An appeals court issued a ruling on Tuesday stating that a lawsuit challenging New York’s property tax system was mistakenly dismissed

Join the movement at Inman Connect Las Vegas, July 30 – August 1!  Seize the moment to take charge of the next era in real estate. Through immersive experiences, innovative formats, and an unparalleled lineup of speakers, this gathering becomes more than a conference — it becomes a collaborative force shaping the future of our industry. Secure your tickets now!  Learn more.

New York’s property tax system — long acknowledged by advocates and the real estate industry as unfair and lacking in logic — may finally face an upheaval.

The New York State Court of Appeals issued a ruling on Tuesday stating that a lawsuit from the real estate backed-group Tax Equity Now New York (TENNY) officially challenging New York City’s property tax system was mistakenly dismissed by a lower court, clearing a path for the challenge to move forward.

The lawsuit was originally filed in 2017, taking aim at both the city and the state with the goal of forcing change through the court system. TENNY, the group that filed the lawsuit, is made up of a consortium of property owners, renters and housing advocacy groups who argue that New York’s current property tax system violates the Fair Housing Act because it puts communities of color at a disadvantage.

As evidence, the group presented that a property in the Canarsie neighborhood of Brooklyn — a predominantly Black, working-class area — is assessed at “triple the rate of the same properties in Park Slope,” — a largely white, upper-class neighborhood where brownstones are worth several million dollars. The lawsuit also offers as evidence the fact that owners of rental buildings are taxed at a higher rate than co-op or condominium buildings, one of the reasons rent prices are so high in the city.

In its 4-3 decision, the appeals court wrote that the plaintiffs had adequately proven that the tax system is “unfair, inequitable and has a discriminatory disparate impact on certain protected classes.” They also agreed that condo and co-op buildings should no longer be taxed at a comparable rate to rent-stabilized apartments, a system that benefits owners of expensive apartments while driving up prices for renters and landlords alike.

The ruling will not have any immediate impact on New Yorkers’ property taxes but paves the way for the city to begin making changes.

The suit was originally dismissed by a lower court in 2020, with the court finding that the system’s disparities did not violate the law. Tuesday’s decision, however, backs up many of the lawsuit’s claims and will allow the city to potentially make reforms outside of the courts if it so chooses.

Virtually all decision-makers in New York agree that the city’s antiquated property tax system is unfair. Where they differ lies in the best way to go about changing it, with the city and state governments arguing that it should be addressed by local lawmakers, while advocates and those in the real estate industry have argued that lawmakers have failed to reform the system for decades, making a legal challenge necessary.

The last time New York’s property tax system was overhauled — in 1981 — was the result of litigation.

“The findings in this decision make clear that New York City’s property tax system is discriminatory and is long overdue for reform,” State Senator Andrew Gounardes, who represents neighborhoods in Brooklyn, said in a statement. “New Yorkers deserve a fair property tax system that funds essential services and ensures everyone pays their fair share without unduly punishing lower-income communities living in rental buildings and small homes. This is about ensuring equity and affordability for all New Yorkers.”

Email Ben Verde

This post was originally published on this site