NYC Property Tax Update – January 2021
The NYC Department of Finance released the 2021/22 tentative roll on January 15. The Tax Commission application filing deadline to protest your assessment is March 1.
The assessment roll shows the largest declines in 25 years. The impact of COVID-19 on the City’s property values is significant. Citywide, total market value declined 5.2 percent on the tentative roll, a decline that is much larger than the one seen during the great recession. Class 4 (office and commercial space) properties saw a steeper decline of 15.8 percent, followed by large Class 2 (residential with more than 10 units) properties declining by 9.2 percent.
Citywide total billable assessed value declined 3.9 percent. That decline, combined with the projected decline in city property tax revenue of 4-5%, means that the city doesn’t expect to drastically raise tax rates to counteract the decline in assessment. If your taxable assessed value decreases, your taxes may decrease proportionally.
Class 2 properties saw billable assessed value decreases of 0.4 percent, compared to last year’s growth of 6.6 percent. A decline in Class 2 assessed value is very unusual. The last time the assessed value declined in Class 2 properties was in the early 1990s. For larger class 2 properties (more than 10 units), value changes are phased in over five years. This typically smooths out the one year rate of change of values, providing stability to both the property owner as well as the City. However, the steep market value drop for large Class 2 properties is expected to offset the positive “pipeline” of transitional value from the prior four years.
The pandemic’s impact on large Class 2 properties was significant. With the increase in rental vacancies and higher delinquencies, large rental property owners were affected by significant reduction in rental income, resulting in a market value decline of 9.8 percent for rental properties on the tentative roll. Co-ops and Condos which are valued based on comparable rental properties also saw a decline of 9 percent. With the widespread availability of the vaccine over the next few months, the Mayor expects vacancy in the rental residential market to improve and the value to rebound over the next two years to pre-COVID-19 levels by 2024. The Mayor forecasts Class 2 billable assessed value growth at an annual average of 1.8 percent from 2023 through 2025.
Class 4 properties, which consist of all other real properties such as office buildings, hotels, and stores, saw billable assessed value declines of 9.6 percent, compared to last year’s growth of 5.2 percent.. A decline of this magnitude in Class 4 assessed value is very unusual. The last time the assessed value declined in Class 4 properties began in the early 1990s but spread over a few years. The Mayor forecasts Class 4 billable assessed value to grow at an annual average of 0.5 percent from 2023 through 2025. Industries devastated by the pandemic’s impact showed significant declines in market value on the tentative roll. Office buildings declined 15 percent. Store buildings declined 21 percent, and hotels declined 24 percent. As the vaccine becomes widely available and the threat from COVID-19 wanes, many office workers are expected to return to their buildings. At the same time, domestic and international travel is expected to recover, albeit slowly, over the next few years. The Mayor expects the office market and hotels to reach the pre-COVID-19 levels by 2025, while the rest of Class 4 is expected to reach the pre-COVID-19 levels by 2024.
Class 1 (one- to three-family homes) billable assessed value increased 5.3 percent over the prior year. Even though market value growth has slowed due to the onset of COVID-19, the healthy Class 1 assessed value growth can be attributed to the large unrecognized value resulting from the impact of statutory assessed value caps. The Mayor forecasts class 1 billable assessed value to grow at an annual average of 4.7 percent from 2023 through 2025.
The Mayor said he won’t raise property tax rates. He’s really referring to the “overall” rate; meanwhile, individual tax class rates do change. For example, last year the tax class 4 rate increased to its highest in 10 years, while the tax class 2 rate dropped substantially. Expect more shifts in tax burden amongst the tax classes – maybe higher rates in tax class 4 to counteract the larger assessment decreases.
To find your new assessment, click here, click BBL Search, enter the Borough Block & Lot, and in the bottom left under Market Values & Assessments in blue, click 2021-2022 Tentative. To compare it to the prior year, click 2020-2021 Final. To see how DOF valued your property, click Notices of Property Value on the left, and click the 2021-2022 notice dated January 15, 2021.
Challenging Assessed Values. The NOPV and assessment roll give property owners the opportunity to review their tentative assessments and file a challenge to their property’s assessment with the New York City Tax Commission, an independent City agency, before the assessment roll is finalized in May. All properties are valued by law according to the property’s condition on the taxable status date of January 5. The deadline to challenge property values for Class 2, 3 and 4 properties is March 1; the deadline for Class 1 property owners is March 15. Forms and information are available on the Tax Commission’s website. Ben’s practice focuses on tax assessment protests; contact him at [email protected] or 212-551-1246.
Why protest your taxes even though DOF decreased your Market Value? (1) DOF didn’t decrease it enough. For example, DOF decreased it 10% but you think it should have been 15%. (2) You have a proceeding pending for the prior tax year 2020/21 and you want to try to get that reduced. To get a hearing on the prior tax year, you must file a protest now. (3) Your Actual Assessment increased despite the Market Value decrease. Perhaps your property is in a “capped” tax class (1, 2A, 2B, 2C) and the assessment is still below the assessment ratio of market value (45% for tax class 2A, 2B, 2C; 6% for tax class 1). (4) Wrong exemption or tax class.
Join Ben and the New York State Society of CPAs Real Estate committee on January 22 for a tech session on NYC real estate tax certiorari. Ben returns as guest speaker on this Zoom teleconference. He will discuss 2021 updates from the Tax Commission and things to watch out for when filing TC-201s and TC-309s. 1 CPE credit. $50 price for non-members. Register at https://cpe.nysscpa.org/product/32287.
2020 Settlements. This week the Tax Commission said the average 2020 assessment reduction was 8.7%. For the second year in a row we continued to achieve larger assessment reductions. In 2020, we achieved an average assessment reduction of 12.4%. Additionally, almost half of our settlements involved reductions in the prior tax year 2019/20; that’s twice the overall Tax Commission rate. Results are still coming in, as about 10% of 2020 Tax Commission determinations are still pending.
2021 Tax Commission applications this year should be PDF copies. They no longer have to be originals, but they still need handwritten signatures and notarization. Like every year, you must hand sign your paper Tax Commission application form (typically TC101, TC109 for condos, TC150 for supplemental) – no electronic signatures. And you still need your signature notarized by another human being. Nevertheless, while the State continues to authorize video notarization, you don’t have to be in the same room as the notary.
Contact Ben to discuss your 2021 property tax assessments and determine if protests are worthwhile.