New York state continues to allow some property owners to save tens of thousands of dollars on their property taxes simply because their homes are designated as condominiums.
More than 200 homes designated as condos have sold in Onondaga County in the last three years, since The Post-Standard | Syracuse.com highlighted the inequity in a series of stories.
In New York, condos are taxed at a lower rate than other homes, even when they are worth a lot more.
One condo in Skaneateles sold last summer for $2.2 million. It was assessed and taxed as if it were worth just $464,000.
Another one sold in May for $1.7 million. It is assessed for a full-market value of about $345,000, records show.
The property taxes on a $2 million home in Skaneateles would be about $50,000 per year. But a home assessed for $400,000 would pay $10,000.
The disparity is not isolated to Skaneateles. It’s happening in Manlius, Lysander, Syracuse and suburbs from Buffalo to Albany. Some lucky homeowners get an unofficial tax break while their neighbors pick up the slack to pay for schools, public safety and more.
When a condo sells, the tax break extends to the new owners. It’s perfectly legal and it’s not a secret. In fact, it is a selling point. In some neighborhoods, it is even advertised — a 37% tax discount is listed along with the quartz countertops, walk-in pantries and stainless-steel appliances.
The condo advantage has become even more exaggerated during the pandemic as home prices soar.
“It’s only going to get worse the longer this continues to be an issue,” said Warren Wheeler, executive director of the New York State Assessors Association and an assessor in Oswego County.
A 12-year effort to close the loophole gained traction in Albany this spring, but legislators ended the session without taking action.
New York state assessors have been pushing since the 1980s to close a loophole that allows condos to be assessed at a lower value.
This year, a bill sponsored since 2009 by Assemblymember Sandy Galef, D-Ossining, made it through committees, but the Senate bill has not advanced.
New this year, a Western New York Assembly member introduced a second, simpler bill that could satisfy some reluctant downstate legislators.
“We’re really optimistic that next year, we’re going to be able to get it,” Wheeler said. “In my opinion, it’s a loophole that’s being abused and it goes against what the assessors strive for, which is assessment equity and fairness.”
The lower tax bill applies to any home classified as a condo, whether it is a free-standing building or a unit in a larger complex.
Assemblymember Monica Wallace, D-Lancaster, drove through a neighborhood in her district where 10 free-standing, single-family homes are each valued at more than $2 million. Two are big enough to be called mansions. All have condo status, allowing them to pay about 40% less in taxes.
“I don’t really think it’s fair that people who can afford to live in a $2 million house should be shifting their tax burden to others,” she said.
Galef has a high-profile example in her district, in Westchester County. The Trump National Golf Club has 12 free-standing homes, each assessed for about one-third of their recent sale values.
Galef’s bill would end the tax break for all Upstate New York condos, even if they share walls. That has been a sticking point for downstate legislators.
Each year, Galef tries to clarify that it would not affect New York City or Long Island.
This year, she added clarification that it would not affect buildings that are subsidized with state or federal money, in other words, low-income housing.
Wallace’s bill would specifically stop allowing condo status for stand-alone homes, which she said are the most egregious examples of abuse. Both bills would affect only future construction. They would leave existing condos alone.
“My bill is getting at single-family homes that are essentially masquerading as condominiums because they’re really not,” she said.
Most people think of a condo as an apartment or a townhouse. But in New York, new properties that do not share walls can also be called condos, as long as they file the correct paperwork. It’s as simple as this: a builder files a declaration of a condominium association with the county clerk and files a promise with the state attorney general’s office to offer the units for a certain price.
The law allows homeowners who join together to form a condominium association to be taxed as one unit. Their property tax bills are based on the units’ potential rental income. Other homes are assessed based on the market value.
The law, created in the 1960s, was originally intended to protect New York City high-rise apartment dwellers as their buildings were converted to units for sale. The goal was to keep taxes low and encourage home ownership in the city.
But nothing in that law prevented other types of houses from becoming condos. Nothing contained it to New York City.
All over Upstate New York, new builders who understood the gimmick formed condo associations for free-standing, single-family homes that look no different than their neighbors.
The only difference is in their tax bills, Wheeler said.
In Manlius, for example, it is impossible to tell which homes in the Mallard’s Landing neighborhood are condos and which are not. Signs that have been up for years advertise a 37% tax break. In a hot real estate market, the discount is increasing.
139 Gadwall Lane is a condo. It has 3 bedrooms, 2 ½ baths and about 2,400 square feet of living space. It sold for $340,000 in 2019. At the time, the assessed value was $194,300. The tax bill was $8,063.
129 Gadwall Lane is not a condo. It has 3 bedrooms, 3 ½ bathrooms and about 2,400-square-feet of living space. It last sold in 2013 for $399,900. It was assessed for $465,000 in 2019. The tax bill that year was $18,480.
The condo paid 44% less in taxes on a house that uses the same roads and schools and police department.
In their defense, builders argue that free-standing homes contribute to shared services, a private road or shared garbage collection. Even when the walls don’t touch, the homes are built close together on a smaller footprint. The fees they pay to homeowner’s associations can amount to as much as being taxed at the full rate.
Lew Dubuque, executive vice president of the NYS Home Builders Association, said condos are popular with older people who want to downsize and young people with no children. They are not burdening the school system, he said.
He said raising assessments on condos would just add to the many ways the state legislature makes building difficult in New York. Dubuque said he doesn’t understand why the state would want to increase costs on a product that’s selling well.
“New York state needs all the economic help that it can get right now and we just wish that the legislature was a little more responsive to that,” he said.
Wallace pointed out that some condo communities share less than three-tenths of a mile of road. When the homeowners pull out of that shared space, they drive onto streets paid for by the neighbors and send their children to public schools.
“What’s the rationale behind giving you a 40% discount?” Wallace said.
Read more about real estate:
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Tell us your story. Are you trying to buy or sell a house in this unusual market? Contact Michelle Breidenbach | [email protected] | 315-470-3186.