Press Mention Taxes

NYC property taxes favor rich and white homeowners, lawsuit claims

April 24, 2017

Read the original news report here.

This year Mayor de Blasio will pay $3,581 in property taxes on each of two row houses he owns in ultra-gentrified Park Slope. The city says his properties are worth about $1.6 million apiece.

Some 14 miles away, in middle-class Laurelton, Queens, Arthur Russell, 66, who retired from computer sales, will pay a property tax bill that, at $4,569, is about 28% higher than the mayor’s — even though the city says his single-family home is worth 75% less than de Blasio’s properties, at $396,000.

If Russell were taxed like the mayor, his bill would fall by roughly $3,500 a year.

“That money could be vacation money,” said Russell, who is African-American. “It’s a substantial amount. My frustration is that it’s blatant abuse. People, if you take a look at this thing, you see disparity.”

Across the five boroughs, the city Department of Finance is subjecting tens of thousands of homeowners to similarly unequal billing — with the winners located primarily in upscale neighborhoods like Williamsburg, Brooklyn Heights and Greenwich Village and the losers located overwhelmingly in working- and middle-class neighborhoods like South Jamaica, East New York and Brownsville.

Often, the brunt falls most heavily on black or Hispanic property owners.

A coalition called Tax Equity Now NY, which includes the NAACP, the Black Institute, several landlords and homeowners, has teamed up with lawyers from the firm Latham & Watkins, including former Chief Judge Jonathan Lippmann, to file a class-action suit this week charging that the DNA of the city’s property tax system is racially biased and favors the affluent over the working- and middle-class.

“This is an insidious sort of economic oppression that doesn’t seem sexy, that doesn’t seem to pop up,” said Bertha Lewis, Black Institute’s president. “The more we looked into this, it’s just outrageous these inequities — from neighborhood to neighborhood, community to community being taxed at different rates.”

With data compiled by Martha Stark, a commissioner of finance during the Bloomberg administration, the lawsuit documents a jarring unfairness between the haves and the have-nots — particularly for homeowners.

The higher the assessed value of a property, the bigger the tax bill. To keep things fair, the state requires that appraisals be based on sales of similar properties.

That’s not what’s happening in New York City.

The data show that collectively, New York City homeowners in predominantly minority neighborhoods pay $376 million more than they would have if their properties had been accurately appraised based on comparative sales. Their properties are over-assessed by $1.7 billion, which averages to an extra $844 per homeowner per year.

Homeowners in Washington Heights, where the demographic is 83% non-white, are assessed at 141% of comparative sales prices. Homeowners in highly gentrified Williamsburg/Greenpoint (which is 63% white) are assessed at only 74% of comparative sales.

Majority white neighborhoods get this assessment break almost universally — properties in Park Slope/Carroll Gardens are assessed at 86% of average sales prices, Brooklyn Heights/DUMBO at 87% and Greenwich Village at 94%.

Of the 101 sales in Park Slope in 2015, the city assigned market values totaling $10 million less than the actual sales total of $269 million. That included a one-family on Prospect Park West that sold for $12.4 million but was given a market value of $4.9 million and one on Garfield Place that sold for $7.6 million but was appraised at $4.2 million.

Around the corner from de Blasio’s row houses, a three-family home that sold for $2.7 million was appraised at $2.2 million, while a single-family home that sold for $1.2 million was appraised by the city at $929,431.

Farther into the outer boroughs homes in nearly all of the poorest neighborhoods are assigned assessments that greatly exceed comparative sales prices, including Jamaica/Hollis in Queens (111%), Crotona Park (123%) in the Bronx and East New York in Brooklyn (112%).

A two-family home on Liberty Ave. in East New York, for example, sold for $105,000 but was appraised at $438,000 by the Finance Department. Across East New York in 2015, the city assigned a market value of $232.3 million to properties that sold for $194 million.

East New York homeowner Guy Sumler, 59, technically faces a $7,308 tax bill on a property the city values at $156,000 — a property that is remarkably similar to the mayor’s: a two-story row house.

He is aware the mayor’s tax bill is half the amount of his.

Sumler, an African-American tech consultant, said he came across the inequities while doing research on why his tax bill was so hefty.

 “I did see certain areas where we’re paying much more taxes than much more influential neighborhoods,” he said. “The few influential neighborhoods, those people don’t look like me.”

He lives with his 84-year-old mother so the home gets a senior citizen tax break that lowers the bill to $3,038, but even that is an annual stress.

“You have a community that’s a low income community that cannot keep up paying their taxes, plus the mortgage plus the other costs. It is not an easy task,” he said.

Up in the middle-class Spencer Estates in the Bronx, retired NYPD Detective Victor DiPierro, 49, paid $1,700 in taxes in 2003, the year he bought a two-story single-family home the city says is worth $512,000. Today he pays $6,141 — nearly twice what the mayor pays on his $1.5 million row house.

“It’s just not fair. We’re blue collar people. We’re not millionaires,” he said.

Though property assessment is not an exact science, it is math based and an error rate on appraisals of plus- or minus- 10 points is considered acceptable by appraisal professionals, experts say. New York City’s assessment error rate has a plus or minus of nearly 100, with the agency’s estimation of value ranging from 49.9% of actual sales prices to 141.1% of actual sales prices.

“That’s terrible,” said Patrick O’Connor of Texas-based O’Connor Consulting, experts in residential valuation.

He should know — he was also the head of the New York City Department of Finance Property Division back in the 1990s.

The inequities for homeowners, he said, are created by rules that cap increases to assessments at 6% per year and no more than 20% within five years.

Because higher value properties rise in value faster, O’Connor says the caps suppress their assessed value while actual sales prices rise higher and higher. Lower value homes tend to stay flat in value, so the 6% assessment hikes often drive their assessed value above their actual sales value.

“The higher value areas were going up faster until the caps. The higher value neighborhoods have benefited from the cap more than the other areas of the city,” he said. “That’s what the problem is.”

On Friday, Finance Department spokeswoman Sonia Alleyne said the agency “values properties based on requirements set out in New York State law. The law includes a cap on assessed values for one- to three-family homes that can create disparities in the taxes paid by owners of homes in different neighborhoods.”

This is exacerbated because the system also places a disproportionate burden on rental buildings with more than 11 units, which the lawsuit will allege is passed on to tenants. While big apartment buildings account for 24% of market value in the city, they pay 37% of the taxes.

As the unfairness of the system became more obvious over the years, property owners tried to get the city and state to fix the problem, but politicians — fearful of enraging certain classes of taxpayers — looked away.

The problem in eliminating these inequities is some taxpayers will end up paying more and some less down the line — a radioactive equation for most politicians, says Carol Kellerman, president of the Citizens Budget Commission, a good government group that’s been seeking reform for years.

“It’s gotten out of whack, but it’s hard to quantify and then present the bill,” she said. “The problem is, if you run them through the formula, there will be some people who are taxed more and some who are taxed less. And our political system doesn’t seem to handle well situations where there are winners and losers.”

Last week, this became obvious during a press conference when the mayor was asked about his modest property tax bills.

He conceded “there are obvious inequities” in the system and promised to confront the problem — but only if he is re-elected this fall. Asked why he couldn’t take on the issue now he replied:

“It’s because it is something that is going to take so much effort and so much of the administration’s time and energy that it’s just not a thing we’re going to do now.”

He called any push for property tax reform as a “massive undertaking, about the most controversial thing you could imagine,” and made a point of noting that it can’t result in a loss of revenue.

“We can’t lose revenue in the bargain. We just can’t,” he said. “Let’s be real world about it.”