S#!t Outta Luck: Values Down, Taxes Up

"Everyone's taxes went up, and now the assessed values are going down, while taxes are still increasing year-to-year. WTF?"

I have in the past appealed my market value estimate, but, as I understand it, there are times when even a falling market value may still result in increased taxes. Assessed value is supposed to be a percentage (about 6%) of market value. On the million+ house above, this would be $60,000+. But note that the assessed value on the house above, even increased this year, is substantially less than this. This is because, even when market values go leaping up, the yearly increase in assessed value is capped at 6%, and it may be considerably lower than the assessed value that the house would have, if computed without regard to the historical values. Thus, in the house above, the assessed value was not increased to $60,000+, but was only given a 6% increase to 45,652 (note that the increase, $2584 was 6% of the prior assessed value, $43,068). Anyway, the owner of this house has no complaint, since he or she is paying taxes as if the market value of the house were about $750,000, not a million. When the market value falls below that, there's reason for adjustment.

Posted by: David Lewis at February 3, 2009 10:53 AM

And yes, taxes on class 1 residential property in New York are really, really low. Compare the taxes on the property above to those on a house of that value in any of our suburbs. (E.g., I pay about $2000 on a house valued at about $700,000 in Brooklyn; I pay about $4500 on a house valued at $300,000 upstate. City dwellers have no reason to complain.)

Posted by: David Lewis at February 3, 2009 10:58 AM

ProfRobert -- I think it's relatively rare that one can gain by contesting one's property tax, though I've done it. It requires a fairly lengthy period of falling values, so that you can submit evidence of comparable sales producing a lower market value than the one the city assigns and that the lower market value results in a lower assessed value (as I've explained above). You probably have no basis for complaint since, even though your market value went up 26%, your assessed value, on which taxes are based went up at most 6%. But you'd have to do your own arithmetic.

Posted by: David Lewis at February 3, 2009 11:07 AM

"The limit is 6%/yr, 20% over 5, but this could go on pretty indefinitely. So my query is the same as yours."

Can't go on indefinitely. As soon as you see that your assessed value is more than about 6% of the actual market value of houses in your neighborhood (as established by sales of comparable houses), you can do something about it. (It's actually fairly simple, if tedious; just collect information about the houses showing comparability and sale prices and submit. I think Google will find you forms.) But until your assessed value is actually more than 6% of actual market value, forget it (and if it's close, you have to determine the value of your time).

Posted by: David Lewis at February 3, 2009 11:24 AM

Well, tybur6, taxes are based on market prices (phased in), really, but I think your complaint is that they're too low. This is not a popular position, but you are probably right. On the other hand, you could just consider yourself lucky that all those big buildings in Manhattan, and the apartment buildings all over the city, pay a much higher rate in taxes than single-family, small-building, owners do.

The real inequity here is that the burden of property taxes on rental housing, lived in by poorer people as a rule, is much higher than that on people who can afford a house (exc. to the extent rent stabilization alters this???). This is exacerbated further by the fact that the government subsidizes home ownership by making much of its cost (property taxes and mortgage interest) tax-deductible.

Thus, to the extent brownstoner is whining about the predicament of that person who owns the million dollar house, above, he's pretty much off base.

Posted by: David Lewis at February 3, 2009 11:32 AM

I think that Gomuppets' note that raising rates on class 1 housing "would not be feasible" should read "would not politically be feasible." You'd have to do it in some less direct way, probably. For example, people seem to like a millionaire's tax. Maybe a surcharge on taxes on houses over a million would fly. But the system seems rigged forever to favor home owners over renters, and I'm not betting on any changes.

Posted by: David Lewis at February 3, 2009 11:39 AM

I'm not exactly sure how the city figures the market values. Brownstoner's sample above showed a 10% drop in market value, while others are receiving valuations that are still going up. It's probably bad PR for the city to show increased market values for properties when, at a time like this, it's pretty clear that values have dropped over the last year. On the other hand, when market values drop and assessed values rise (because they're still catching up), people like brownstoner complain at the disparity.

Posted by: David Lewis at February 3, 2009 7:34 PM

BrooklynGreene -- read the materials that came showing how your taxes are figured. Read the comments above. Then figure out whether you would benefit from filing. It's not hard and it's all in your materials, as further explained in the comments.

Posted by: David Lewis at February 3, 2009 8:22 PM