your property tax might jump to $ 20,000 after change of C of O
As someone in the very early stages of a reno that will change our C of O (from 3 family to 2 family) this is incredibly disheartening, but not totally surprising. I’ll be tracking this thread in hopes of seeing if your efforts gain any traction, though as others have pointed out, these kinds of things seem to turn like a cruise ship (slowly and over the course of a long time). Happy Monday!
Guest User | 6 years and 2 months ago
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Augustiner | 6 years and 3 months ago
if you did an Alt-1 or bought a flip in the last 7 years please get in touch.
I would like to get to get together with people to discuss our options and fight the unfair and intransparent taxation practices.
The DOF is putting a disproportional tax burden on people who abide by the laws when renovating a property, and generally disadvantage 1-3 family class buildings in low income areas.
explanation:
On the ‘notice of property value’ which is sent out mid January most class 1 market values tripled or quadrupled compared to 5 years ago. The actual tax you pay did not increase more than 6% because it is calculated from the obscure assessed value, which leads to ‘Effective Market Value’ which is capped at 6%. I know…
From a DOF brochure: “Your assessed value cannot rise more than 6% in one year or 20% over five years, no matter how quickly the market value of your home increases, unless you make a physical
change to the property, such as an addition or renovation. Due to these caps, most class 1 properties are assessed at less than 6%.”
if you renovate or make a ‘phy sical change’:
1. For alt-2 the DOF will add the money you spent to the market value and assessed value: it will be added directly to your assessed value bypassing the 6%cap. Many times they don’t use the number you filed, but they make up a higher number because they know ‘everybody files a lower amount’ (DOF employee).
2. For alt-1 (C of O change) they will add the money you spent PLUS your cap will be completely removed one year and you will be taxed based on market value. At current market values around 2 million, this will lead to a $ 20.000/year tax bill, no matter how high your tax was previously.
This was not the case 5 years ago when market values for tax purposes were half what they are today.
So the cap removal today has a completely different impact that 5 years ago.
when will the tax increase hit?
Mine came 5 years after the C of O was issued.
The two changes (added value + cap removal) might not come at once, but spread out over 2 years.
So you get the added value change one year and you think ‘that’s OK’, and you might not appeal it.
The next year the real hammer hits and your taxes are double from the year before. Both times it is difficult to take action because there are is no sufficient explanation on the Notice of Property Value document. There is also no explanation how it is calculated or what laws this is based on. In my case it the note said solely “adjustment due to error”. Taxation is supposed to be transparent, equal and fair.
Appealing the assessments:
You can appeal the market value at DOF, but unless houses in your street cost sell for 500k you have no chance.
You can appeal the assessed value (at NYC Tax commission – different process!). If your renovation was less costly than the value they added, you need to bring the paperwork to prove it.
But you can not appeal the basic unfairness of the system:
a) the massive delay in cap-removal, which appears half a decade after you got your new C of O.
b) the intransparency of this type of taxation, that seemingly is not based on any law other than ‘this is how we do’
c) an unequal tax burden compared to your neighbor who has essentially the same house than you, asks the same rents than you but it’s an unsafe building
d) that your tax will rise at 3 times the rate than your neighbors (because the base for your calculation is 3 times as much)
e) that the value of your investment is permanently diminished by this tax magic
Legal Assistance:
I had no luck finding any lawyer willing to take on 1-3 family taxation. They all do corporate multi family because that’s where the money is. It is also an indicator of a low success rate of fighting it.
Maybe if we get together we can do something about it.
if you are affected by this, you are a lawyer or just generally interested
please get in touch: flo @ flat-peach dot com
resident2 | 6 years and 3 months ago
Sorry to have to tell you this but 1-3 family houses are in fact the lowest tax class/rate in the whole NYC Real Estate tax system.
You will not get a lawyer to fight this because it is very clear in the tax code how capital improvements effect re-assessments etc. I fault the Architects & Contractors etc for not forwarning people; but then of course they will be talking themselves out of a job…..
A one family house is afterall a luxury housing unit. 2-3 family houses were originally meant for extended families, live in servants etc…. again luxury housing. Yet they have the cheapest tax rate.
The Attorneys that work for big “Corporate multi family” landlords, do not make a lot of money but that is where there services are really needed and appreciated. It does not pay to fix up your large rental buildings, the tax rates on Landlords running rent stabilised are buildings are the worst.
With all the tax abatements expiring on Condo’s & Co-Op buildings, they have plenty of work to just try & keep the buildings afloat. I know you do not want to hear it but …. City Hal l does not want to hear about your $2-3 million housing problem when they are making poor tenants homeless because landlords cannot pay the taxes on their buildings while the City houses homeless people in Over priced poorly built Hotels with huge development tax abatements.
The whole NYC tax structure has been turned upside down by handing out far too many tax abatements to new development and corporations moving low paying jobs (IE Amazon) to the City…. it is all short sited.
The wealthy will all start moving back out to the suburbs to the relatively lower Real Estate Taxes of only $20-30,000 a year, but with better schools and public services.
The Real Estate tax system in NY is not sustainable, especially now that people cannot even deduct it off their Federal Taxes. But it all moves so slowly it will take years to right itself if ever.
Augustiner | 6 years and 3 months ago
Hi resident2 – I know you are a wise man and I value your opinion.
But I don’t get your reply. I am aware that this is not a real problem compared to world hunger, the melting of glaciers and presidents disassembling democracies.
My post is just about the imbalanced taxation within the 1-3 family tax class.
That’s it. Do you have any contribution to clear things up?
I just would like to to know the tax code that explains why an almost identical item can be taxed at 3 times the rate. What is the underlying logic.
I was taught that taxation follows laws. Where is it written down exactly? And I don’t mean the DOF pamphlet.
BkStyle | 6 years and 3 months ago
There was this article a while ago about a similar situation in Harlem and even if Resident2 above thinks know one in City Hall wants to hear about it, many middle income New Yorkers in class 1 are suffering from the bizarre property tax system we have.
https://www.nytimes.com/2005/02/20/realestate/in-brownstones-taxes-suddenly-rise.html?auth=login-email
Class 1 small home owners are the not the city tax problem, the 30% of real estate in NYC that isn’t taxed is. The apartments used as pied a Terre by foreign zillionaires are. Huge tax abatements given to coroporate crony developers, with my favorite being one of the biggest land owners , New York University. Biggest landowner doesn’t pay property taxes. Surprised?
& since I vote and many class 1 homeowners too, we can complain and ask why do I pay 16k while my neighbor only pays 4k. Why are Bed Stuy property taxes higher than many Park Slope homes? Change of c/o, upgrades, renos , yada, yada, yada, same square footage, same block,
Let’s see where the current lawsuits against the city for tax reform will go.
chemosphere | 6 years and 3 months ago
There’s a lawsuit slowly making its way through the courts. NAACP is one of the groups trying to change this system. Not sure what the chances of success are.
I agree this is a big problem and one of the contributors to NYC’s housing woes. Gentrified homeowners should pay a bit more, low income homeowners should pay a bit less, older apt buidling owners should pay less and new condo owners should pay more. Everything is out of wack. https://taxequitynow.nyc/about/
resident2 | 6 years and 3 months ago
Augustiner; firstly why do you assume I am a “wise man” ?
To the point…. :Older long term residents & houses that have not had major alterations / new C of O’s etc. filed, will not get huge increased assessments.
Renovations that are basically heavy cosmetics without a change of C of O or major alterations will not get huge increases.
This is why for many years before “gentrification” took over many owners did not file. Because they always knew that it would trigger a huge increase in taxes.
A lot of what your increase will be is based on how the plans, permits and final sign offs where filed. As there are many ways to skin a cat as they say…. there are also many ways to file your renovations that may or may not increase your final Tax assessment a few years after you have finished.
That said; if what you want to do is a major gut rehab, there is no getting around a huge increase. Because you have essentially built a new house, subject to today’s assessed / market value. While your neighbors “same” two family house was “renovated”.
Augustiner | 6 years and 2 months ago
What it ultimately leads to is unsafe buildings and increased rents.
1. nobody will do upgrades if it messes them up in so many ways
2. who in their right mind will file if they choose to do improvements.
Just close the doors and windows, dig a tunnel to Home Depot like you are el Chapo .
3. You can use a 2 family as a 3 without problems. Heck – you can even do Airbnb and it’s legal. Done!
4. if you have to file because you have no choice – well than you need to make the money back from your rents
Unfortunately I didn’t have the choice – as I was converting an SRO.
The building was empty for 10 years. As an investment it would have made more sense to let it rot. So being a nuisance is a more profitable business these days.
The ‘gentrification’ debate is valid, but this notion that everything needs to stay hazardous and effed up to be keep rental prices down is misguided. You mentioned rent stabilized buildings being excessively taxed, how does that fit in the picture? What’s the justification for that? it makes no sense.
There needs to be a transparent and jus t taxation system.
And maybe the city should find some other ways to tax people.
Make gas $10/ gallon. That might free up some parking spaces at least.
andy | 6 years and 2 months ago
I’m in your situation and have been in touch. Posting so I can follow the replies. Another thing is that it forces neighbors to carefully monitor other projects in their neighborhood to ensure they are legally filing. Not saying that is a bad thing.
Augustiner | 6 years and 2 months ago
I recommend to have a look at tax notices of similar houses in your street.
The differences are shocking. Taxes can range for 1-3 family houses from $ 2,000 to $20,000 . That’s a 1000% higher tax on roughly the same asset. There is no explanation that makes sense and there is no scenario where this is justifiable.
It is random, and they can do it because they can. I hope there will be a bit more outcry in the next years.
Fair taxation means transparent and balanced taxation.
Houses should be taxed by apartments and SQF first.
Bring in some bedroom and zip code variables if you like to determine low bedroom high SQF count as luxury, and yes – bring in some recent upgrades too if you can’t leave it.
But the end result should be a somewhat equal taxation on the same asset.
astoriahomeowner
in Dept. of Buildings (DOB) 6 years and 2 months ago
Gentrifyers AND long time homeowners both suffer by raised taxes that go up so much. Long time owners that want to make renovations, and are forced to change the C of O in order to legally rent new units are now penalized?
xchx | 6 years and 2 months ago
this is super unfair. pretty sure your explanation is accurate too.
So what if I do an Alt-2, and I do a renovation that costs approx. $20,000? How much will my taxes increase?