Property taxes, one of New York City’s main wellsprings to finance its transit, police, fire, and public school districts, are under fire.
A seven-year-old lawsuit brought forward by Tax Equity Now New York or TENNY, a broad housing coalition, argues that the city imposes “substantially unequal” tax burdens on similarly valued NYC properties.
As Kiplinger has reported, the complaint alleges that the current tax code violates federal and state law by unfairly taxing renters and homeowners in lower-income areas and neighborhoods of color compared to more affluent areas.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
After nearly a decade of debate over this in NYC, the state’s highest court recently weighed in, ruling the case can proceed. The latest order from acting state Supreme Court Justice Gerald Lebovits would kick off the discovery process as soon as October.
Some say this lawsuit underscores Mayor Eric Adams' glaring inaction regarding amending the city’s notorious property taxes.
Adams promised in his mayoral campaign more than three years ago to “tackle property tax reform,” but his administration instead fought this lawsuit. The city’s argument, under Adams, is reportedly that a property tax system needing reform isn’t necessarily unlawful.
Notably, the state supreme court has revived the case as Adams had just been indicted on federal bribery charges. (Adams has declared his innocence and vows to stay in office.)
Eric Adams' promises
It’s been a couple of years since Eric Adams became mayor, and his pledge to fix New York City’s property tax system hasn't translated into action.
- The Adams administration promised to immediately place a committee to evaluate solutions to alleviate tax burdens on co-ops and condominiums.
- Ultimately, they would shift the tax burden from renters and homeowners in less affluent areas to the owners of pricey apartments in wealthy neighborhoods.
Yet, to date, the Adams administration appears to be at odds with campaign promises as it fights this lawsuit, preferring to let reforms be addressed through legislative channels.
Since Adams has been indicted, it's hard to say what will happen with his administration's stance on the lawsuit.
New York City's property tax problem
In New York City, property taxes account for approximately 45% of the city’s revenue, but for many, the climbing costs have become unsustainable.
“Property tax disparity has gotten worse since the pandemic, which is concerning because it’s driving up housing costs for those less able to afford it,” New York State Comptroller Thomas DiNapoli said in a statement. “A recalibration of the process used to determine tax bills is needed if the city wants to remain accessible to working and middle-class families.”
Under the current tax code, New York City sets different tax rates based on the following:
- Property class, including single or multifamily homes with more than three units.
- Co-ops and condos are not assessed by their market value but by that of similar apartments, including rent-stabilized units or those in buildings receiving a tax exemption.
Furthermore, the state’s property tax limits the amount local governments and school districts can levy with annual and five-year caps that vary depending on the property type. Because of that mixed formula, even if the market value of a lower-valued property declines it won’t always result in a lower tax bill.
According to the Office of the NY Comptroller, lower-valued properties are more likely to bear a greater tax burden than the city’s highest-value properties. The problem has only worsened since the pandemic impacting both homeowners and renters.
New York renters are also affected
In a nod to New York’s former candidate for governor Jimmy McMillan: The rent is too damn high.
Even though renters don’t directly pay for property bills, landlords often pass some or all of that burden onto their tenants. As a result, renters' bills grew on average 9.6% from 2021 to 2023, despite a market value loss of 0.3%, the NY Comptroller said.
In a pattern similar to home property taxes, the results showed that renters from working to middle-class neighborhoods often bore the brunt of higher bills compared to those in more expensive Manhattan neighborhoods.
- The top 20th percentile saw market value decline by 2% and their tax bills grew by 2.1%.
- Meanwhile, the bottom 20th percentile saw market value rise by 1.7% and tax bills increase by 11%.
Property tax lawsuit seeks tax fairness
TENNY’s complaint against New York’s 40-year-old property tax system argues that the current tax code violates the federal Fair Housing Act (FHA). The organization alleges it’s an unfair system with an “inequitable and discriminatory disparate impact” on certain protected classes of New York City property owners.
The lawsuit raises three key issues, alleging that the city’s property tax system:
1. Imposes an inequitable tax burden, resulting in higher tax rates on renters and homeowners in less expensive neighborhoods than wealthier counterparts.
2. Taxation is not based on the fair market value of homes, as required by state law — resulting in homes with the same sales price or market value often paying different tax amounts.
3. The tax code is discriminatory and arbitrarily penalized communities, where owners of properties in lower-income minority neighborhoods generally pay higher property taxes compared to expensive or high-income communities.
What NYC’s property tax lawsuit means for you
If the TENNY lawsuit is successful, New York City’s property tax system could be rewritten. That alone could have broad impacts on similar claims which have failed, and help other plaintiffs who are still navigating legal challenges and seeking tax justice.
if you’re a New Yorker and are curious about how much you’re getting taxed compared to your neighbors visit Tax Equity Now’s website. By entering your zip code and property type class act, their search engine offers data on over 800,000 NYC residential and commercial properties.
Related Content:
-
Could ESG Funds be Removed from Your 401(k) Plan?A pilot successfully sued American Airlines for including ESG factors in its 401(k) plan.
-
UnitedHealth Is the Worst Dow Jones Stock Thursday. Here's WhyUnitedHealth is putting pressure on the 30-stock index Thursday after the insurance giant reported a rare revenue miss. This is what you need to know.
-
Rushing to Go Solar? Homeowners Scramble Before Trump Tax Credit CutsTax Credits With a new incoming presidential administration, is the solar energy tax credit in the hot seat?
-
Gov. Hochul Vows to Deliver $1 Billion in Tax Relief to New YorkersState Tax The proposed tax cuts would benefit New York middle-class families.
-
Trump Pitches New ‘External Revenue Service’ AgencyTax Policy The new organization would collect tariff revenue from foreign nations.
-
House GOP Bill Aims to Abolish the IRS and Rewrite the Tax CodeTax Policy The stability of the IRS faces yet another challenge as the U.S. presidency changes hands.
-
More Taxes Could Slam New Yorkers Over MTA Budget ShortfallState Taxes Lawmakers warn that New Yorkers may need to brace for more taxes.
-
'Pickleball Tax' Battle Heads to CourtState Tax The pickleball controversy continues as a nonprofit organization takes legal action against “illegal” taxes.
-
IRS Free File Is Now Open for 2025: Are Your Taxes Eligible?Tax Filing Official tax season doesn't begin until late January, but taxpayers can start filing free online returns now.
-
California Fires: How to Recover Tax Records and Other Important DocumentsDisaster Recovery Having your tax records and other vital documents is important for claiming casualty loss deductions that can help with recovery.
