The NYC Department of Finance Office of the NYC Comptroller recently released a report detailing options for the city to secure new sources of funding for services. Among these are two that seek to achieve more equitable taxation of real property.
First is a luxury pied-à-terre surcharge that follows State Senate Bill S44B which proposes a tax on homes that are not occupied by the owner or their family members and are not legally rented to an NYC resident. Intended to offset the lower effective tax on high-value properties that is embedded in the city’s existing property tax system, says the report, the surcharge would incentivize the renting out of vacant properties, which would alleviate housing shortages while adding to the city’s coffers.
One- to three-family homes of $5 million or more and co-ops and condos with assessed values of $300,000 or more (which equates to more than $3 million in market value, according to the report), would be subject to the surcharge at a progressive rate. The report estimates that fewer than 15,000 properties would be affected.
The NYC Comptroller’s Office estimates that the median effective surcharge rate would be 0.20% for co-ops and condos and 0.53% for single-family homes.
The other proposal is a partial repeal of the co-op/condo abatement for luxury units. Enacted in 1996 to lower taxes on Class 2 co-ops and condos, bringing them closer in line with taxes on Class 1 properties, the co-op/condo abatement equals 17.5% of the tax for properties with average assessed value above $60,000, according to the Comptroller’s report. In fiscal 2023, co-op and condo owners received $656.1 million in tax benefits through the abatement. This proposal would remove the abatement for those properties assessed above $300,000 (again, more than $3 million in market value). There are approximately 4,283 condominium units and 237 co-op buildings that would be affected by the partial repeal.
The report notes that properties that are not the owner’s primary residence are not eligible for the abatement.