In a helpful turn for New York property owners, New York Governor Kathy Hochul vetoed legislation that would have closed a tax loophole on full-size homes declared as condominiums.
In June of 2022, New York legislators passed a bill focused on the status of properties designated as condominiums. Longtime legislative Assemblywoman Sandy Galef was a primary driver of the bill, which she pressed after hearing complaints from homeowners who argued condominium owners do not pay appropriate property taxes. The bill as passed was not retroactive and would have allowed existing homes designated as condominiums to retain the tax break. According to the media, condominium status was established in the 1960’s to assist apartment dwellers in New York City. Originally, condominium status gave apartment residents a tax break, but builders and buyers found a way to reduce the tax burden of full-size suburban homes.
To take advantage of the loophole, residential developments are designed to include a condominium association in order to identify the development as a condo project. An investigation in 2018 reported that about 100,000 condominium owners in New York obtained an average tax reduction of 36 percent on their properties. Those reductions came with a cost of approximately $330 million in property taxes to the state of New York. One example cites a $2.2 million home in Skaneateles that is identified as a condominium. Rather than being taxed at value, the property is assessed as if it has a market value of $464,000.
Governor Hochul, in a statement explaining her veto, remarked new home buyers are reliant on the tax break. She felt higher taxes would lead to fewer housing starts and less affordable options for condo buyers. She added, “At a time when New York state is in the midst of a statewide housing crisis, this would be an unacceptable outcome.” Assemblywoman Galef noted that the bill included an exemption for affordable housing and exempted New York City and Nassau County which have well-known housing shortages.
Although the loophole is safe for now, legislators have signaled the tax break will be revisited next session. In the meantime, current property owners and those who purchase prior to additional law-making to close the loophole can enjoy the tax break. When you have a question on your tax liability in New York, speak with an experienced tax lawyer for answers.
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