Paul L. Caron
Dean




Wednesday, October 20, 2021

How A $2 Million Condo In Brooklyn Ends Up With A $157 Real Estate Tax Bill

Bloomberg, How a $2 Million Condo in Brooklyn Ends Up With a $157 Tax Bill:

Opaque methods, hypothetical numbers and ‘bonkers’ adjustments shift the property-tax burden toward middle- and working-class New Yorkers.

For years, when confronted with complaints of uneven property taxes, the New York City Department of Finance has blamed a state law that requires it to ignore the sale prices of condos and co-ops when determining their taxable value. Instead, the law requires city assessors to engage in a kind of thought experiment: Pretend co-ops and condos produce income for their owners—even though they don’t—and set their taxable values based on a hypothetical amount of income they’d generate if they did.

That law, designed to protect condos and co-ops from higher taxes, lays the groundwork for warped results. But now, for the first time, a Bloomberg News investigation reveals that city officials have made a bad situation worse. They’ve invented data points that bear no resemblance to market reality and used them in opaque calculations that tend to favor wealthy property owners. These flawed valuations shift hundreds of millions of dollars in tax burden from higher- to lower-priced properties and to rental apartment buildings every year.

City ordinances have created special exemptions that reduce taxable values for qualifying properties and abatements that shrink eligible tax bills—special breaks that have significant effects. But flawed valuations present a problem at a deeper level, one that’s far less apparent to most taxpayers.

A Bloomberg analysis of millions of city records related to condo sales and taxes shows that, in effect, two steps in New York’s assessment process combine to help perpetuate unfairness. First, city officials reduce the taxable values of condos across the board by adjusting an important data point—the so-called capitalization rate—in their calculations. Capitalization rates help investors gauge the value of income-producing properties; the higher the rate, the lower the property value. The rate that assessors apply is more than double the actual rates reflected in New York real estate markets.

Bloomberg

https://taxprof.typepad.com/taxprof_blog/2021/10/how-a-2-million-condo-in-brooklyn-ends-up-with-a-157-real-estate-tax-bill.html

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