Ending A Discriminatory Property-Tax Structure
By Lucas A. Ferrara, Esq. and Randolph M. McLaughlin, Esq. (April 2, 2014)
Mr. Ferrara and Mr. McLaughlin are co-counsel in the Robinson v. The City of New York case, discussed in this Guest Commentary.
At the end of February, Latino and African-American renters in the City of New York filed a class action lawsuit, Robinson v. The City of New York, in State Supreme Court. It alleges that our municipality's property-tax classification system is inherently discriminatory, benefitting those buildings where whites predominately reside and unfairly burdening the homes of Latino and African-American families.
The complaint tracks some of the facts cited in a number of studies, including a report entitled Shifting the Burden, published in 2013 by New York University's Furman Center For Real Estate & Urban Policy. According to the Furman Center's analysis, two practices result in a disproportionate share of the City's property tax falling on Latino and African-American shoulders: first, the City chronically under assesses houses, co-ops, and condos; and second, among rental housing, the City's tax rates favor buildings with less than 11 units. Most of the City's Latino and African-American residents live in buildings with 11 or more apartments.
Many experts and organizations (including the City's Rent Guidelines Board) have opined that real-estate taxes comprise about 30 percent of a tenant's rent, and their calculations (along with their review of extensive demographic data) support the view that minority communities are paying a disproportionately higher sum -- particularly when compared to the mostly white owners of homes, co-ops and condos, and the predominantly white renters of buildings with less than 11 units. According to the Furman Center's data, this unilateral and misdirected application of the tax has adversely impacted the Big Apple for some three decades -- slowly, but surely, chipping away at the very fabric of the "gorgeous mosaic" that is New York and dramatically altering the landscape of once affordable communities.
Federal law, specifically the Fair Housing Act ("FHA"), bans "practices, laws or regulations" that have a disparate impact on minority groups. On behalf of Latino and African-American residents of buildings with more than 11 units, Newman Ferrara LLP is seeking an injunction stopping the continued application of a property-tax classification system that has proven to be grossly unfair and unbalanced. Under the FHA, if a system is found to place a greater burden on minority group members, the court has the power to issue a sweeping order compelling the City and State to make significant adjustments to how properties are classified and valued and how a tax system is structured. Should the court agree with our position, the State Legislature and City Council would have the first opportunity to address this inequity; any changes that are proposed would then be subject to court approval, and the affected members of the class would have an opportunity to offer their insights and recommendations.
Although New York offers a particularly egregious example, property-tax burden-shifting is not restricted to Gotham, and we hope to spark a nationwide debate by calling attention to this local dysfunction. Typically, when property taxes are implemented by state and local governments, lobbyists from the real-estate industry and other special interest groups gather to influence the process by which those fees will be calculated and applied. All too often, minority communities are given little voice and less consideration in these discussions.
But this lawsuit has the potential of closing that "gap" and sends a warning signal to all concerned to afford everyone representation in the fact-finding and tax-implementation process because the inability or refusal to create an equitable system would likely violate federal law and would trigger litigation seeking to secure similar remedies. We urge communities across the nation to work collaboratively to ensure that the concerns of all constituencies, including minority communities, are given more than mere platitudes at election time, and that their rights and interests are truly safeguarded.
Lucas A. Ferrara is a named partner at Newman Ferrara LLP - a civil rights, class actions, and real-estate litigation firm. In addition to serving as an Adjunct Associate Professor of Real Estate at New York University, Mr. Ferrara is an Adjunct Professor at New York Law School. He can be reached at LFerrara@nfllp.com.
Randolph M. McLaughlin is co-chair of the Civil Rights Practice Group at Newman Ferrara LLP, and is a tenured professor at Pace University School of Law. He can be reached at RMcLaughlin@nfllp.com.