New York City’s property tax system is the primary source of local tax revenue, utilizing a complex structure of assessment caps, tax classes, and exemptions to determine the annual tax burden for residential and commercial properties. This page covers CBC’s work on property tax reform, including the elimination of class share systems, the transition to market-value assessments, the creation of income-based circuit breakers, the equitable treatment of rental and commercial properties, and the impact of assessment growth caps.
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The City should release a detailed analysis that assesses how tax burdens would be redistributed within the proposed new residential class.
The Commission should make additional recommendations if current assessment procedures do not lead to equitable treatment for rental and commercial property.
Policymakers must resist pulling apart the recommendations and instead consider the reforms holistically to avoid greater inequities and uncertainty.
The City should analyze the extent to which there may be intra-class inequities resulting from Department of Finance methods for commercial and rental buildings.
The City should narrow the differences in tax burdens among classes to encourage the development of rental housing.
Key Data
According to a November 2022 analysis, the proposed residential class would establish a nominal tax rate of 0.81% (compared to current rates of 20.309% in Class 1 and 12.267% in Class 2), increasing tax bills for 35% of parcels and decreasing them for 65%.
In a November 2022 testimony, the CBCNY highlighted that the median effective tax rate (ETR) is highly unequal across property types, standing at $0.83 per $100 of market value for small homes, $1.53 for large rentals, and $1.72 for office buildings.
In a December 2019 post, the CBCNY noted that for fiscal year 2020, the property tax was projected to generate nearly $30 billion, or 32% of all City revenues, funding almost $1 of every $3 spent.
In a March 2019 post, the CBCNY evaluated a proposed pied-à-terre tax on nonresident owners of NYC homes worth over $5 million, which would levy an annual property tax surcharge starting at 0.5% and increasing to 4% for values over $25 million to yield $650 million annually.
A September 2018 report on Class 1 properties showed that citywide, the median market value of a home was $683,000, the median assessment ratio was 4.3% (below the 6% target), and the median effective tax rate was 0.89%.
$124.7 billion is the amount Mayor Mamdani proposes to spend in fiscal year 2027. The budget process is never simple, but this year the intensity ratcheted up. Revealing a large budget gap, the City administration negotiated with the State for aid to bridge it while simultaneously pursuing its ambitious programmatic…
Mayoral candidates were surveyed on their commitment to comprehensive property tax reform, with nearly all respondents expressing support for such measures by the end of their second year in office. The responses highlight a consensus on the need for a more equitable system, with various candidates proposing targeted reforms like ending specific exemptions or creating more equitable tax brackets.
Recommendations related to Property Tax Reform
Michael Blake will focus on targeted reforms, such as a vacant apartment tax and ending the MSG property tax exemption, to make the system more equitable.
Zohran Mamdani states the City must embrace equitable property tax reform to ensure the top 1% of New Yorkers pay their fair share.
Jessica Ramos asserts that the property tax system is broken and that reform is a racial and economic justice priority.
Curtis Sliwa argues the current system is regressive and unfair, stating that the city needs equity, transparency, and simplicity.
Jim Walden proposes keeping the overall tax yield constant while shifting the relative burdens to lower the tax burden on working-class families.
Reforming the city's property tax system is essential to improve fairness and increase housing supply. This policy is part of a broader strategy to enhance affordability and livability for residents and businesses.
Recommendations related to Property Tax Reform
The next mayor should reform property taxes to boost fairness and housing supply.
New York City's property tax system requires comprehensive reform to address structural inequities, particularly regarding the valuation and tax burdens of rental and commercial properties. While the proposed new residential class would improve transparency and equity for many homeowners, policymakers must ensure that tax relief programs are well-targeted and that the system is not reformed in a piecemeal fashion.
Recommendations related to Property Tax Reform
The City should release a detailed analysis that assesses how tax burdens would be redistributed within the proposed new residential class.
The Commission should make additional recommendations if current assessment procedures do not lead to equitable treatment for rental and commercial property.
Policymakers must resist pulling apart the recommendations and instead consider the reforms holistically to avoid greater inequities and uncertainty.
The City should analyze the extent to which there may be intra-class inequities resulting from Department of Finance methods for commercial and rental buildings.
The City should narrow the differences in tax burdens among classes to encourage the development of rental housing.
Key Data
$1.5 trillion
— The estimated total market value of the new residential class, representing a 40 percent increase from the current valuation.
0.81 percent
— The nominal tax rate for the new residential class before the application of a homestead exemption and circuit breaker.
$0.83 per $100
— The median effective tax rate for one- to three-family homes.
$1.53
— The median effective tax rate for large rental buildings.
$1.72
— The median effective tax rate for office buildings.
20.309 percent
— The current tax rate for Class 1 properties.
47 is the number of people who will have held the office of NYC Comptroller once Brad Lander is sworn in on January 1, 2022. At a breakfast with CBC Trustees, President Andrew Rein sat down for a wide-ranging conversation with the Comptroller-elect, covering subjects including risks to New York’s…
The incoming administration is urged to prioritize core services, implement performance management systems, and address fiscal instability to manage a $5 billion annual budget gap. To support economic growth and housing, the city should focus on improving land-use decision-making and reforming the property tax.
Recommendations related to Property Tax Reform
The administration should improve land-use decision-making and reform the property tax to help the city provide for New Yorkers.
New York City's property tax system is widely considered broken, with tax burdens distributed in an unfair and inequitable manner. To address this, the incoming administration should finalize a comprehensive reform proposal, build a coalition for support, and work with the state legislature to pass and implement necessary changes.
Recommendations related to Property Tax Reform
The incoming Administration should finalize a reform proposal, build a supporting coalition, develop legislative language in cooperation with the State legislature, advocate for passage, and implement the reforms.
The incoming Administration should reform the property tax system to increase equity.
New York City's property tax system requires comprehensive reform to address inequities in tax burdens among residential, rental, and commercial properties. The current system's reliance on class shares and lack of transparency necessitates a new approach that clarifies assessment methods and structures relief programs like homestead exemptions and circuit breakers.
Recommendations related to Property Tax Reform
Develop a simple and transparent tax rate setting process that eliminates the function of class shares and distributes the levy based on clearly articulated policy rationales for the differential levels of taxation.
Expand the scope to address disparities within the rental and commercial classes.
Provide details on how the homestead exemption and circuit breaker should be structured to ensure eligibility and benefit levels are clearly defined.
Clarify how assessed values for the new residential class will be set to resolve conflicts between phasing-in market value changes and assessing properties at 100 percent of market value.
The next New York City Comptroller will play a critical role not only in holding the next Administration and agencies accountable, investing and managing five pension funds with $248 billion in assets, and partnering in $13 billion City debt issuance, but also in spotlighting and promoting New York City’s fiscal…
New York's housing affordability crisis is exacerbated by a dysfunctional regulatory environment, including an opaque property-tax system that disproportionately burdens multifamily buildings and hinders new development. To address these challenges, the city and state must modernize zoning, building codes, and tax policies to facilitate increased housing production across the region.
Recommendations related to Property Tax Reform
New York should reform the property-tax system to address the unequal taxation of multifamily buildings that makes it difficult to finance new construction and drives up rents.
New York City's property tax system generates nearly $30 billion annually, accounting for 32 percent of all city revenues, and has seen an average annual growth of 6.2 percent since fiscal year 1999. To improve equity and transparency, the system should transition to a model where valuations reflect actual market values, the class share system is eliminated, and tax burdens are adjusted through homestead exemptions and income-based circuit breaker rebates.
Recommendations related to Property Tax Reform
Move cooperatives and residential condominiums to Class 1 with one-, two-, and three-family homes.
Valuation for tax purposes should reflect actual real estate market value, using sales-based models for one-, two-, and three-family homes, cooperatives, and residential condominiums.
Full market value should be the starting point for assessing the tax base.
Class 1 should face the lowest tax burden, with increasing effective tax rates for residential rental buildings, utilities, and commercial properties, in that order.
The use of a homestead exemption to reduce tax burdens on owner-occupied primary residences should be considered.
The existing class share system should be eliminated.
Stability of the property tax should be achieved by phasing-in market value changes over three years for all parcels.
To ease burdensome tax bills, rebates of owner-occupied residential property taxes should be provided based on household income when tax bills exceed a set share of income.
Transition to the new system should occur over a five-year period.
Key Data
$30 billion
— Amount of revenue the property tax will generate in fiscal year 2020.
32 percent
— Portion of all City revenues generated by the property tax in fiscal year 2020.
$1 out of every $3
— Amount of City spending funded by the property tax.
6.2 percent
— Average annual growth of property tax revenue since fiscal year 1999.
A proposed pied-à-terre tax on high-value homes would generate approximately $650 million annually, but it risks negatively impacting the luxury housing market and the city's overall economic competitiveness. Instead of implementing this piecemeal tax, the city should pursue comprehensive property tax reform that bases levies on property characteristics rather than ownership.
Recommendations related to Property Tax Reform
The property tax should be levied based on the characteristics of the property, not its ownership.
The extensive disparities in the property tax system should be addressed through comprehensive reform, not another piecemeal approach.
Revenues should not be dedicated, but rather allocated through the budget process.
The State should not adopt a pied-a-terre tax without thoughtful deliberation about whether it is needed and revision of the proposal to mitigate the negative impacts.
Lawmakers should seriously consider lower tax rates that will do less harm to the attractiveness of NYC.
Key Data
$5 million
— Threshold value for New York City homes subject to the proposed annual property tax surcharge.
0.5 percent
— Starting annual property tax surcharge rate for homes worth more than $5 million.
4.0 percent
— Top annual property tax surcharge rate for the value of homes greater than $25 million.
$25 million
— Threshold value for the top 4.0 percent annual property tax surcharge rate.
$650 million
— Projected annual yield from the proposed pied-à-terre tax.
New York City's property tax system lacks transparency and equity, requiring a comprehensive redesign that moves cooperatives and condominiums into Class 1 and adopts a market value-based assessment system. To ensure fairness and stability, the city should implement a circuit breaker for lower-income homeowners and transition to the new system over a five-year period.
Recommendations related to Property Tax Reform
Move cooperatives and residential condominiums to Class 1 with one-, two-, and three-family homes to ensure consistent treatment of owned homes.
Class 1 should face the lowest tax burden, with increasing effective tax rates for residential rental buildings, utilities, and commercial properties.
Valuation for tax purposes should reflect actual real estate market value using transparent methods that utilize data available to the Department of Finance.
The existing class share system should be eliminated to prevent the current distortions that result in higher effective tax rates for commercial and rental properties.
Stability of the property tax should be achieved by phasing-in market value changes over three years for all parcels, while eliminating current caps and phase-ins.
Rebates should be provided of owner-occupied residential property taxes based on household income when tax bills exceed a set share of income to ease burdensome tax bills.
Transition to the new system should occur over a five-year period to temper the impact of the redistribution of the property tax levy.
Key Data
4 to 5 times
— The effective tax rates of commercial and rental properties are 4 to 5 times those of owner-occupied homes.
2.25 times
— In 46 of 53 cities, effective tax rates on commercial properties are no greater than 2.25 times that of owner-occupied homes.
10 percent
— The Constitutional debt limit sets the maximum outstanding debt for New York City at 10 percent of the five-year average of market value.
2.5 percent
— The maximum property tax revenue that can be raised and used for operating expenses is set at 2.5 percent of the five-year average of market value.
5 percent
— A circuit breaker could apply to property taxes on residential properties that exceed 5 percent of household income for households with income below $100,000.
20 percent
— The current cap on assessed value growth over five years on Class 1 homes results in foregone revenue by delaying the recognition of growth.
The data point for today is 1981, the year in which the State Legislature enacted S7000A, the landmark bill that formalized the current property tax system for New York City. A response to the Hellerstein case, which found the system was in violation of State law, S7000A essentially codified the…
Problems, Inequities, and Potential Reforms NYC Advisory Commission on Property Tax Reform is charged with recommending reforms to make the NYC property tax fairer, simpler, and more transparent. CBC, the Regional Plan Association, and NYU Wagner convened a panel to discuss the current property tax system and the reforms that…
New York City's property tax system creates significant inequities for homeowners because statutory caps on assessed value growth shift tax burdens onto properties with stable values while benefiting those in rapidly appreciating neighborhoods. To create a fairer and more transparent system, the city's Advisory Commission on Property Tax Reform should prioritize restructuring or eliminating these assessment growth caps.
Recommendations related to Property Tax Reform
The New York City Advisory Commission on Property Tax Reform should prioritize addressing the inequities in the Class 1 property tax by restructuring or eliminating caps on assessment growth.
Key Data
$1.25 trillion
— The full market value of taxable properties across all tax classes in fiscal year 2019.
47 percent
— The share of total market value accounted for by Class 1 properties.
660,000
— The approximate number of one-, two-, and three-family homes in New York City.
21.861 percent
— The tax rate for Class 1 properties in fiscal year 2019.
$683,000
— The median market value of a Class 1 home citywide.
0.89 percent
— The median effective tax rate (ETR) for Class 1 properties citywide.
Vice President Maria Doulis discusses issues such as New York State and local tax deductions, New York City’s $85 billion fiscal plan for 2018, and the inequity of New York City’s real estate property tax system. Original video can be found here .
New York City's property tax system is riddled with inequities, such as assessment caps and the undervaluation of co-ops and condos, which create disparate effective tax rates across different property types. To address these issues while raising $2 billion in revenue, the city could implement reforms like consolidating homeowner categories, revaluing properties based on market rates, or eliminating assessment caps and phase-ins.
Recommendations related to Property Tax Reform
The city should consolidate all homeowners into a single category and assess co-ops and condos based on their true market values to eliminate disparities among homeowners.
Policymakers should eliminate the caps and phase-in provisions for all properties to reduce intra-class inequities and improve system transparency.
If city officials are concerned with protecting homeowners who do not have sufficient cash incomes, caps on increases in assessments should be means-tested rather than applied broadly.
The city should assess co-ops and condos at the same 6 percent assessment ratio as 1-3 family homes to ensure equitable taxation.
The city should eliminate the cap on small rental properties to address the significant revenue loss and inequity in that category.
Key Data
$2 billion
— The target amount of additional property tax revenue the city aims to raise through the proposed reform options.
$4.5 billion
— The estimated revenue foregone due to the cap and phase-in rules in fiscal year 2015.
45 percent
— The target assessment ratio for Class 2, Class 3, and Class 4 properties.
0.78 percent
— The effective tax rate for Class 2 condos and co-ops based on Department of Finance determinations.
4.60 percent
— The effective tax rate for large Class 2 rental buildings.
1.21 percent
— The assessment ratio for a specific two-family home in Park Slope/Carroll Gardens.
On February 22, 2017, New York State Budget Director Robert Mujica presented highlights from the New York State Executive Budget for Fiscal Year 2018 to the Citizens Budget Commission.
New York City's property tax system generates $24 billion in annual revenue, yet it relies on a structure that creates significant inequities by taxing different property types at vastly different effective rates. These disparities, driven by policy decisions and exemption programs, result in commercial and large rental properties bearing a disproportionate tax burden compared to small residential homes.
Key Data
$24 billion
— Projected revenue for fiscal year 2017, representing 44% of all City tax revenues.
$1.47 trillion
— The total value of property in New York City in 2017, which more than tripled from $382 billion in 2000.
$3 billion
— The cost of housing and economic development tax exemptions granted in 2016, significantly higher than the $350 million spent on personal exemptions.
4.12%
— The average effective tax rate for large rental properties, which is more than five times the 0.74% rate paid by small homes.
3.87%
— The average effective tax rate for commercial property, which accounts for 42% of the property tax levy despite comprising less than 20% of total market value.
$25.8 billion
— The total tax levy in fiscal year 2017, which tripled from $8.4 billion in 2000.
New York City's property tax system is riddled with inequities, including assessment caps and the undervaluation of co-ops and condos, which create disparate tax burdens across different property types. To address these issues while raising $2 billion in revenue, the city should consider reforms such as eliminating assessment caps and revaluing properties to ensure a more transparent and equitable tax structure.
Recommendations related to Property Tax Reform
If city officials are concerned with protecting homeowners who do not have sufficient cash incomes to cover comfortably their property taxes, caps on increases in assessments should be means-tested.
The city should eliminate the caps and phase-in provisions for all properties to address the inequities among properties.
The city should value condos and co-ops based on market values using sales prices to correct the valuation methodology.
The city should assess co-ops and condos at the same 6 percent rate as 1-3 family homes to eliminate disparities among homeowners.
The city should eliminate the assessment growth caps on 1-3 family homes to ensure all homeowners face the same effective tax rate.
Key Data
$2 Billion
— The target amount of additional revenue to be raised by the proposed property tax reforms.
$4.5 Billion
— The estimated revenue foregone in fiscal year 2015 due to existing assessment cap and phase-in rules.
1.21%
— The assessment ratio for a two-family brick home in Park Slope/Carroll Gardens in fiscal year 2013.
45.00%
— The assessment ratio for a commercial office building in East New York/Starrett City in fiscal year 2013.
0.78%
— The effective tax rate for Class 2 condos and co-ops based on Department of Finance market value determinations.
4.60%
— The effective tax rate for large Class 2 rental buildings.
New York City's property tax system is riddled with inequities, including disparate effective tax rates across different property classes and neighborhoods caused by assessment caps and phase-ins. Three proposed options for raising $2 billion in additional revenue range from proportional rate increases to structural reforms that would eliminate assessment caps and revalue co-ops and condos to align them with market values.
Recommendations related to Property Tax Reform
This option eliminates all disparities among homeowners by assessing and taxing both categories of property in the same way.
This option eliminates these disparities by eliminating the caps for Class 1 properties and by treating co-ops and condos identically to Class 1 properties.
The third option would raise $2 billion in revenue and addresses the inequities among properties by eliminating the caps and phase-in provisions for all properties.
If city officials are concerned with protecting homeowners who do not have sufficient cash incomes to cover comfortably their property taxes, caps on increases in assessments should be means-tested.
One possibility is to value these properties based on the sales of units within the same, or similar, buildings.
Key Data
$21.1 billion
— Baseline property tax levy estimated for fiscal year 2015.
$2 billion
— Additional revenue to be raised by the proposed options in fiscal year 2015.
$4.5 billion
— Estimated revenue foregone due to the cap and phase-in rules in fiscal year 2015.
1.21 percent
— Assessment ratio for a two-family brick home in Park Slope/Carroll Gardens.
45 percent
— Assessment ratio for a commercial property in East New York/Starrett City.
17.5 percent
— Minimum tax abatement for co-ops and condos.
New York's current property tax circuit breaker program is outdated, with eligibility criteria unchanged since 1985, failing to provide meaningful relief to residents as housing costs and incomes have risen. Replacing the flawed School Tax Relief (STAR) program with an expanded, income-based circuit breaker model would more effectively target tax relief to homeowners and renters based on their actual ability to pay.
Recommendations related to Property Tax Reform
New York should replace the current, poorly crafted STAR homestead exemption program with an improved circuit breaker program that more effectively targets tax relief.
The state should update the income and wealth criteria for the circuit breaker program, which have remained unmodified since 1985, to reflect current economic realities.
Policymakers should implement a circuit breaker model that refunds property taxes exceeding 5 percent of income for homeowners earning less than $20,000 and 7 percent for all others.
The state should expand the circuit breaker program to include a model for renters that refunds property taxes in excess of 6 percent of income.
Key Data
$18,000
— The income ceiling for New York's current circuit breaker program, which has remained unchanged since 1985.
$51,384
— The median household income in New York in 2006, which is far above the current circuit breaker income ceiling.
$2.6 billion
— The estimated cost of a circuit breaker program for homeowners that refunds property taxes above 5 percent of income for those earning less than $20,000 and above 7 percent for all others.
$2.7 billion
— The estimated cost of a circuit breaker program for renters that refunds property taxes in excess of 6 percent of income.
5.1 million
— The total number of owners and renters that would be reached by the dollars currently planned for the STAR program.
0.7 percent
— The percentage of income that the richest 1 percent of New York households pay in property taxes.
New York's high local tax burden is driven by heavy reliance on property taxes, particularly for school funding, and significant local costs for Medicaid and public employee labor. To address these issues, the state should consider reforms such as converting to defined contribution pension systems, implementing circuit breaker programs based on income, and assuming full responsibility for local Medicaid costs.
Recommendations related to Property Tax Reform
The current unnecessarily expensive pension system should be reformed by converting to a defined contribution rather than a defined benefit system.
State law could require arbitrators to award wage increases that will not necessitate tax increases or require that any wage increase be funded in part by productivity gains.
An easy and transparent way to improve upon the STAR rebate program is to base a household’s rebate on property taxes as a share of income.
A complete state takeover of local Medicaid expenses would ameliorate the fiscal pressure on counties.
Arbitrators could be allowed to grant an award that is chronologically current in the event of severely expired contracts.
Key Data
$111 billion
— New Yorkers pay about $111 billion annually in state and local taxes.
56 percent
— Property taxes account for 56 percent of total local tax collections.
$2.2 billion
— In fiscal year 2005, Medicaid mandates required $2.2 billion from the counties (excluding New York City), representing about 12 percent of their total spending.
$4.7 billion
— From fiscal year 1998-99 to 2007-08, school property tax relief spending increased from $600 million to $4.7 billion.
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