For the last three years State Senator Tony Avella, D-11, who represents the Queens neighborhood of Bayside, has been trying to get co-ops and condominiums in the state of New York reclassified under the tax code so as to lower the amount of property taxes residents of these buildings need to pay.

It was co-op homeowners in Avella’s district that contacted him in 2011 when they were hit with double and triple-digit increases in their tax assessment valuations, based in part on how they were appraised. As of right now co-ops and condos are in Class 2, which groups them together with rentals, despite the fact that these are not rental properties.

“One of the things that I’ve been talking about to co-ops and condos in my district is the inordinate property tax that they pay,” says Avella. “I felt that co-ops and condos are still basically single-unit occupancy—it’s a single-family per unit. So why aren’t they treated the same in terms of the property tax code, like the Class 1 properties—the one, two and three-family homes? So I started taking a look at it and realized that the higher property taxes are a result of co-ops and condos being in Class 2 with commercial retail properties, which brings their property taxes up and unfairly allows for greater increases in any one year.”

Talking Points

What began as a conversation with former Mayor Michael R. Bloomberg’s Finance Commissioner David Frankel has become New York State Senate bill S893, now in its third year of existence. Avella’s bill was referred to the Real Property Taxation Committee and delivered to the New York State Assembly. It is currently waiting to be voted out of committee.

The bill is designed to create a new classification for co-ops and condos called Class 1-A. This would result in lower taxes for a majority of co-ops and condos in the city, though it would also raise rates for multimillion-dollar co-ops and condos.

“So I thought why don’t we change that?” says Avella. “Why don’t we create a separate class in Class 1 called Class 1-A, which would forever equate co-ops and condos with similar properties. So take them away from commercial rental properties and also provide the same tax cap on how much their property tax can be raised in any one year over five years, the same way one, two and three-family homes are.”

Creating a New Classification

The creation of Class 1-A is designed to make sure that property taxes in the existing Class 1 buildings remain unaffected while still lowering property taxes in co-ops and condos.

New York City administrators have been reluctant to passing the new legislation because changing the property tax structure would have been a massive undertaking.

“I introduced the bill and the Senate has passed it three years in a row, but unfortunately the Assembly has not taken action and each year the city keeps coming up with reasons not to do it. So each year I keep addressing those reasons,” says Avella.

Perhaps the biggest obstacle has been determining how shares in co-ops would be valuated under the new tax code. As of right now the valuation has been done by comparing co-ops and condos to similar rental properties. The new bill looks to change this by changing the assessment to be based on comparable sales instead of comparable rentals. Now it was found that for certain buildings that this would wind up increasing property taxes, which is why abatement reform has been included in the bill.

Tax Abatements

The current tax abatements for buildings that are valued at $50,000 or less under the current system would be increased from 28.1 percent to 33 percent, with the same happening for buildings valued from $50,000 to $55,000 under the current system (increasing from 25.2 percent to 33 percent). Under the new system, as the valuation of the building increases, the tax abatement offered would decrease, so multimillion-dollar buildings would no longer get access to the same rates as buildings worth just under $1 million. For example, buildings worth $660,001-$750,000 would get a 22.5 percent tax abatement while buildings worth over $5 million would get nothing extra.

The idea is that the issues addressing low and middle-income co-ops and condos would be addressed without granting a windfall to multimillion-dollar properties.

“This year we addressed every single argument that they came up with,” says Avella. “The bill, I think, is very well written. There’s been a lot of effort that went into this, not only from the Independent Democratic Conference Staff, my original conversations with the city department of finance, and a lot of input from co-ops and their legal representation. So I think we’ve got something that will really be a benefit to co-ops and condos if we can get the city to agree and the Assembly to pass it.”

John Zurz is a staff writer and reporter for The Cooperator.