Senate Bill S414

                                 
BILL NUMBER: S414

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 exceeds $250,000

 
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 with a gross household income of $250,000 or less.

Section 2 provides that the act shall take effect on the first of Janu-
              

ary next succeeding the date on which it shall have become a law.

 
JUSTIFICATION:

New York City sorts all real property within its boundaries into four
categories for purposes of assessment and taxation: Class 1 is all resi-
dential buildings with one, two, or three dwelling units, Class 2 is all
residential buildings with four or more units, Class 3 is utility prop-
erties 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 a
significant share of the market value of their homes escapes assessment.
This puts their property tax bills on par with those of middle-class
homeowners 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 with a gross household income of $250,000 or less, ensuring that
only households who are truly lower or middle-class will continue to
receive the assessment cap. Households exceeding these property value
and income thresholds will wind up paying property taxes that better
reflect the true value of their homes, thus picking up a greater portion
of the Class 1 tax share.

 
PRIOR LEGISLATIVE HISTORY:

2024: S11 - Referred to Local Government

2023: S11 - Referred to Local Government

2022: S785 - Referred to Local Government

2021: S785 - Referred to Local Government

2020: S5324B - Referred to Local Government

2019: S5324B - Referred to Local Government

 
FISCAL IMPLICATIONS:

None to the state.

 
EFFECTIVE DATE:
This bill would take effect on the first of January next succeeding the
date on which it shall have become a law and apply to all assessment
rolls completed on or after such date.