Mayor Zohran Mamdani skated into office on slickly-produced videos claiming he’d help New York residents with affordability. For his next highly-produced social media video, Mamdani should blow the dust off the report from the New York City Advisory Commission on Property Tax Reform, which could actually help lower costs for tens of thousands of New Yorkers.
In the report already footed by taxpayers, he’ll read about the arcane complexity of New York City’s property tax scheme and learn about two policies that would have immediate benefits for many residents: creating a partial homestead exemption and applying circuit breakers.
New York has a state level homestead exemption that provides the highest tier of benefits for the five boroughs with a $150,000 homestead exemption. The state defines a homestead as a house, a share in a coop or a unit in a condominium. The Commission’s recommendations include the creation of a homestead exemption at the city level.
The report offers two options for a homestead exemption for primary resident owners with income less than $500,000.
The first is a 20% flat rate exemption which that out starting at an income of $375,000.
The second proposed option is a graduated rate starting at 30%, phasing out with different percentage exemptions for portions of the market value. For example, a home valued at $800,000, would have 30% of the first $500k and 20% of the additional $300k exempted.
The latter suggestion would add substantial complexity to determining the city’s property taxes, making the 20% flat rate preferable from an administrative perspective.
While not quite as widespread as homestead exemptions, circuit breakers limit how much property tax disadvantaged populations pay relative to their income, helping lower income households stay in their homes.
A threshold-based circuit breaker, like the one recommended in the report, allows a certain ratio of property tax to income. If a household is paying more than a certain percentage of its total income in property taxes, it receives a tax credit. As outlined in the report, a circuit breaker for the City would apply to primary residents making less than $58,000 for a property tax-to-income ratio of 10%.
This means that, after the homestead exemption and any other exemptions are applied, if an individual’s property tax bill exceeds 10% of their income, all of that excess tax would be paid back to the taxpayer after filing. If a homeowner in the Bronx makes $40,000 annually and received a tax bill for $4,500, they would receive $500 back from the city. The circuit breaker can be applied to primary residents with income up to $90,550, but the benefits decline as income increases.
New York City currently applies various property tax exemptions to seniors, veterans, clergy, and good samaritans – victims of violent crimes or someone injured while trying to prevent a crime.
No doubt childcare providers and grocers will be added to that list during Mamdani’s tenure.
But homestead exemptions and circuit breakers are good tax policy because they increase the neutrality of the tax code rather than providing exemptions to small groups.
Another reform recommendation from the report is changing the class share system and lowering tax rates on rental units between four and ten units, which would lower prices for some of the city’s hundreds of thousands of renters.
Some of the report’s recommendations are imperfect, but they provide a roadmap for how the mayor’s office could approach reform in a way that could actually work. Plenty of ideas, including the $5 million pied-a-terre tax first floated in 2019, were rejected by the Committee as unworkable. The reforms recommended would improve affordability.
They are certainly less pie-in-the-sky than state-managed grocery stores and universal daycare. If Mayor Mamdani is willing to enact a DeBlasio-era solution, he could actually deliver on his campaign promises to bring relief to the city.
