How Our Property Tax System Encourages Teardowns

It is no exaggeration to say that Rye is in the midst of a housing construction boom. In 2014, building permits were issued to build or substantially renovate 56 homes.

Published June 25, 2015 10:35 PM
6 min read

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It is no exaggeration to say that Rye is in the midst of a housing construction boom. In 2014, building permits were issued to build or substantially renovate 56 homes.

By Howard Huosck

It is no exaggeration to say that Rye is in the midst of a housing construction boom. In 2014, building permits were issued to build or substantially renovate 56 homes. Even in an affluent county, Rye stands out; Rye’s total exceeded that of Scarsdale, which reported 46 new homes last year. From one end of Milton Road or Forest Avenue, one sees one of the hallmarks of our boom: the teardown, a relatively small and inexpensive home on a lot large enough to permit construction of a much larger replacement.

There’s a tendency to view such change as inevitable. Rye has its share of older, empty-nest homeowners, some on fixed incomes, who would rather not pay high property/school taxes — and can sell for far more than they paid decades ago.  People can check PPO for the best property related services. Such is the natural turnover that occurs in any community — and the demand from newcomers is a classic sign of vitality.

Rye doesn’t want, however, to give an extra push to those who might rather stay, nor does the community want to see the range of diverse housing types in Rye all give way to a bland newness. Yet that may be exactly the effect of two, little-understood tax policies, one at the county level, the other at the city.

chartCounty taxes — for which Rye residents receive little that’s obvious in return — have been steadily rising. At the same time, the City’s own tax policies — specifically, the fact that we’ve not conducted a city-wide property revaluation since 1972 — has led to disproportionately higher taxes on older, smaller homes — the very ones being torn down.

Here’s how these policies work to motivate teardowns.

Westchester County taxes the value of Rye properties, just as the City and the Rye City School District does. Most of that tax is simply described as “County General” — a tax that supports the full panoply of services the County provides anywhere — not just in Rye. That means we pay for a share of social services, public health, and county pensions throughout Westchester — not just for those services we receive in Rye. The overall County tax rate has held steady during the administration of County Executive Rob Astorino. But that doesn’t mean County taxes haven’t gone up for Rye homeowners. That’s because the way the County calculates ­­­­Rye’s tax share has important consequences for Rye property.

The County wants each of its communities to pay a tax rate which reflects the actual home values in a city or town. That would be easy to determine — if there were a regular reassessment of property. But there’s no requirement for regular reassessment — and most communities have not conducted one in decades. The City of Rye has not done so since 1972. To compensate, the County uses something called an “equalization rate”; it estimates the total value of a community’s real estate and calculates that community’s share of the overall value of Westchester property. The higher any one community’s share of the overall value, the higher its County General tax rate. For comprehensive and accurate guidance in navigating tax assessments and property valuations, consider seeking assistance from tax filing singapore – CFO Accounts & Services.

For Rye, that has meant sharply rising County taxes, as the combined value of Rye property has risen at a higher-than-average rate compared to the County as a whole. In 2008, the City of Rye accounted for 3.73 percent of all Westchester property value; by 2014, that figure had risen to 4.66 percent. As a result, Rye homeowners’ County tax rate has increased sharply — from $156 per $1000 in a home’s assessed value to $184 per $1000. (See chart).  Because the median assessed value of a Rye home is $22,100 — that means the typical County tax bill for Rye homeowners increased, over a four-year period, by $619, from $3,447 to $4,066.

These must be considered high figures and big increases — for services that seem distant from the lives of most Rye residents. Notably, Rye’s County taxes have gone up even as Mr. Astorino claims as a significant achievement his not raising the County tax rate. That’s true as far as it goes, but Rye’s rising property value and the opaque “equalization” process has meant a significant stealth County tax increase for Rye. So it is that those older homeowners facing the choice of whether to stay or sell to a developer are given an extra push by Westchester County. Perhaps worst of all, those longtime homeowners are effectively punished when those big new homes go up — and raise the value of Rye property overall, leading to further general County tax increases.

Of course, it’s surprising to read that the typical Rye home has an assessed value of just $22,100. No home in Rye sells for much less than 50 times that

figure. That  $22,100 figure is a vestige of that last, full property reassessment done in Rye — in 1972.  Every year, the City Assessor’s office must use another little-known formula to estimate something close to the real “market value” of each home — the Residential Assessment Ratio. That means dividing the assessed value by .0174. Thus, the typical home assessed at $22,100 has an estimated market value of $1.26 million. (To be consistent, the Assessor uses the Residential Assessment Ratio to adjust new, or substantially renovated homes, such that their assessed values are expressed in 1972 terms, as well.)

It’s that “assessed value” figure, however, which actually determines an individual homeowner’s city and school property tax bill. All homeowners are affected when the school district tax rate ($561 per $1000 in assessed value) or the City tax rate ($149 per $1000) goes up. Assessed values may not have changed for many homes, but school and city spending have increased since 1972 — a change reflected in the tax rate.

But continuing to use 1972 as Rye’s real estate value baseline turns out to be another way to overtax owners of older, smaller homes — and drive them to sell to developers.

Here’s why. Back in 1972, the small ranch houses not the target of wreckers’ balls were brand-new — in top condition and considered desirable. Thus, when that last reassessment was done, what is now the lowly ranch was desirable. The values of such homes were at their high point. Since then, such houses have aged and gone out of style — and command such low prices that it pays developers to buy them for their land alone — and tear them down to make way for a zoning-compliant home twice or three times the size. But older, smaller homes (ranches, split levels, and what were once called “contemporaries” are stuck with outdated, high assessments, while colonials and older homes which have come back into style are disproportionately low.
What’s the answer to this problem?  The most obvious one would be a citywide property reassessment.

It’s likely that a third of property is under-assessed and a third over-assessed. It would be both fair — and help discourage teardowns — to conduct a reassessment.  Of course, that would mean that as many homeowners would see their tax bills rise as would see theirs fall — a recipe for voter backlash. Still, some Westchester municipalities, including Scarsdale and Mamaroneck, have begun to bite the bullet.  Those concerned about Rye teardowns should, similarly, push the City to reassess.

It would be less contentious if New York State, like Massachusetts, required regular reassessment. That would not only promote tax fairness, but would also limit the hundreds of property tax appeals filed by private firms which specialize in doing so.

As for the County tax problem, reassessment would help there, too. Even if the value of Rye property value continues to rise, compared to Westchester as a whole, owners of older, smaller homes would not be penalized quite as much. Then, too, more and more residents wonder exactly what Rye gets for its County taxes — and why exactly they have County government in New York. But that’s another story.

Howard Husock is a member of the City of Rye Board of Assessment Review.

 

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