More and more New Yorkers have stopped paying property taxes — a troubling trend since the start of the pandemic that city officials attribute to the end of a tax lien sales program that punishes delinquency.
Overdue property taxes are expected to reach their highest level ever, jumping more than 30% to more than $880 million at the end of the fiscal year in June from three years ago, according to an offering document for a city general bond sale Tuesday. That means New York could bring in less tax revenue, as nearly half of it comes from property tax collection.
“It’s not just the absolute dollar amount that I think should concern all of us,” Preston Niblack, the city’s finance commissioner, said at a March 4 City Council Finance Committee hearing.
It’s people realizing that “there are no consequences if you don’t pay your property taxes,” he said. “We cannot allow this to continue.”
To be sure, the increase in unpaid property taxes comes as New York’s office market continues to struggle. According to the city’s January financial plan, Manhattan’s overall office vacancy rate stood at 22.5% in November, the highest on record.
Rent-regulated apartments are also facing challenges after a 2019 law dramatically reduced landlords’ ability to raise rents.
Because a tax lien sales program on unpaid property taxes expired in March 2022 and has not been reauthorized by the City Council, officials say delinquent property owners have no incentive to pay their debts. Under that plan, the city was allowed to sell liens on single-family homes and condominiums after three years of nonpayment, while liens on other types of properties could be sold after one year.
The city packages its most marketable liens into securities to sell at a discount to a third-party trust, which borrows money from investors to pay the city up front. The trust takes responsibility for collecting the debt through the servicers and adding fees and interest payments. After investors are repaid, the city has the right to collect additional revenue from interest and fee payments.
Community activists and some elected officials have criticized the program for unduly targeting low-income property owners. The “additional fees can quickly turn a relatively small tax lien into an overwhelming financial burden, ultimately pushing homeowners into foreclosure,” New York Attorney General Letitia James said in December 2020, referring to a mandatory 5% surcharge , legal fees and a 9% tax or 18% interest rate compounded daily.
Fair solution
The city’s Department of Finance said it is working on legislation that would reauthorize tax lien sales that would ensure homeowners don’t face foreclosures or evictions.
“We look forward to working with [City] I advise on this important issue and look forward to a new and more equitable form of property tax enforcement.” said Ryan Lavis, spokesman for the Department of Finance.
The City Council said in a statement that it is working with “the administration, advocates, impacted communities and all stakeholders to advance policies that address outstanding expenses while supporting the economic health of homeowners, our communities and the city”.
Former Mayor Rudolph Giuliani created tax fire sales in 1996 in an effort to raise revenue and fill budget gaps. Between fiscal years 2018 and 2022 the city raised $260 million from such sales, according to the city’s bond offering document, a fraction of the revenue generated from overall property taxes.
New York expects to collect $32.7 billion in property taxes in the current fiscal year, providing about 45% of city tax revenue and nearly 30% of overall funds for the current $114 billion budget.
City Council member Gale Brewer, who represents Manhattan’s Upper West Side, said three buildings in her district each owe $1 million. According to the Department of Finance, as of March 8, single-family and condominium owners accounted for one-third of delinquencies, while rentals made up 28.5% and commercial properties 38.2%.
Biggest derision: A 16-unit rental building in Cobble Hill, Brooklyn, owes $52.2 million and a 49-unit apartment building in the Bronx owes $24.7 million, according to a list compiled by the Department of Finance city for Bloomberg News.
Hyacinth Blanchard, listed by the city’s Department of Buildings and Preservation as Cobble Hill’s lead property official, did not respond to a voicemail seeking comment. No one answered the phone from Romad Realty, the listed owner of the Bronx condominium.
“We have to do something,” Brewer said. “People should pay taxes.”