In New York City, homeownership is something that many will only aspire to but only a few will achieve. But for those that do manage to snag a piece of the American dream in NYC, there are other hurdles to overcome and one of them is property taxes.
A new report from city Comptroller Scott Stringer’s office take a look at rising residential property taxes and found that since 2005, residential property tax revenue has increased by more than 98 percent, growing around 6.2 percent per year, on average. Meanwhile, household incomes over the same period have only grown an average of 2 percent per year.
As a result, low-income homeowners are disproportionately burdened by rising property taxes (almost 13 percent of annual income), tax appeals are up by 35 percent over the previous decade, and the city is facing a lawsuit that alleges that its property tax assessments systematically discriminate against lower income and minority households.
According to the report, the existing appreciation in property values—along with rising asset values and declining interest rates—slightly mitigated property tax burdens. Additionally, homeowners who itemized their deductions during tax time were able to deduct the full amount of their property taxes up until this year. However, “the effects of these mitigating factors have subsided,” says the report.
“Interest and mortgage costs have begun to rise and while property values have stopped increasing in many neighborhoods, property taxes have continued to grow as a result of the lagged nature of property taxes. The recent Federal tax law now limits the deductibility of state and local taxes to $10,000. As a result, property tax burdens will be felt more acutely by homeowners.”
For perspective, the report notes that between 2005 to 2016:
- Households making less than $50,000 have seen their property tax burdens nearly double from 6.6 percent to almost 13 percent.
- Homeowners in the $50,000 to $100,000 income bracket have seen their burdens almost double from 3.4 percent to 5.4 percent, as growth in property taxes has far outpaced income growth.
- Homeowners earning between $100,000 and $250,000 saw their property tax burdens increase from 2.4 percent in 2005 to 3.7 percent in 2016.
- Homeowners in the $250,000 to $500,000 income bracket experienced the lowest growth in tax burdens and also have the lowest overall burden of any income group at 2.9 percent.
- Property tax burdens for homeowners with annual incomes of $500,000 or more were at 3 percent in 2016 and tend to be “more erratic than for other groups,” which might be due to the volatility of income and property values within this group, as well as the fluctuations in capital gains and luxury home prices.
Stringer’s report compares New York City’s median property tax by income range to surrounding areas like Westchester and Long Island, finding that “while property taxes for most levels of income remain higher in surrounding areas, the relative burdens have narrowed particularly for low income households.”
In summary, the report calls upon the city to take note of the rise in property tax burdens and the reasons it should be a cause for concern to policymakers. It suggests requiring the city’s Department of Finance to publish annual reports on median tax burdens of various income levels, along with expanding and increasing property tax credits and calls upon officials to consider how to “address the increasing regressivity of property taxes.”
Read the report in its entirety here.