Outdated Law Prevents NYC from Cashing In on Luxury Apartments
Elizabeth Harris explores the effect of an obscure New York state law that ties the valuation of condominiums and co-ops for tax purposes to comparable rental buildings, rather than apartment sales. Of course, says Harris, "At the tippy top of the market, populated by $20 million, $30 million, $40 million, even $88 million apartments, real estate experts say that truly comparable rental buildings essentially do not exist."
"An apartment at the Plaza Hotel that sold for $48 million last year is valued by the city at $1.7 million. A condo at 80 Columbus Circle that sold for $30.55 million last summer is valued at $2 million. And the $88 million apartment is valued at $2.97 million, or just 3.4 percent. The impact on city revenue needs then ripples down."
"If a certain kind of property is systematically undervalued, another kind of property has to pick up the slack," said Andrew Hayashi, a property tax expert at the Furman Center for Real Estate and Urban Policy at New York University.
The state law was enacted in the 1980s, during a different real estate market, but when the subject of reforming the law is explored, "technical and political pressures tend to overwhelm the cause, which then is quietly put on a shelf."
Thanks to Jessica Hsu