Posted by Leonard Steinberg on November 13th, 2011

In today’s real estate section of the New York Times, the cover article addresses the subject of expiring tax abatements that result in monthly taxes on new buildings that are super-high. In my opinion, this article does not get the story right and misses some very important points:

1. Real estate tax abatements, specifically the most popular 421-A, allows reducing real estate taxes by fazing in the full rate incrementally every 2 years over a 10 year period.  Monthly taxes start out extremely low.  The abatement (that has ended) was designed to stimulate building and encourage buying. At the end of this 10 year period people are ‘discovering’ that the taxes for new buildings are rather high. The article identifies this fact showing how at the time of purchase, buyers should have noted the taxes at the beginning and at the end of the abatement, but fails to mention that most of these taxes have been increased (often dramatically) well beyond their original estimations as assessed values have been raised across the city.
2. The article does not address the gross inequality between assessed values: a weak government official attributes it to the fact that assessed values are based on potential rental valuations: this is an antiquated method that should be abolished immediately. Just because 740 Park Avenue does not allow sub-leasing, thereby eliminating any data for rental valuations for the building, should not entitle the bulding to lower taxes than neighboring buildings: should another condo close by be penalized because it does allow rentals? The system is thoroughly unfair, ridiculous and corrupted.
3. The article does not address the most important issue of all: Most buildings that have increased assessments are compelled to hire an attorney to file a tax grievance on behalf of the building…..most times these grievances are successful in reducing the assessed value of the building and these attorneys subsequently bill 10% of the reduced taxes. This happens every year. Its a system designed to keep lawyers in business doing something that should not happen in the first place. Who writes the laws? Is this a racket?

The real estate tax assessment situation in Manhattan is a disgrace. It is also un-constitutional if we assume we are all to be treated equally. Yet the Times made this a sensationalist story about the shock of expiring abatements rather than the ridiculous valuations some buildings are assessed at when compared with similar neighboring buildings. This is a huge dis-service to the Times’ readership and the article should be corrected immediately. It’s also time for a major class action suit against the City as (unfortunately) government only wakes up when its voters use the legal system to make the point. Manhattan and New York need to be re-assessed across the board. This is long overdue.