Tag: property tax

• New York City is budgeting $30.8 billion in property tax collections

  According to the WSJ, New York City is budgeting to collect $30.8 billion in property taxes for fiscal year 2021. These tax bills will go out on June 1 and payments will start becoming due on July 1, which is the start of the city’s fiscal year. Here’s how the collections break down across houses, apartments, and commercial properties:

  

  Overall — and despite the fact that values have softened in the wake of COVID-19 — this year’s property tax budget represents a 5.7% increase over FY2020. The reason for this is that each year the city completes its annual assessments on January 5. And so according to the city’s January numbers, everything is just fine.

  Supposedly this January 5 date is usually non-negotiable. A lawyer is quoted in the Journal article saying that under normal circumstances, if your house were to burn down on January 6, you would still have to pay all of your taxes for the upcoming fiscal year.

  Time will tell if this time is different. But it is interesting, though not surprising, to note just how significant property taxes are to New York City’s overall tax collections. They represent a little more half of all taxes collected.

  2020.05.31

• New York’s “pied-à-terre tax” explained

  New York is close to implementing new “pied-à-terre tax.” If the bill passes, which the New York Times believes is likely, cities of a million or more people will be able to levy an additional property tax on non-primary residence homes worth $5 million or more. The additional tax would be based on the following sliding scale:

  

  So let’s say for argument sake that you own a pied-à-terre in New York City worth approximately $238 million. Based on the above, your additional tax would be $370,000 + [4% x ($238 million – ~$25 million)]. That’s almost $8.9 million. Most of the revenue from this tax is expected to come from this upper (and open-ended) valuation bracket.

  New York City estimates that the tax could bring in about $650 million annually. The state in turn believes it could then raise $9 billion in bonds. And the intent is that these additional funds could be used to fund things like transit and housing. I am curious how elastic the demand is for trophy real estate in New York.

  Another thing I noticed while reading up on this bill is that the New York State Senate has made it pretty easy to voice your opinion on proposed legislation. On the sidebar of every bill making its way through the system is a box that looks like this:

  

  This is probably the clearest engagement tool I have ever seen on a government website. Do you think something like this could work for new housing?

  2019.03.11

• Documenting a city

  Starting in the late 1930s, New York City began hiring photographers to document each and every building in the city. It did this to improve the accuracy of its tax assessments, and so every photo was taken with a sign board indicating the building’s block and lot number. The photos looked like this (taken from here):

  

  The initiative produced over 700,000 black and white photos, all of which have been recently digitized according to the New York Times. The Times also recently published this interactive piece where they go back to these archival photos to see how the city has and hasn’t changed. 

  In the late 1930s and early 1940s, documenting a city and its buildings was clearly a manual endeavor. Today we have Google Street View (launched in 2007), which has now photographed much of the world. Many countries, including all of North America, are reported as having “mostly full coverage.”

  But already autonomous vehicles (and their supporting services) are starting to scan and map our cities in new ways. So it will be interesting to see what ends up getting built on top of this data. I am certain it will empower much more than just better tax assessments.

  Happy New Year, friends. Thanks for reading over the last year.

  2018.12.31

• Vancouver’s Empty Homes Tax

  In an effort to curb the much talked-about and much debated empty home situation in Vancouver (supposedly the number is ~20k vacant homes), the city, as many of you know, implemented an Empty Homes Tax.

  To enforce this, the City of Vancouver now requires that every year, every owner of residential property must file a status declaration. If you don’t file this by the deadline, the property is automatically deemed vacant and the tax (1% of assessed taxable value) and a penalty ($250) are applied.

  Last month, 11 days before the 2017 deadline, the city published the below heat map showing the concentration of Vancouver property owners who hadn’t yet made their declaration. There were just under 4,000 undeclared properties.

  

  But as Jens von Bergmann points out on his blog, Mountain Doodles (great data-driven blog), this was really just a map of where people live. Because if you also create a map of residential properties subject to the tax, which he did, it looks pretty similar to above.

  2018.03.25

• “I hate golf”

  

  I am a big fan of Malcolm Gladwell, and not just because he’s Canadian and went to the University of Toronto (my alma mater), although those facts certainly don’t hurt.

  I’m late to his podcast, Revisionist History, so in case some of you are as well, I would encourage you to check it out. Every episode reexamines something from the past and questions: Did we get it right the first time? It’s very Gladwell. It’s a must listen.

  The episodes span a secret research project setup by the Pentagon in downtown Saigon during the Vietnam War to why rich people are obsessed with the game of golf. Spoiler: He hates golf.

  The golf episode will be of particular interest to many of you because it deals with real estate. Malcolm wades into something known as California Proposition 13, which is a constitutional exemption that keeps property taxes artificially low.

  It is what has allowed these “vast, gorgeous, and private” golf courses to continue to exist in expensive cities like Los Angeles. Otherwise they would have long ago drowned under the property taxes following reassessment.

  This also leads to a philosophical debate about what constitutes a change in ownership, since many clubs are member owned and Proposition 13 requires that there not be a change in more than 50% of the ownership. 

  But I’ll stop there. Give it a listen. Malcolm is just excellent.

  Photo by Rémi Müller on Unsplash

  2018.03.11

• Thoughts on land-value taxation

  Yesterday I wrote about a new book that was just released called The Next Urban Renaissance. 

  The first essay in the book, written by Ingrid Gould Ellen of New York University, is centered around three ideas to help cities deal with the affordable housing problem. This is something that successful cities all around the world are grappling with.

  The first idea is land-value taxation, which is also known as a “split-rate” tax. I’ve touched on land-value taxation before on ATC, but I never really dug into it. So this was a good reminder to do that.

  The idea behind land-value taxation is to split property taxes into a land tax and an improvements tax (i.e. the building), and then shift more of the burden over to the land side. Economists tend to really like this model because taxing buildings/improvements can discourage property investment and development, whereas taxing land doesn’t impact supply. The supply of land is fixed.

  So in the context of affordable housing, land-value taxation is thought to be a way to encourage more development and to increase the supply of new housing – which is usually a good way to keep home prices in check.

  Here’s how Ingrid Gould Ellen described it:

  …a land tax would discourage speculators from hoarding
  undeveloped land and incentivize them to develop their parcels to the
  full extent allowable. Regardless of whether a parcel sits vacant, houses a
  partially occupied, one-story retail strip, or holds a 30-story apartment
  tower, the annual tax bill would be the same. By switching to a land tax,
  a city could therefore increase the supply of housing and, by doing so,
  reduce prices across the board.

  But I can’t help but wonder if this isn’t more applicable to cities or areas that are currently struggling to encourage development. For instance, would boom town Toronto really benefit (in terms of affordable housing) from a tax change that ends up encouraging more high-rise development?

  It also strikes me as being exceptionally difficult to implement, particularly in city like Toronto that is growing and changing so quickly. Is it reasonable to ask the owner of a small downtown parking lot to being paying property taxes as if a 90 storey supertall had been built on top of it? Because that is the reality in some parts of this city.

  And if we opted to phase in this new land tax, would it then become a game of arbitrage where developers look for properties with the lowest land taxes but the highest achievable densities?

  Finally, I wonder if it wouldn’t exacerbate some of the problems that already exist in rapidly growing cities, one of which is the preservation of smaller heritage buildings in centrally located neighborhoods:

  In the case of a split-rate tax,
  the losers will be owners of parcels with high land-to-building value
  ratios, or owners of small buildings on valuable, centrally located parcels,
  who will likely see an increase in their tax bills after the switch to
  a split-rate tax.

  Land-value taxation is something that I’ve been thinking about for a number of months now. But I am struggling to come up with a decisive position. If you have any thoughts on this, it would be great to hear from you in the comments.

  2015.10.13