WWW.FURMANCENTER.ORG JULY 2013 the Burden: inNewYork City Examining theUndertaxation of SometheMostValuable Shifting Shifting In this policy brief we highlight features ofNew briefwe highlightfeatures York’sIn thispolicy taxlaw nance’s building.We marketvalue estimated fortheentire co-op then inthecity. and condo properties valuable Wemost co-op evidence report about the magnitude of this undervaluation, identifying 50 individual themagnitudeofthisundervaluation, identifying50individual about explain the consequences of this undervaluation within the context of of thisundervaluation withinthecontext of explain theconsequences ofFi formore thantheDepartment thatwere units in2012 sold co-op the system as a whole. taxsystemasawhole. the property ofthe undervaluation ofsome intheseverethat result andpersistent FURMAN CENTERPOLICYBRIEF

- 2 Shifting the Burden: Examining the Undertaxation of Some of the Most Valuable Properties in City Tax providesthat: 1. TheProblem of Finding (DOF) as if they were rental properties. asiftheywere rental properties. (DOF) Rental properties are valuedonthe Rental based properties New York Cityinterprets thisprovision from “comparable” be must buildings income fortheirowners,the condoand income they generate and so in the city. Few, if any, rental buildings prized buildings on Central Park. Quite Park. onCentral buildings prized of havingposition to find rental properties used to impute income to them. DOF uses uses to impute incometoused them.DOF that are comparable, forexample, to highly this approach. and condo buildings to that co-op mean to rent andthustheamount stabilization, on Tabletop listed ten buildings 1are subject Comparisons forHard-to- Compare Buildings buildings selected as comparables forthe ascomparables selected buildings oftheir comparableages. because Further, the city co-ops. pre-war buy luxury comparisons. forthese used buildings valued ofFinance be by the Department should fourunits withatleast buildings attract tenants aswealthy whoattract aspeople comparabletoare any not rental properties generallygenerate donot and co-ops Section 581 places DOF inthedifficult DOF places 581 Section valued be using also must buildings co-op ofNew 581 York’sSection over 29.5 intherental oftheunits percent presumably co-ops, for pre-war comparables rent regulated as buildings often selects simply, of buildings many sorts of these therental to select modeling statistical were the parcel not owned or leased were theparcel ownedorleased not suchparcel upon would placed be not exceeding the assessment which theassessment exceeding not ofthischapteratasum for purposes [R]eal property owned or leased by owned or leased [R]eal property by a cooperative corporation oron a by acooperative corporation a cooperative corporation orona a cooperativecorporation basis. assessed condominium basisshallbe 2 However, condos because 1

3 Just Just valuable Side East buildingontheUpper valued by DOF at well under $500 per square valued at well square under$500per by DOF valuable are rental in Manhattan buildings was, according to DOF, approximately ways valuable. thatmakeitless Many of The example of rent stabilization highlights The example of rent highlights stabilization DOF selected as comparables foravery ascomparables selected DOF limited. also likely affects limited. Rent likely affects regulation also into accountinarigorous way. For example, andage, yet ofunits, other number differin investment in building improvements foot—still less than one ninth of the per- less foot—still if thecitywere to value co-ops olderluxury Thisextreme difference isdrivenfoot. in approximatelysquare per $4500 million—or part by the fact that close to of 30percent thatclose by thefact part unit in this building recently sold for$54 unit inthisbuildingrecently sold using the rental buildings that DOF has using therental thatDOF buildings $188 per square foot. Meanwhile, a$188 single foot. square per the average value buildings ofthethree be takeneasily cannot differences these size, location, building in its to a co-op thatarental buildingmay the fact similar be the units inthe units three rental in buildings and maintenance, making those buildings buildings and maintenance, makingthose above. would be still theco-ops as comparables, valuable asthemost inthecity assessed especially poor comparisons. comparisons. poor especially of incometheycangenerate isartificially question are rent regulated. However,question even square-foot sales price of the unit described priceoftheunitdescribed sales square-foot themost significantly undervalued. Indeed, rental buildings aswell. 4 Thissuggests thatDOFmay alsobeundervaluing luxury rent regulated units. before 1974 islikely to becompared to buildings containing selecting comparables, any condoorco-opbuilding built 3 To theextent thatthe city relies onbuilding age when ny.us/iboreports/propertytax120506.pdf Property Tax Report). Retrieved from http://www.ibo.nyc. Burdens Have Shifted inNew York City ber 5). 2 NewYork City IndependentBudget Decem (2006, Office in taxclass2. comparable sales.Inthisbriefwewilldiscussonly condos Smaller condos belong to taxclass1andare valued using 1 N.Y. Real Prop. Tax Law §581(1)(a) (McKinney 2013). Twenty-Five Years After S7000A: How Property Tax 4

(p.17)(hereafter IBO - 3 Shifting the Burden: Examining the Undertaxation of Some of the Most Valuable Properties in values, building of values the as percentages valuing smaller(1-3 and unit) residences, as if they were value and co-ops condos while the entire property was valuedwhile theentire property at$15.6 wrong. Theyare obligatedto pay only the The use of comparables has resulted in hasresulted ofcomparables The use In one particularly striking case, asingle striking In one particularly For valuable the of very a number properties, Bloomberg’s Side townhouse Upper East For currently example,values DOF Mayor large. The Furman has identified Center 50 for the coming fiscal for thecomingfiscal year. Table 1includes thatwere (in46buildings) individual co-ops rental rather buildings, than by simply compare valuablenot to the most condo valuablemost rental simply buildings do many valuable ofthemost residential million. Even if the other 12 units inthis units million. Even 12 iftheother for$50million, was units sold residential per square foot. square per rentpartially regulated as buildings systematically inthecitybeing properties units in the buildings, and neighborhoods andneighborhoods inthebuildings, units is creates undervaluation thismethodology for undervalued years. While the city units were undervalued, that does not mean mean not wereunits undervalued, thatdoes the sale prices, DOF’s estimated building estimated DOF’s prices, the sale the assessment methodology and policy set set andpolicy methodology the assessment in Theproblemlies instead charged. taxes didanything ofthe units that theowners building were andthe totally worthless, by thestatelegislature andthecity. by comparingthemtorecently other sold requiringthecityto 581, blame isSection in a co-op building with 13 in a co-op apartment at $17.6 approximately $2300 million—or arrives at much more valuations.realistic inthecity. buildings and co-op to More of each of these properties. While these Whilethese properties. ofthese of each of the marketvalue of theentire building whencomparative methodology sales a use The city does and co-ops. condos even the co-ops, to luxury comparables theproblem byexacerbates selecting entire property wasentire valued property worth only to be single unit sale price, number of residential price, ofresidential single unitsale number estimate formore in2012 thanDOF’s sold Although these 50 units are 50units extremeAlthough these thefinalcolumnofTableAs 1reveals, variation from the resulting inthediscount with more than 70 percent located in just injust with more located than70 percent Heights Community Districts. Districts. Community Heights In many cases, therental thatare In many buildings cases, in from differences arises methodology DOF Moreover, foundthat thediscount thatstudy how truly comparablerentalare buildings 6 IBOProperty Tax Report at35. 5 IBOProperty Tax Report at33. in Jamaica valued at 44.8 percent. market valuation varies the widely across were andcondos in 2006foundthatco-ops property taxes in the past year. in the past taxes property The truth, published by the Independent Budget Office Office Budget bypublished theIndependent units are also worth a substantial amount. worth asubstantial areunits also would buildingstill have unit, theco-op used as comparables for condos and co-ops and co-ops for condos as comparables used Carroll GardensCarroll andFort Greene/Brooklyn Carroll Gardens valued at22.5 of percent $1.6 12 theother year because millionper these severely undervalued properties are severely undervalued properties these to condos and co-ops across neighborhoods. neighborhoods. across andco-ops to condos market values, andthose their sales-based ontheir enjoy owners that condoandco-op that they would have using assigned been by the co-op’s is far more residents than being valuedbeing at 23.4 oftheamount percent and Upper East Side,and Upper East andtheParkSlope/ theUpperWesta fewneighborhoods: Side price of thatsingle as muchthesales are quite different from those co-ops and co-ops are quite different from those an alternative, methodology. sales-based is pervasive. a study Indeed, and co-ops examples, the undervaluation ofcondos examples, concentrated inBrooklyn andManhattan, received isthatthetaxdiscount of course, owed approximately $1.6 millionmore in compared tocompared thatoften rental are buildings are particularly Thedifferences condos. inParkSlope/ city, andco-ops withcondos subject to rent regulation. subject theyare forpre-1974stark because co-ops, 6 This 5

4 Shifting the Burden: Examining the Undertaxation of Some of the Most Valuable Properties in New York City Table and UrbanPolicy Source: New York Final AssessmentRollFurman File, Center City DepartmentofFinanceAutomated for CityRegister InformationSystem, Unit Sales Price ($) 1 20,000,000 50,000,000 42,000,000 54,000,000 40,064,000 26,000,000 22,000,000 14,000,000 24,500,000 23,900,000 : Sales in2012Where theUnitPriceExceeded DOF’s Estimated Value oftheEntire Building 12,800,000 19,500,000 31,500,000 2,800,000 27,222,500 2,600,000 2,300,000 2,010,000 2,100,000 2,550,000 3,250,000 1,880,000 4,275,000 1,240,000 1,805,000 1,650,000 1,350,000 1,865,000 1,403,500 1,210,000 10,133,333 1,375,000 1,150,000 1,359,300 1,762,500 2,922,175 880,000 699,000 630,000 360,000 780,000 995,000 465,000 384,000 622,000 625,000 625,000 550,450 975,500 411,500 FY2013/14 DOFEstimated

Building Value ($) 41,099,000 34,104,000 22,818,000 15,766,000 18,881,000 15,765,000 11,610,000 15,735,000 12,221,000 4,065,000 11,558,000 13,821,000 9,994,000 15,617,000 13,132,000 1,609,000 1,390,000 1,390,000 3,801,000 1,596,000 2,347,000 1,629,000 1,455,000 1,243,000 1,770,000 1,012,000 1,749,000 2,153,000 1,128,000 1,351,000 1,125,000 660,000 984,000 620,000 896,000 854,000 570,000 550,000 432,000 354,000 295,000 365,000 365,000 583,000 583,000 437,000 437,000 437,000 712,000 741,000 Value as%ofSingle Estimated Building Unit Sales Price 100% 100% 60% 60% 90% 40% 80% 69% 50% 50% 50% 99% 86% 89% 89% 48% 88% 67% 84% 76% 76% 97% 92% 92% 56% 47% 39% 95% 78% 78% 95% 82% 82% 93% 93% 93% 58% 77% 77% 54% 35% 73% 53% 55% 74% 61% 81% 71% 31% 31% Residential Units in Building 66 20 20 24 10 10 16 16 19 19 14 18 17 17 13 13 13 12 12 12 21 15 15 11 11 11 11 11 11 6 6 6 9 4 4 4 4 4 4 4 4 8 7 3 3 3 2 2 5 5 Upper EastSide Fort Greene/Brooklyn Heights Clinton/Chelsea Greenwich Village/Soho Upper EastSide Upper EastSide Upper EastSide Upper EastSide Upper EastSide Upper EastSide Upper EastSide Upper EastSide Upper EastSide Upper EastSide Upper EastSide Upper EastSide Upper EastSide Upper EastSide Community District Bedford Stuyvesant Sunset Park Crown Heights/Prospect Heights Crown Heights/Prospect Heights Jackson Heights Jackson Heights Jackson Heights Jackson Heights Park Slope/Carroll Gardens Park Slope/Carroll Gardens Greenpoint/Williamsburg Bedford Stuyvesant Fort Greene/Brooklyn Heights Fort Greene/Brooklyn Heights Park Slope/Carroll Gardens Park Slope/Carroll Gardens Fort Greene/Brooklyn Heights Fort Greene/Brooklyn Heights Upper West Side Greenwich Village/Soho Fort Greene/Brooklyn Heights Park Slope/Carroll Gardens Fort Greene/Brooklyn Heights Greenwich Village/Soho Park Slope/Carroll Gardens Park Slope/Carroll Gardens Upper West Side Fort Greene/Brooklyn Heights Upper West Side Fort Greene/Brooklyn Heights Upper West Side Fort Greene/Brooklyn Heights 5 Shifting the Burden: Examining the Undertaxation of Some of the Most Valuable Properties in New York City “Distribution oftheBurden ofNew“Distribution York York City’s HousingandNeighborhoods was amended in 1981 because it constrained itconstrained was in1981 amended because whenthelawwas asavirtue initially seen The use ofincomefrom rent regulatedThe use 2011 report, containsamore detailed2011 report, 9 IBOProperty Tax Report at9-11. tion_of_the_Burden_of_New_York_Citys_Property_Tax_11.pdf Retrieved from http://furmancenter.org/files/sotc/Distribu Distribution oftheBurden ofNew York City’s Property Tax. State ofNew York City’s andNeighborhoods 2011: 8 Furman Center forRealEstate andUrbanPolicy. (2012). 7 IBOProperty Tax Report at32. law, asthecityinterprets it,hasgenerated required co-ops and condos to be compared compared to be and condos required co-ops andthelaw formerrental buildings, in fact penalized for their decision. Regardless of Regardless fortheirdecision. penalized undervaluation of those buildings. The use Theuse buildings. undervaluation ofthose City’s Property Tax,”City’s Property inourState ofNew the taxes paid by condo and co-op owners paidbythe taxes condoandco-op fortheprovision,the reasons over timethe to rentals to ensure who thatowners caps”rules. the “assessment enjoy from to three-family that one- taxgrowth onco-ops the rate ofproperty buildings to value older co-ops isone to valuebuildings olderco-ops across neighborhoods. Our chapter entitled chapterentitled Our neighborhoods. across providingand condos, them with some discussion ofthishistory.discussion in disparities enormous andpersistent were to convert not chose theirproperties from annual increases of the protection ascomparables buildings of rent stabilized inthepersistent culprits of theprimary significant number of co-op buildings buildings were ofsignificant co-op number 8 7 Moreover, a - York tax system explicitly City’s property At the same time that the legislature created At created timethatthelegislature thesame 1981, New York asystem State adopted when the system waswhen thesystem adopted. which was basically theshare paidin1981 The system results inwidely disparateThe system results tax To ofthe appreciate thefulleffect fits into the larger property tax system. into fits property the larger New highly favorable to to ofone- theowners 12 IBOProperty Tax Report at17. 11 IBOProperty Tax Report at17. property/property_val_glossary.shtml#T ment Terms. Retrieved from www.nyc.gov/html/dof/html/ ofFinance. Glossary ofPropertyCity Department Assess includes allcommercial property. andindustrial NewYork owned by gas, telephone, orelectric companies.Class4 three stories. Class3includes property withequipment large multi-family rental buildings, co-ops,andcondosover 2 includes allotherprimarily residential property, suchas residential useandmostcondosunderfourstories. Class attached. Italsoincludes certainvacantlandzoned for ings, orsmallstores orofficeswithonetwoapartments units, suchassingle-family homes,smallapartment build 10 Class1includes mostresidential property of oneto three is important to understand how this policy to how understand this policy is important provides for drastically different fordrastically provides tax property tax levy each class was class tax levy each to bear,property undervaluation of condos and co-ops, it andco-ops, undervaluation ofcondos the same value.the same inNewthat divided York property City treatment ofequally valuable properties three-family homes (Class 1 properties). As As 1 properties). (Class homes three-family a cap on any enacted the legislature also system, itfixed thesharethe class ofthe Condos andCo-ops burdens for different kinds of properties of of burdens fordifferent kindsofproperties and Nassau County into four classes, with intoand Nassau fourclasses, County adjustments of the class shares dueto shares oftheclass adjustments 2. The Burden Shifting Effect TheBurden Shifting 2. class and with different tax rates in each. andwithdifferent in class taxrates each of fortheassessment different rules onthe kind ofproperty.depending In changes inmarketvalues. changes of theUndervaluation of 10 12 The result is Theresult 11 In1990, - - 9

6 Shifting the Burden: Examining the Undertaxation of Some of the Most Valuable Properties in New York City with morearein thanthreeunits included 2’s share ofcitymarketvalue would likely Properties in this class are on valued inthisclass based Properties owners property those Figure 1illustrates, Figure 1:Share ofTax Levy andShare ofDOFEstimated Value by Tax Class,FiscalYear 2010-2011 market value. The remaining three property market value (48.3%). ascalculated by DOF reduced somewhat. somewhat. reduced market value. However, and condos co-ops pay a smaller share of the tax levy (15.4%) Class 1 is theClass only that pays class a share Class 2, along with larger rental properties. 2,Class rental alongwithlarger properties. Source: New York CityDepartmentofFinanceProperty Tax Furman Report, Center forReal Estate andUrbanPolicy than their properties’ share of citywidethan their properties’ their income and expenses. If condos and If condos their income and expenses. be higher,be in tax burden and the disparities share ofthecity’s bill thantheirrespective among the four classes would therefore be among thefourclasses of taxes smaller than its share smallerthanits ofthecity’sof taxes co-ops were valued more accurately,co-ops Class payclasses agreater share ofthetotaltax 13

The primary consequence ofthe consequence The primary from undervalued properties to the from other undervalued properties effectivelyincrease, shiftingthetax burden properties in the same class. inthesame properties are thetaxrate undervalued, set properties undervaluation of condos and co-ops, andco-ops, undervaluation ofcondos the share of the tax levy collected from each from each the share ofthetaxlevycollected though, is within 2 itself. Class Because by thatshare thecitycounciltomust raise class inagivenclass year isfixed,whencertain tion_of_the_Burden_of_New_York_Citys_Property_Tax_11.pdf Retrieved from http://furmancenter.org/files/sotc/Distribu Distribution oftheBurden ofNew York City’s Property Tax. State ofNew York City’s Housing andNeighborhoods 2011: 14 Furman Center forRealEstate andUrbanPolicy. (2012). not accurately reflect thetruemarket value. demonstrates, forcertainproperties, DOF’s valuations may to properties ofFinance.Asthisbrief by theDepartment 13 The“market value” referred to here isthevalues assigned

14 In the case Inthecase

- 7 Shifting the Burden: Examining the Undertaxation of Some of the Most Valuable Properties in New York City Although we say cannot who for certain Table 2shows thedemographic households who live in co-ops and condos: andcondos: wholivehouseholds inco-ops have thanthe different demographics very by renters ofitisborne likely thatsome rental buildings. Shifting thetaxburdenrental in buildings. in Class 2 rental Wein Class buildings. highlight muchmore 2rentals likely arein Class also property tax within rental properties, it is taxwithinrental properties, property Class 2 condos and co-ops and those living andthose andco-ops 2condos Class the undervaluation of co-ops and condos andcondos the undervaluation ofco-ops the incomeofownersmore recently therent to set Board the Rent Guidelines this way consequences. hasdistributional than co-op and condo owners, so the burden the burden and condo owners, so than co-op blackorHispanicandtoto have be children to afford housingin New York City. Tenants therefore already falls on families struggling built co-ops and condos. Theburden of andcondos. built co-ops the ultimate burden economic of the bears ability and retain to attract a diverse range thanhalf theymakeless at themedian, owner. by the property and some In rent changes inrents. Tenantschanges 2rentals inClass in result intaxes thatchanges ensures are large 2, properties of Class theother characteristics of the households living ofthe households in characteristics of households. of undervaluation may threaten thecity’s stabilized properties, the formula used by theformulaused properties, stabilized Source: New York CityHousing andVacancy Survey, Furman Center forReal Estate andUrbanPolicy Table 2:Characteristics ofNewYork CityHouseholds by Tax ClassandProperty Type, 2011 % BlackHouseholder % White Householder % Poverty Persons Median Income % Receiving Public Assistance % withChildren % AsianHouseholder % HispanicHouseholder Citywide $48,040 30.2 23.9 22.3 41.3 17.4 11.5 2.5 16 $58,800 Class 1 42.4 10.6 23.8 37.4 14.2 18.7 11.9 3 what the aims of the tax system are—what what theaimsoftaxsystem are—what To atthe basic aims,we look identifythese taxmatters oftheproperty The distribution 3. SmartPolicy? It also affects howeconomic muchofthe affects It also homeowners, and real estate investors, estate andreal homeowners,

incentives we taxto want theproperty bear.must analysis A proper of the various forownership.rental housingversus homes properties. many ofthese as“comparables”regulated buildings for undervalued as a result of the use ofrent oftheuse undervalued asaresult those buildings are most likely to be are most buildings those wholive those inpre-1974 because co-ops the general principles that it reflects, and that it reflects, principles the general and the valuation forcondos methodology the state andthecityhave like adopted, burden of supporting Newburden York ofsupporting City’s public land use about decisions it affects because and who should bear the economic burden theeconomic and whoshouldbear and development, includingthesupply of of the property tax. tax. of theproperty create fordevelopment andmaintenance, atthe outset, specifying, requires co-ops, that tax policies oftheproperty elements of taxpayers, suchasrenters, , structure of Newstructure York’s tax and property andgovernment different classes services co-ops built $68,000 pre-1974 Class 2: Class 2: 18.4 61.9 14.6 12.8 9.9 9.3 6 2

Class 2: co-ops Class 2: and allcondos built post-1974 $98,000 24.4 10.2 57.8 21.2 4.4 9.3 2.1 10 buildings $40,000 Class 2: Class 2: rental 20.6 26.9 29.5 38.2 21.4 9.8 2.2 20 8 Shifting the Burden: Examining the Undertaxation of Some of the Most Valuable Properties in New York City with fewer than 10 One of the early units. ways thatNew York’s taxsystem property with some of the same benefits assmaller benefits ofthesame with some Is the undervaluation of condos and co-ops andco-ops Is theundervaluation ofcondos line withthefavorable taxationofowner- homeownership, because inpart atleast from a preferencelikely arises for in Class 1 can increase inasingleyear, 1canincrease in Class or a preferencereflects for owner-occupiers Moreover,for owner-occupiers. thetaxlaw and properties four-plus unitresidential in property taxes over a short period of time. over taxes period in property a short preference forpreventing sharpincreases interms ofcappingproperty properties exemption (the“STAR”partial exemption) preference, taxlaw theproperty a grants justifications forusingrentjustifications stabilized City cap the rate at which assessed values City captherate atwhichassessed then evaluate whethertheundervaluation to exclude pieds–à–terre that theabatement was recently revised to bring society. with such a Consistent over properties residential to three-unit in light sense makes the income method the undervaluation of condos and co-ops andco-ops the undervaluation ofcondos tax increases. buildings as comparables for condos and for condos as comparables buildings and tenants in Class 2,and tenants inClass itisanextremely anabatement forcondoand includes also of assessment increase for Class 2 properties 2 properties for Class increase of assessment therate caps over Italso afive-yearperiod. state lawSecond, that requires New York over landlords andrenters. conclusion. Thus,there are numerous homes. in detached occupiers in more 2homeowners closely of Class to bringthetaxation owners designed co-op is thought homeownership of the benefits That preference commercial properties. share theclass First, principles. of those of through theuse andco-ops of condos occupiers of these units thanforlandlords units ofthese occupiers in a lower result taxburden forowner-does two aims?consistent withthese Although was thatitwould provide them co-ops system reflects a policy preference for one- preferencepolicy for one- a system reflects 17 These features reflect a reflect features These 16 reinforces this 15 The fact Thefact Amending thestatelaw DOF to authorize 1 owner-occupiers, and between owner- andbetween 1 owner-occupiers, 1 property. vary on the arbitrary widely depending For similar reasons, the use oftheincome For theuse similarreasons, located in different neighborhoods or in indifferent neighborhoods located 18 IBOProperty Tax Report at36. 17 IBOProperty Tax Report at32. html?pagewanted=all tax-abatement-changes-affect-many-unit-owners. from http://www.nytimes.com/2013/03/26/realestate/ Affect Many UnitOwners. March16 Higgins,M.(2013, 31).Tax-Abatement Changes condo_abatement.shtml from http://www.nyc.gov/html/dof/html/property/coop_ Cooperative andCondominium Tax Abatement. value oftheproperty. NewYork ofFinance. CityDepartment 25 percent infiscal2013,dependingontheassessed year owners, effectively theirtaxes reducing by between17.5 and op/condo abatement provides significant relief to eligible Abatement Program. IBOProperty Tax Theco- Report at 34. creation oftheCooperative andCondominiumProperty Tax of Class2condosandco-opssuccessfully lobbied forthe 15 Reacting to thefavoring ofClass1homeowners, owners imprecise wayimprecise ofimplementingsuchatax increases for Class 2 owner-occupiers. Only Only 2owner-occupiers. forClass increases and poor only provides avery method preference. Budget a 2006 Independent As using the income method to value a property to valueusing theincomemethod aproperty uneven tool for stabilizing assessment uneven assessment forstabilizing tool Office report documented, oncethecondo/ Office report the problem we highlighthere. However, thevalue to estimate prices of sales to use their slower rate ofincomegrowth. to have rental as buildings rent stabilized 1974 builtbefore buildings those are likely buildings with different characteristics. withdifferent characteristics. buildings andClass 2owner-occupiers Class between are used. So the use of the income method oftheincomemethod theuse So are used. and whetherrent regulated“comparables” availability ofcomparablerental buildings units account, theeffective taxrate forthese occupiers of Class 2 condos and co-ops andco-ops 2condos ofClass occupiers both ineffective differences taxrates creates thanthetaxrate even onaClass can be less takeninto taxabatement hasbeen co-op co-op and condo buildings would andcondobuildings solve co-op and therebycomparables from to benefit 18 Moreover, of thetaxbenefits . Retrieved Retrieved the undervaluation of condos and co-ops politically challenging. But the fact that is only one of several significant inequities 50 individual co-op units sold in the past in the property tax system, detailed and year for more than their entire building’s explained in greater depth in the Furman valuation reminds us, once more, of the need Center’s State of New York City’s Housing to reexamine the fairness and efficiency of and Neighborhoods 2011 report. Correcting the property tax system. them would not only require significant changes in the law, but would also be

About the Furman Center and the Moelis Institute for Policy The Furman Center for Real Estate and Urban Policy is a joint center of the New York University School of Law and the Robert F. Wagner Graduate School of Public Service at NYU. Since its founding in 1995, the Furman Center has become a leading academic research center devoted to the public policy aspects of land use, , and housing. The Furman Center launched the Moelis Institute for Affordable Housing Policy to improve the effectiveness of affordable housing policies and programs by providing housing practitioners and policymakers with information about what is and is not working, and about promising new ideas and innovative practices.

Shifting the Burden: Examining the Undertaxation of Some of the Most Valuable Properties in New York City in New York Properties Examining the Undertaxation of Some Most Valuable Shifting the Burden: furmancenter.org 9