The state’s outdated property valuation system is resulting in the super-rich paying a fraction of the property taxes they should be, the New York Post has learned.
To put the inequity into perspective, the Post notes that “the buyer of the most expensive apartment ever sold – a $100 million duplex overlooking Central Park — pays taxes as if the place were worth just $6.5 million.” In absolute terms, that’s still a big number to most of us — but Max Galka, CEO of real estate service Revaluate, explains it with percentages:
Galka said that while the city values apartments at about 20 percent of their actual worth, the top 10 are valued at between just 3 and 6.8 percent of their sales prices, generating just $935,000 in taxes this fiscal year.
If those apartments were taxed at the national effective rate of 1.29 percent of sale prices, the city would pocket nearly $9 million, Galka said.
What’s more distressing is that industry experts anticipated this problem back in 1996, years after a new set of complex property valuations were written into state law in 1981:
Experts blamed the situation on the city’s complicated method of assessing the “market value” of condos and co-op apartments. The off-the-mark assessment formula is primarily based on the income, per square foot, that’s generated by neighboring rental apartments.
“It’s a big problem,” said George Sweeting, deputy director of the city’s Independent Budget Office. “It creates major inequities in the tax system.
“The city has been asked to submit a plan to Albany since 1996 but no one ever has,” he added.
While Mayor de Blasio has been a big proponent of affordable housing — even facing off with Governor Cuomo over the issue — his office seemed less inclined to fix a housing valuation system that favors New York’s elite. “These inequities have been built into the tax system over decades, and they won’t be solved easily or quickly,” said spokesperson Wiley Norvell. “Any solution would require tax-law changes in Albany, and the impact of those changes on the lives of New Yorkers would have to be taken into account.”