When CNBC reported that the billionaire residents of One57 would have low property taxes thanks to a 421a tax abatement, it caused a bit of an uproar. But One57 isn't alone in this?all of New York's mindboggling expensive apartments have very low tax rates in comparison to the cost of the unit. The Times delves into this in this week's Appraisal column, explaining that low tax bills come from the valuation of an apartment.
Take the $88 million penthouse at 15 Central Park West. If the owners paid the Manhattan median 2010 tax rate of 0.78 percent, the bill would have been $686K. The city, however, values that building at only $332 per square foot (a huge difference from the reality of $7,813 per square foot), so the tax bill would have been $145K, but it was actually even lower because 15 CPW, like One57, benefits from the 421a tax abatement. So the owners only paid $59,000 in property taxes.
A state law dating from the 1980s mandates that the value of co-ops and condos be calculated by comparing them with similar rental properties, not sales. But 30 years ago, Manhattan had a lot more rent regulation and way less condos and co-ops, and today, there are no comparable buildings for apartments selling for tens of millions of dollars at the top of the market. The Finance Department tries to find comparable buildings by looking at location, size, and age, but sometimes this makes the taxes even lower because older, grander buildings often have rent-stabilized units.
Officials are not blind to the discrepancies?in fact, the city would make a lot more money on these mega sales if it could charge higher taxes?but to change the rules would mean a complete overhaul of the system. As an analyst at the Independent Budget Office put it, "It's not so easy to go and change one screw."
· As Prices Soar to Buy a Luxury Address, the Tax Bills Don't [NYT]
· One57 Watch [Curbed]