New York City calculates property taxes for condos and co-ops using a byzantine formula mandated by the state. Which is all well and good, except that the formula underestimates the value of New York’s most valuable properties—some of the most valuable residences on Earth—meaning that the billionaires who own them pay a fraction of the property taxes that other New Yorkers pay.
Billionaires don’t pay property taxes in New York. While the property levy is New York City’s biggest source of revenue, it’s also inherently inefficient, assigning higher real property taxes to apartment-renters than to the universally maligned absentee foreign owners living in sky-gems along Billionaires’ Row. The state’s formula deprives New York of millions in revenue each year; it calls into question why former New York Mayor Michael Bloomberg was so eager to see billionaires move to New York in the first place if they weren’t ever going to be charged a dime in property (or income) taxes.
This fundamental flaw in New York state tax code is in part the subject of a new show at the Storefront for Art and Architecture in New York. “Sharing Models: Manhattanisms,” which opens Friday, assembles 30 architectural models and drawings by 30 different international firms, each one tasked with analyzing a slice of Manhattan. For its part, SITU Studio, one of the firms participating in the Storefront show, took on a charge near and dear to this writer’s heart: inequitable property-tax distribution in New York.
SITU’s models demonstrate how fundamentally out of whack property assessment and property value are in New York. The acrylic ribbons flying over the city show the magnitude of the difference between the assessed value of a property and its sale value. SITU has created a rolling, physical map of inequity.
“The most valuable rental buildings in Manhattan are valued by the [Department of Finance] at well under $500 per square foot,” reads an essay by SITU attached to the project. “The market has seen luxury condo sales typically made at a much higher expense per square foot—often in the $4,500 range.”
For the show, Storefront divided Manhattan into 30 sections between the East River and the Hudson River, assigning each part to a different design studio. SITU explored the parts of the Upper East Side and Upper West Side contained between West 62nd Street (to the south) and East 79th Street (to the north). The firm’s project, titled “Section 581,” takes its name from the state code dictating the assessment of property taxes.
SITU’s assessment shows that the highest disparities run along Central Park West and Park Avenue—where, not coincidentally, some of Manhattan’s most expensive condos are located. The firm’s report estimates that, under the current property-tax assessment dispensation, undervaluation of luxury condo properties within this narrow band of Manhattan alone totals some $5.2 billion.
The report provides a detailed example of the enormity of this undervaluation:
One of the most expensive recorded sales in our section was $33,000,000 for a single coop unit in an 111-unit building on Central Park West. The city assessed the entire market value of the building—all 111 units—at $60,722,00 for the fiscal year 2017, only $28,000,000 over the sales price for just a single apartment in a luxury building of many. The sale price of that $33,000,000 apartment is nearly 60 times its value assessed by the [Department of Finance] for tax purposes.
According to a press release from SITU, the firm’s installation draws on research by New York University’s Furman Center for Real Estate, as well as from a 2015 report by CityLab. It also owes a debt to Max Galka, who began visualizing property-tax undervaluation in charts at Metrocosm last year.
The project by SITU Studio goes further, though. By giving physical form to property-tax undervaluation, it shows—in dramatic, sweeping fashion—how New York state law forces New York City to give away the store to its billionaire condo owners.