The city’s property tax system has long been criticized for favoring homeowners over renters, but a bombshell lawsuit filed Wednesday charges that it discriminates against blacks and Hispanics as well.
The allegation, if upheld, could force a radical overhaul in how property taxes are levied — potentially forcing homeowners to pay billions of dollars more each year.
“The state would have to alter the property tax system to address the disparities, which would change the distributions of property tax burdens,” said Doug Turetsky of the Independent Budget Office.
The class action lawsuit seizes on a long-documented imbalance: one-, two- and three-family homes account for 48% of the market value of all city property, yet generate 15.5% of property tax revenues.
Conversely, apartment buildings account for 23% of total market value, but pay 37% of all property taxes. When abatements for condo- and co-op owners are factored in, the share of taxes paid by rental apartment buildings is even greater.
The imbalance is deliberate, part of a decades-long effort by state lawmakers and City Council members to keep the city’s residential homeowners - at one point, considered the middle class - from leaving the city.
But the lawsuit says the imbalance amounts to discrimination, because homeowners are disproportionately white or Asian, while renters are disproportionately black or Hispanic, compared to the city’s population.
“We’re asking that a dysfunctional (system) be examined and repaired,” said civil rights attorney Randolph McLaughlin, of the Manhattan law firm Newman Ferrara, who filed the lawsuit.
Anthony DelMundo/New York Daily News
Rosa Rodriguez lives in a 12-unit building in Middle Village, Queens and questions the fairness of the property tax system as it stands today.
Two renters agreed to lend their names to the litigation - Ernest Robinson, identified as an African-American living in the south Bronx, and Rosa Rodriguez, who lives in a 12-unit building in Middle Village, Queens.
“It’s really important that the playing field is level for the working and middle class,” Rodriguez told The Daily News. “Why should those that make less pay more?”
The suit cites a 2006 IBO study that said taxing all classes of property equally would save owners of rental apartment buildings $1,237 to $1,854 per unit each year - savings that likely would be passed along to tenants.
McLaughlin said ending the tax imbalance would help reduce income inequality, a major goal of Mayor de Blasio’s.
However, shifting the tax burden away from rental buildings likely would trigger a political uproar by homeowners whose tax bills would soar.
The de Blasio adminisration said it would review the lawsuit.
Carol Kellerman, president of the Citzens Budget Commission, said changing the city’s arcane property tax system would be wrenching.
“The problem is, helping one segment is going to impose higher taxes on another segment, and nobody really wants to take that on,” she said.