Much has been written and discussed in recent months about the failure of the New York State Legislature to extend the property tax abatement for co-ops and condos, notes Ira Meister, president and founder of Matthew Adam Properties, Inc., a premier property management firm. The discussion has focused on the failure of the legislature to take action during the session that ended in June and the need to make permanent the abatements, which have been authorized with continuing legislation since the late 1990s.
The city included the abatement in the tax bills due on July 1 of this year and again on October 1, assuming the legislature would take positive action in an anticipated special session after the election.
The impact of the abatement is not insignificant. “There are approximately 365,000 co-op and condo units in the city and the city estimates the abatement would save these taxpayers about $430 million or $1,194 per unit,” Meister said.
Condo owners pay the property tax directly to the city. For co-op shareholders, the tax is included in the monthly maintenance charges.
The property tax is based on the assessed valuation of a property. “Here, is an issue that has been pushed into the background and is another quirk in the system that works against co-ops and condos,” Meister explained.
To the average voter it would seem that the entire New York City legislative delegation would be pushing to have the abatement passed. But, Meister said, this is not the case and he attributed this to underlying factors. Most noticeably is the city’s practice of categorizing co-ops and condos as profit-making corporations. The city has four classes of properties and taxes co-ops and condos similar to rental properties, rather than as single family homes. “The difference is dramatic,” Meister said.
To determine the assessed value, the city applies a complex ratio to each of the four categories. For example, a single family home valued at $1 million has an assessment ratio of six percent and the assessed valuation would be no more than $60,000. For a condo or co-op, the ratio is 45 percent and the assessed value would be no more than $450,000.
“The net result is that the condo owner or co-op shareholder is paying nearly six times more than a single-family owner,” Meister said. “That hurts.”
A change would require a request to Albany from the City Council, Meister explained, where the majority of councilpersons represent owners of smaller properties who do not want the imbalance corrected.