TITLE: Section 581
Anachronistic tax code, anonymous shell companies, and absentee residents are all distinct characteristics of New York’s luxury housing market. As the veils of limited liability companies are pierced and leaks from Panama converge on the same investments, it is illuminating to render visible the drivers of the built environment across a swath of Manhattan’s most valuable real estate, and to project a future in which access and exchange of information play a greater role in shaping the City. It is also a moment to reflect on Michael Bloomberg’s enduring legacy of shoring up New York City’s standing as a hub of international luxury real estate investment and his largely unqualified conviction that concentrations of global capital are a net benefit to all citizens of the City.
While the inequalities engendered by the real estate market leave many signatures on New York City’s built environment, the arcane model of calculating property tax and the misalignment of this process with the realities of the contemporary market are particularly acute. Following Section 581, the component of New York State property tax law that lends its name to this project, property taxes on condos and co-ops in New York City are calculated based on an assessment of property value conducted by New York City’s Department of Finance, not based on sale prices. For reasons that are too complex to go into here, the assessed values are often orders of magnitude lower than sale prices – a condition that is concentrated in the most expensive properties in the city, many of which are located in the swath of area covered by our model. Because gross undervaluation of assessments by the Department of Finance are most extreme at the highest price points, a wealthy owner’s tax burden on luxury real estate is disproportionately low.
Accompanying this text are a model and drawing which present this skewed reality in our area of interest. In the model, the height of the resin surface above a co-op or condominium building represents the relative magnitude of difference between its sale price and assessment value. The drawing unpacks selections of the underlying data. It identifies the fifty most expensive of the 11,000 undervalued unit sales in our section, and compares their respective sale prices to the values used for property tax assessment. This study represents a small fraction of the lost property tax revenue that could be captured across the entire city. As a general trend, the more expensive the sale price, the more extreme the disparity, in some cases numbering in the tens of millions of dollars for a single unit alone.
Making use of NYC’s rich information commons, the model and drawings are based on analysis of available financial and geospatial datasets published by the City. Comparison figures for assessments draw from the Department of Finance’s property assessment roll for fiscal year 2017. Sales data was gathered through the DOF’s rolling and annualized datasets from the last thirteen years (2003 to 2016).
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