1 May
2013
Posted in: Blog
By    Comments Off

The Continuing Story of Bill’s Bungalow

On Monday, subscribers to Bill de Blasio’s New York City Public Advocate email list received what looked to be a thought provoking email from the Democratic primary candidate; a query asking “Where has all the affordable housing gone?” Unfortunately, Mr. de Blasio’s email proved little more than a screed setting forth tired Democratic tropes about raising taxes, mandating construction, and subsidizing housing. Since Mr. de Blasio didn’t answer his own question, we’ll take the opportunity to steer him in the right direction. Indeed, Mr. de Blasio needs look no further than his own backyard…because he has one, literally.

There are many reasons New York City lacks affordable housing (rent stabilization, burdensome regulation, lack of available land), but one of the most pernicious is the way in which property taxes are allocated. Reading about taxes is about as soul crushing as attending a Nickelback concert, so please bear with me.

New York City is blessed with a property tax system that is simultaneously arcane and archaic, but it breaks down roughly into four different property classifications. Class One properties are individual houses, residential properties of up to three units, and most condos under four stories. Class Two properties are taller condo buildings, most co-ops, and larger rental buildings.  We’re only going to discuss Class One and Class Two, the classes pertaining to housing, so Class Three (Utilities) and Class Four (Commercial/Industrial), won’t to concern us here.

Class One properties, and those Class Two properties which are condos and co-ops are typically taxed at a far lower effective rate than the remainder of Class Two properties, which are larger rental buildings. Therefore, if you live in a large rental building, you’re typically paying a far higher effective tax rate than folks living in a house. As a tenant of a large rental building, this tax is invisible, because it is incorporated into your rent; essentially, your landlord passes the tax on to you.

So just how bad is the disparity between property taxes paid by residents of houses, condos, and co-ops on the one hand and residents of large rental buildings on the other? Property taxes on large rental buildings are about 5 times as high as those on houses, condos and co-ops. While Class One properties make up about 49% of the City’s total real estate value, their share of the City’s property tax revenue is only 15%. Out of the nation’s 50 largest metropolitan areas, New York City has one of the lowest tax rates on individual housing, coming in at number 44. Meanwhile, taxes on large rental housing are the second highest in the country.

Judging from his campaign photos and his statements, Mr. de Blasio is a homeowner in Park Slope, which puts him squarely in the Class One category. Those larger rental buildings which pay 5 times as much as Mr. de Blasio are typically found in New York’s less affluent areas, such as Inwood and the Bronx, where residents are often young, poor, or minorities, and usually a combination thereof. Simply stated, Mr. de Blasio’s lower tax rate is subsidized in effect, by the higher taxes paid by residents of larger apartment buildings, who can less afford it.

To answer to Mr. de Blasio’s question, “Where has all the affordable housing gone?” is pretty simple: to benefit Mr. de Blasio and his ilk.

If Mr. de Blasio is truly earnest about increasing the availability of affordable housing, one of the first proposals he can champion is to make New York’s property tax system equitable for all its residents by flattening the rates. Raising taxes on those Class One properties and Class Two properties which are condos and co-ops, and lowering taxes on the large rental housing predominantly occupied by the City’s poor and lower middle class families, would be one positive -step towards making housing affordable for all our City’s residents.

DISCLAIMER: This post and the contents thereof are the views of only the author identified immediately above and do not necessarily represent the views of the New York Young Republican Club (the "NYYRC"), its officers or its members. The NYYRC expressly disclaims responsibility for the contents thereof and by its charter documents may not, and does not, endorse any candidate for any office, except in a general election.

Comments are closed.