Senate Bill S5324B

                                
 
BILL NUMBER: S5324

SPONSOR: GOUNARDES
 
TITLE OF BILL:  An act to amend the real property tax law, in relation
to eliminating the cap on assessed value growth for certain class one
properties

 
PURPOSE OR GENERAL IDEA OF BILL:

To eliminate the cap on assessed value growth for Class 1 properties
with a market value of over three million dollars in special assessing
units

 
SUMMARY OF PROVISIONS:

Section 1 amends Section 1805 of the Real Property Tax Law to provide
that the cap on assessed value growth for Class 1 properties should
apply only to properties with a market value below three million
dollars.

Section 2 provides that the act shall take effect immediately.
              

 
JUSTIFICATION:,

New York City breaks all real property within its boundaries into four
different categories for purposes of assessment and taxation: Class 1 is
all residential buildings with one, two or three dwelling units, Class 2
is all residential buildings with four or more units, Class 3 is utility
properties like power plants and substations, and Class 4 is all other
commercial and industrial buildings. Each of the classes must bear a
specific percentage of the overall tax levy for the City, known as a
"class share." The share for Class 1 properties has historically been
around 15%, meaning that 15% of the overall taxes collected in a certain
year will be paid by Class 1 homeowners. As the Regional Plan Associ-
ation notes in its 2018 report "Residential Property Taxation in New
York City," because of these predetermined percentages any reforms to
the property tax system that do not affect the division of class shares,
like exemption policies, assessment caps, or valuation methods, have the
effect almost exclusively of shifting a tax burden within a class rather
than between classes.

A shift within Class 1 of the tax burden in order to provide relief to
low and middle-income homeowners is exactly what this bill intends.  The
cap on assessed value growth for all Class 1 properties, which limits
increases on the assessed value to 6% a year or 20% over five years, was
originally written to protect against spikes in home valuations that
would lead to sudden and dramatic increases in property tax bills, but
has long since outlived its purpose. It fails to reflect the tremendous
appreciation of real estate in the City (between the years of 2000 and
2017 the value of real property more than tripled from $382 billion to
$1.47 trillion) and results in homeowners in long-gentrified neighbor-
hoods bearing a disproportionately small burden of the tax levy since
almost all of the market value of their homes escapes assessment. This
puts their bills on par with those of middle-class homeowners in south-
ern Brooklyn who struggle to make ends meet and provide for their fami-
lies in an increasingly expensive city. This bill would correct this
injustice by clarifying that the cap on assessed value growth should
apply only to homes worth less than $3 million.

 
FISCAL IMPLICATIONS:

None to the state.

 
EFFECTIVE DATE:
This bill would take effect immediately

                                
 
BILL NUMBER: S5324A

SPONSOR: GOUNARDES
 
TITLE OF BILL:  An act to amend the real property tax law, in relation
to eliminating the cap on assessed value growth for certain class one
properties

 
PURPOSE OR GENERAL IDEA OF BILL:

To eliminate the cap on assessed value growth for Class 1 properties in
special assessing units with a market value of over three million
dollars where the gross household income is $250,000 or more

 
SUMMARY OF PROVISIONS:

Section 1 amends Section 1805 of the Real Property Tax Law to provide
that the cap on assessed value growth for Class 1 properties should
apply only to properties with a market value below three million dollars
and where the owners are eligible for the school tax relief exemption
program based on gross household income.

              

Section 2 provides that the act shall take effect immediately.

 
JUSTIFICATION:

New York City breaks all real property within its boundaries into four
different categories for purposes of assessment and taxation:  Class 1
is all residential buildings with one, two or three dwelling units,
Class 2 is all residential buildings with four or more units, Class 3 is
utility properties like power plants and substations, and Class 4 is all
other commercial and industrial buildings. Each of the classes must bear
a specific percentage of the overall tax levy for the City, known as a
"class share." The share for Class 1 properties has historically been
around 15%, meaning that 15% of the overall taxes collected in a certain
year will be paid by Class 1 homeowners. As the Regional Plan Associ-
ation notes in its 2018 report "Residential Property Taxation in New
York City," because of these predetermined percentages any reforms to
the property tax system that do not affect the division of class shares,
like exemption policies, assessment caps, or valuation methods, have the
effect almost exclusively of shifting a tax burden within a class rather
than between classes.

A shift within Class 1 of the tax burden in order to provide relief to
low and middle-income homeowners is exactly what's needed. The cap on
assessed value growth for all Class 1 properties, which limits increases
on the assessed value to 6% a year or 20% over five years, was
originally written to protect against spikes in home valuations that
would lead to sudden and dramatic increases in property tax bills, but
has long since outlived its purpose. It fails to reflect the tremendous
appreciation of real estate in the City (between the years of 2000 and
2017 the value of real property more than tripled from $382 billion to
$1.47 trillion) and results in homeowners in long-gentrified neighbor-
hoods bearing a disproportionately small burden of the tax levy since
almost all of the market value of their homes escapes assessment. This
puts their property tax bills on par with those of middle-class homeown-
ers throughout the city who struggle to make ends meet and provide for
their families in an increasingly expensive city.


This bill would correct this injustice by clarifying that the cap on
assessed value growth should apply only to homes worth less than $3
million who are eligible for the STAR exemption pursuant to section 425
of the Real Property Tax Law.

Because the STAR program for tax exemptions is limited to households
below a certain income threshold, which is currently $250,000, this bill
ensures that only households who are truly lower or middle-class will
continue to receive the assessment cap (household incomes above $250,000
still qualify for STAR but as a tax credit rather than exemption and are
defined by a different section of law). This means that households worth
more than $3 million with a household gross income greater than $250,000
will wind up paying their fair share of property taxes that reflect the
true value of their homes, thus picking up a greater portion of the
Class 1 tax share.

 
FISCAL IMPLICATIONS:

None to the state.

 
EFFECTIVE DATE:
This bill would take effect immediately