![]() ![]() City officials said that because state law requires them to use a hypothetical income-based approach for valuing condos and co-ops, using sale prices to check their results isn’t valid. Bloomberg’s analysis used sales ratios to determine how closely assessors’ values for condos and rental buildings track with actual market prices. The industry standard for fairness studies is a “sales-ratio” analysis, which compares prices for recently sold properties to the assessors’ values for them. Standards set by the international industry group for assessment officials call for local offices to conduct regular studies of their fairness and accuracy, but New York officials say they haven’t done such studies for condos, co-ops or rentals. In written responses to questions, they defended the methods they use and attributed any unfairness or inaccuracies to the state law they have to follow. Hayashi, one of four independent experts who reviewed Bloomberg’s analysis, added: “I don’t see how state law constrains them from doing a better job on this.”Ĭity officials declined to grant interviews for this story. “They are wildly undervaluing properties and, as they’re trying to make up income for residential buildings, they’re biasing their estimates too,” said Andrew Hayashi, a University of Virginia law professor who specializes in property taxation and has examined New York’s system. But flawed valuations present a problem at a deeper level, one that’s far less apparent to most taxpayers. These flawed valuations shift hundreds of millions of dollars in tax burden from higher- to lower-priced properties and to rental apartment buildings every year.Ĭity ordinances have created special exemptions that reduce taxable values for qualifying properties and abatements that shrink eligible tax bills-special breaks that have significant effects. They’ve invented data points that bear no resemblance to market reality and used them in opaque calculations that tend to favor wealthy property owners. But now, for the first time, a Bloomberg News investigation reveals that city officials have made a bad situation worse. ![]() That law, designed to protect condos and co-ops from higher taxes, lays the groundwork for warped results. Instead, the law requires city assessors to engage in a kind of thought experiment: Pretend co-ops and condos produce income for their owners-even though they don’t-and set their taxable values based on a hypothetical amount of income they’d generate if they did. For years, when confronted with complaints of uneven property taxes, the New York City Department of Finance has blamed a state law that requires it to ignore the sale prices of condos and co-ops when determining their taxable value. ![]()
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