market value.

"Mayor after mayor has promised to tackle property tax reform, but struggling homeowners continue to wait and pay unfair bills under a fundamentally unfair and overly complicated system," read Adams' campaign website when he ran for mayor in 2021.

At a third of the city's revenue (over $31 billion last fiscal year), changes to the property tax system could significantly affect New York's bottom line. The issue has historically been a third-rail in City Hall and Albany. Under most reform proposals, for every property owner whose effective tax rate improves there is another whose lot is made worse.

Any comprehensive change would likely benefit key constituencies of Adams' own base, namely working class Black homeowners and New Yorkers of color seeking affordable places to rent. But it would require overtures to state lawmakers and investment of significant political capital, and risk upsetting many of the wealthier and whiter supporters Adams accrued during his campaign.

State Senator Liz Krueger, a Manhattan Democrat and chair of the powerful Senate finance committee, told Gotham Gazette any property tax reform effort should come from city government leaders. 

"If you let us do it without the City of New York deciding what is in its best interest, everybody is going to be really sorry that happens," Krueger said in a recent interview. "This is a complex assignment and you should not leave it to Albany to come up with the answer for the city."

She is one of seven state legislators who confirmed to Gotham Gazette that they have met with Lander about his property tax reform agenda or otherwise said they want to see major reform.

The Latest Chapter
Lander, Borelli, and Riley argue the mayor should take up the recommendations of the city's Advisory Commission on Property Tax Reform, which de Blasio and Johnson formed in 2018 to come up with a "revenue neutral" formula to rebalance the system.

In 2017, Tax Equity Now New York, a group led by Martha Stark, a former Department of Finance commissioner under Mayor Michael Bloomberg, sued the city and state over tax codes it said placed a greater burden on low-income residents and people of color, in violation of state law and the federal Fair Housing Act. A year later, de Blasio and Johnson launched the advisory commission and stacked it with prominent economists, budget experts, and city planners. One of them was Jacques Jiha, de Blasio's first finance commissioner. He was later promoted to director of the Mayor's Office of Management and Budget and continues to serve in that role in the Adams administration.

The commission held 15 public hearings and meetings across the five boroughs over three years. Its final recommendations — delayed due to the covid pandemic and released just days before de Blasio left office at the end of 2021 — focused on some of the most glaring issues facing homeowners, while leaving rental and commercial property largely untouched. The report, when it finally came out, was praised as a strong launching point for a true property tax reform push during Adams' term.

A year later, this past December, Lander tweeted about a meeting his group had with Adams to discuss their proposal. "Thank you @NYCMayor for listening to our broad coalition, including hundreds of New Yorkers who signed our petition," he wrote. "Look forward to working together to ensure tax fairness across NYC."

A City Hall spokesperson said the mayor was crafting recommendations but would not offer specifics.

“Mayor Adams believes our property tax system is in need of long-overdue reform. Low- and middle-income homeowners deserve relief, especially as the city continues to recover from the pandemic," wrote Jonah Allon, the mayor's spokesperson, in an email.

"While we are still in the process of developing our own updated recommendations and analysis, we look forward to working with our partners in government and advocates to ensure the system is simpler and more equitable for all,” Allon continued.

"The commitment I took away from the meeting was that the Dept of Finance would work on a revenue neutral formula to present to the legislature," Borelli, the Republican minority leader of the City Council, wrote in an email to Gotham Gazette in January. His Staten Island district has some of the highest effective tax rates in the city, along with the Bronx, where Council Member Riley represents a district. Manhattan has among the lowest.

"There is no other way to get it done than the legislature, and I have had brief and informal conversations with legislative leaders this week about what we need," wrote Borelli, a former State Assembly member.

Adams made no mention of property tax reform when he unveiled his second State of the City agenda on Thursday, focused on job and housing creation, public safety, and care services.

When he unveiled his $103 billion preliminary budget proposal in January, Adams indicated he wanted to see some property tax revision accomplished in the next fiscal year, which begins July 1, while tempering expectations. Any comprehensive reform would require state action, meaning the administration would have to act either this legislative session or next. Adams is expected to unveil his Albany agenda in the coming weeks.

"If we do any property tax [reform], we have to be thoughtful, look after those small homeowners when we think this through, and we want to get this resolved during this fiscal year," Adams told reporters in the City Hall Rotunda as part of a response to a question about calls from Lander and others to raise more revenue for immigrant services, ostensibly by raising taxes on the wealthy. 

"But we need to be thoughtful. We need to spend our tax dollars appropriately," Adams said. (The city has the ability to raise and lower the property tax rate but not change the assessment regime. It was not clear to what extent Adams had reforms to the system in mind, but a City Hall spokesperson said he was referring to property tax reform.)

Campaign Promises
Earlier that day, Adams raised eyebrows for participating in a closed-to-press “CEO roundtable” with Ken Griffin, the hedge fund billionaire and major campaign donor, whose $238 million Manhattan penthouse – the most expensive property ever sold in the United States – has become the poster child for New York City's unequal property tax system.

Griffin pays an effective tax rate five times smaller than the owner of a home in the Bronx valued at less than half a million dollars.

That's because state law places condominiums and coops, like his, in the same tax category as large rental buildings. That means some of the most valuable properties in the city are not taxed on their market value but on the far lesser income they would generate in yearly rent.

In 2021, Adams promised to address that when he became mayor.

"I’m going to immediately put in place a committee to look at these tax laws and come up with real solutions to alleviate co-ops and condominiums and shift the tax burden off of renters and homeowners in less affluent areas to the owners of pricey apartments in wealthy areas," he wrote on his campaign website. "Billionaires are not paying their share of taxes."

"This will be fairly examined within our first year, with a robust outreach effort that gets maximum input from impacted New Yorkers," he wrote. (Adams' entire campaign website was taken down after his election, but has been preserved by Gotham Gazette.)

The mayor has made no announcement of either the committee or the outreach program since taking office. His spokesperson would not say whether either existed.

De Blasio made the same vow as Adams just months into his first term, a commitment that ultimately resulted in the advisory commission more than four years (and one lawsuit) later.

"We’re going to have to review what’s taken place. If there are discrepancy and inefficiencies within the system we’re going to have to try to minimize them," said Jiha, then de Blasio's Commissioner of Finance, in an April 2014 press conference, just a few months into de Blasio’s tenure.

"Equally situated people should not be treated differently. OK? That’s our goal," he said, even mentioning the issue of small-home classification.

"Part of why we wanted a finance commissioner with Jacques’ experience and insight is to take a whole look at the tax system of this city and look at ways to make it clearer, more transparent and more equitable," de Blasio said at the time.

"First we have to come to an analysis of what is going on and what’s a better way to approach it," he said. "And then when we feel we’re on that firm ground, then we’ll start discussions with Albany."

The Previous Analysis
De Blasio's advisory commission tackled the classification issue by recommending co-ops and condos be grouped with small homes and taxed on market value.

It also recommended the state remove caps that limit the amount taxes can grow as the market value of property increases. Caps have meant that tax rates on homes in neighborhoods where property values are booming have grown more slowly than in neighborhoods where market values have crept along. Some of the poorest communities, typically in Black, Latino, and immigrant neighborhoods, pay the highest effective tax rates.

The commission recommended "circuit breakers," or abatements, for low-income homeowners in rapidly appreciating areas who may still feel the pressure of rising taxes, even with the caps.

The commissioners and outside experts noted many of the recommendations required further analysis. They also left rental buildings, utilities, and commercial property virtually untouched.

This past November, the City Council finance committee held an oversight hearing to discuss the advisory commission recommendations.

Asked Thursday whether the Council is working on synthesizing the advisory commission recommendations into legislative proposals to push in Albany and the city, Council finance committee chair Justin Brannan indicated it was. "Yes, lots of stuff in the works for our Albany agenda," he wrote to Gotham Gazette by email.

"I've been screaming about inequities in our property tax system since I got elected a few years ago. The fact that homeowners in Bay Ridge often pay more than homeowners in Park Slope is completely insane," Brannan, a second-term Democrat from Southern Brooklyn, wrote in a previous statement.

"If the City Council could fix the badly broken property tax system on our own, we would have done it a long time ago," he added, noting that the Council did pass rebates in the last year.

A spokesperson for Speaker Adrienne Adams, a Queens Democrat, said the Council was in discussions with state lawmakers but did not say whether they involved the advisory commission recommendations. “Our city’s working and middle-class homeowners are a major priority to this Council," the spokesperson wrote in an email. "It has been clear that we need a more equitable property tax system, and the Council will continue discussions with our Albany partners towards achieving this goal.”

Citizens Budget Commission, a fiscal policy watchdog, commended many of the recommendations while acknowledging the road ahead to turn the recommendations into concrete policy. The group cautioned that any reforms must be designed to work together in concert.

"Policymakers must resist pulling apart the recommendations—for example, moving coops and condos into Class 1 without eliminating caps, or implementing a circuit breaker without changes in valuation and assessment," said Ana Champeny, a CBC's vice president for research, in testimony before the City Council last fall. "These recommendations were made as a package and should be deliberated as such; implementing reforms piecemeal could lead to greater inequities and uncertainty."

Last fall, Lander published a framework that built on the advisory commission's recommendations. It went further, suggesting large rental buildings, which the commission avoided, see drastic tax cuts to bring them in line with other types of residences. Lander argued doing so would incentivize affordable housing production, especially absent a replacement for the expired 421-a tax break, and alleviate financial pressure that is often passed on to tenants.

Albany's Appetite
This has all happened before. In 1993, Mayor Dinkins formed a commission with the same mission. It released its recommendations in the final weeks of his mayoralty, after he had lost a second term bid to Giuliani. When he took office, Giuliani expended little political capital on property tax reform and Bloomberg followed suit.

“Without the courts, the property tax will continue as it has for almost half a century – with just band-aid fixes," Stark, the former finance commissioner leading the lawsuit, said in a statement to Gotham Gazette. "As the court did in Brown v. Board of Education, we need a similar ruling on property taxes."

"The current system is not uniform, is grossly unfair, and requires a complete overhaul with guidance from the State’s highest court," Stark said. "Nothing short of that will lead to real reform.”

Tax Equity Now's lawsuit is set to go before the state’s highest court, the New York Court of Appeals, this year. If successful, it could force lawmakers to rewrite the tax code. That's what happened in 1975 when a lawsuit impelled lawmakers to draft the current system. It took six years. Ultimately legislators drove through an amendment codifying an existing practice that allowed taxes to be assessed on fractions of a property's value depending on the tax classification.

Governor Kathy Hochul has not made wholesale property tax reform a priority. Numerous policymakers, including Lander, Borelli, and Krueger, have argued reform that reduces the burden on large buildings could help spur rental production in line with Hochul's ambitious effort to build 800,000 homes over the next decade.

"The reality is that we can't meet the demand for housing without an incentive program like 421-a in New York City," Hochul said at her State of the State address on January 10, referring to the expired tax abatement for housing developers who include a certain percentage of affordable rental units. "Without it, developers will only build condominiums or build elsewhere, which isn't the outcome we need."

"I actually believe that the number one way to increase affordable housing in New York City is to create a fair property tax system, which would by definition, bring down property taxes on low cost rental buildings," Senator Krueger told Gotham Gazette in December.

Lander and Borelli echoed that sentiment in a Daily News column they co-authored last fall.

"The expiration of the 421-a tax abatement this past June opened the door to broader reforms that tackle the underlying issue of a tax system that disincentivizes rental development," they wrote.

Hochul didn't mention property tax reform in her State of the State address and Lander didn't mention it in his response to her speech.

A spokesperson for Hochul declined to discuss the governor's appetite for transformative changes in line with the advisory commission's recommendations.

"Governor Hochul worked with the legislature to provide more than $6 billion in tax relief this year, including $3 billion in STAR tax relief, $2.2 billion in homeowner tax rebate checks, $330 million in addition Child and Earned Income Tax Credit payments, and $585 million in gas tax relief, and she will continue working with the legislature to improve affordability and keep money in New Yorkers' pockets," wrote Justin Henry, the spokesperson, in an email to Gotham Gazette.

Property tax reform's previous champion in Albany had been the Senate's budget and revenues committee chair, Brian Benjamin, before he became lieutenant governor and resigned amid federal bribery charges (some of which have been dropped).

At least seven Democratic lawmakers from New York City that were on a list of coalition members provided by Lander's office, including Krueger, said they wanted to see wholesale reform. Only State Senator Andrew Gounardes, a Brooklyn Democrat and the current budget and revenues chair, pointed to legislation he sponsored, which addressed only a small subsection of the tax code. None of the others carried bills though some said they were considering legislation.

"For decades working class communities, particularly black and brown homeowners, have felt the brunt of unequal property taxes," said Assembly Member Khaleel Anderson, whose Southern Queens district has some of the highest effective tax rates, in a statement. "Reforms to overtaxed homeowners are long overdue.

"New York State legislators must work collaboratively with the New York City Council to make homeowner property tax reforms," he said, noting that he is "in alignment" with Lander's framework. "This session, I will be sponsoring legislation that promotes fairness among homeowners."

“Property tax reform must happen in NYS," said State Senator Leroy Comrie, also a Democrat of Southeast Queens, in a statement to Gotham Gazette. "We’re losing too many middle class homeowners. We’re inhibiting the fair and equitable value of properties. We’re creating undue harm in minority communities that have been unfairly overtaxed for too many years. It’s necessary that these are repaired immediately. There’s a lawsuit pending and I’m happy to work with my colleagues to use any tactic to get this resolved.”

"Small homeowners in Queens & beyond are burdened with some of the highest property taxes in the city, despite being under-resourced & in transit deserts," wrote Assembly Member Juan Ardila, also of Queens and just inaugurated into office, in an email. "Currently, in Albany, there is a great opportunity to ensure a more equitable and fair property tax system. I will fight for increasing resources for homeowners and relief measures for tenants. We must do everything we can to make sure all New Yorkers can thrive."

State Senator James Sanders, Jr., whose district overlaps Anderson's, and Assembly Member Emily Gallagher, of Brooklyn, also support Lander’s recommendations, according to their spokespeople.

State Senator Brian Kavanagh, a Manhattan Democrat, was among those listed by the comptroller's office as part of the coalition. His office did not reply to requests for comment.

Assembly Member Harvey Epstein, another Manhattanite, was also on Lander's list. He told Gotham Gazette he had taken part in a working group but hasn't been involved recently.

In January 2020, de Blasio's advisory commission published initial recommendations. Had it not been for the pandemic, according to de Blasio, he may have been able to get the recommendations finalized before having a single session to push a reform package in Albany in 2021, seven years after taking office promising to address property taxes.

"A lot of work has been done already, more than it has been done in decades, honestly, and the direction that our task force was taking I think was exactly what's needed," de Blasio told reporters in 2021, just days before he made his final testimony on the state budget in Albany.

by Ethan Geringer-Sameth, reporter, Gotham Gazette

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