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Appeals court allows New York City property tax lawsuit to proceed


(The Center Square) — New York’s highest court has given a green light to a lawsuit from homeowners and real estate groups challenging New York City’s property tax system.

A 4-3 decision issued Tuesday by the New York Court of Appeals reinstates claims that New York City’s property tax system is unconstitutional and violates the Fair Housing Act.

A lawsuit filed by a coalition of homeowners and real estate industry groups — called Tax Equity Now New York — argues that the city’s taxation scheme is unconstitutional because it requires lower-income property owners and renters in “majority-minority” neighborhoods to pay more than their fair share of the tax burden than those who live in wealthier neighborhoods.

A lower court dismissed the coalition’s complaint in 2020, ruling that the system didn’t violate state or local law and that the Legislature had the authority to make changes to the system if it wanted. But the group appealed. The appeals court’s ruling sent the claims back to a lower court for proceedings, where the city will need to defend claims that the system is unconstitutional.

Backers of the lawsuit praised the court’s decision, saying it supports their claims that the city’s tax system creates inequities that hurt those who can least afford to pay heavy taxes.

TENNY Policy Director Martha Stark called the appellate court’s decision a victory for “millions of New Yorkers who have been treated unfairly by the city’s unconstitutional property tax system.”

“It has been evident to everyone that New York City’s property tax system is inequitable and systemically racist for the past four decades,” Jay Martin, executive director of the Community Housing Improvement Program, said in a statement. “This has manifested itself through skyrocketing tax hikes on older rent-stabilized buildings, which provide the majority of the affordable housing in New York City, as wealthy homeowners are given huge tax breaks.”

However, in a dissenting opinion, Justice Michael Garcia argued for the panel’s minority that the claims should be dismissed, writing that the complaint “falls well short of alleging any cognizable legal theories of statutory violations.”

“The majority’s endorsement of these theories requires a misreading of the statutory language and our precedent; chiefly, a flawed understanding of the statute as requiring the city to provide equal tax treatment for all properties of equal market value,” Garcia wrote. “The statute requires no such thing.”

Unlike many large U.S. cities, New York City’s property taxes are based on an “assessed value” of their estimated market price. Those assessments can vary depending on the type, size and use of properties. Property taxes are the city’s largest source of revenue, providing about $35 billion every year.

Critics of the city’s taxing scheme say caps on property tax increases put in place over the years keep the rate down in wealthier neighborhoods, while lower-income areas are subject to rising assessed values.

New York City Mayor Eric Adams has criticized the system and vowed to push through policy changes to ease the burden on property owners, but housing advocates say he hasn’t followed through on the pledge.

In Tuesday’s decision, the appeals court’s majority acknowledged the New York City officials’ inaction to correct the alleged disparity in the tax system.

“While these officials bemoan the situation, the city fails to act,” Judge Jenny Rivera wrote. “According to the complaint, the numbers tell the story of a taxation scheme that requires lower-income property owners and renters in majority-minority New York City neighborhoods to pay more than their fair share of the tax burden in violation of the law.”