Mayor Weighs 9.5 Percent Property Tax Hike as NYC’s Byzantine System Persists

The city’s eccentric property tax regime distorts neighbourhoods, warps rents and baffles everyone—yet attempts at reform seldom survive contact with political reality.

It is a peculiar New York ritual: two otherwise identical brownstones, barely a mile apart, pay property tax bills that differ by thousands of dollars a year. Meanwhile, renters—though they may fancy themselves exempt—quietly shoulder much of the burden, their rents inflated by a system that largely defies logic. The city’s property tax structure, woven from layers of legislation dating to 1981, appears designed less for efficiency, fairness or transparency than for the perpetuation of fiscal folklore.

Mayor Zohran Mamdani, in office scarcely a year, faces a familiar conundrum. With a looming $5.4 billion budget shortfall for fiscal year 2025, he proposes a 9.5% across-the-board property tax hike unless Albany, in a rare show of generosity, permits a new tax on the wealthy. Yet the deeper absurdities of the system—its baroque categorizations, conflicting incentives, and manifest inequities—remain steadfastly untouched.

Property tax is no minor matter in New York. The city collects about $33 billion annually from roughly 1 million parcels, making up the largest chunk—nearly 30%—of a $112.4 billion budget. These revenues fuel everything from rubbish collection to libraries, schools and police. But the way this leviathan tax is levied verges on the quixotic.

Blame, or credit, rests chiefly with a state statute from 1981, which saddled the city with the current four-class system. Class 1 covers one- to three-family homes; Class 2 encompasses rental buildings and many co-operatives and condominiums; Classes 3 and 4 capture utility property and commercial real estate, respectively. Each class enjoys its own tax rate, determined annually by City Council fiat, divvying up the city’s “property tax pie” into slices of distinctly uneven width.

So far, so wonkish. But the devil, as usual, lurks in definitions and assessments. The “market value” assigned to a property may bear minimal resemblance to actual sale prices—especially for apartment buildings, which are valued according to the rent they theoretically could fetch, rather than what they do. Even more arcane is the treatment of large condos and co-ops, whose values are often based on the income of imaginary rental equivalents, not their glittering recent transactions.

The effects are hard to miss. Owners of elegant brownstones in Brooklyn Heights or condos overlooking Central Park—who might expect to pay for their privilege—frequently enjoy startlingly low effective tax rates. By contrast, homeowners in outer-borough working class neighbourhoods, or renters in legacy apartment blocks, shoulder a disproportionate share of the municipal burden. A two-bedroom in Astoria can face a vastly higher tax bill than a penthouse in Tribeca, in flagrant defiance of any plausible notion of equity.

These quirks are not merely academic. They shape the city’s very fabric, influencing where developers choose to build and what kinds of homes arise. NYC’s rental sector, subject to higher assessment ratios, is penalized relative to owner-occupied or luxury properties—encouraging the proliferation of glitzy condos while doing little for affordable housing. For the legions of renters (about two-thirds of city dwellers), property tax may be invisible, but its distorting effects ripple through their monthly bills.

The politics are equally tangled. Any attempt at reform raises hackles: change the rates, and someone’s tax bill rises; adjust the classes, and entire voting blocs howl in protest. Progressive pols demand relief for renters and the working class, while well-heeled homeowners clutch their current windfalls. “Don’t tax you, don’t tax me—tax the one behind the tree” would fit right in as a slogan at City Hall hearings.

Why reform is so hard, here and elsewhere

Other American cities also labour under antique property tax regimes, but few can match New York’s patchwork of privilege and penalty. Attempts at reform have foundered repeatedly: Mayor after mayor—Bloomberg, de Blasio, and now Mamdani—has eyed the Rubik’s cube of real estate taxation, only to shrink before a host of vested interests and Albany’s legislative roadblocks. The 1981 state law enshrines class categories and caps annual increases, providing ample legal cover for inertia.

The economic consequences are not confined to household budgets. A system built on caprice undermines trust, deters efficient land use, and weighs on the city’s broader appeal to investors and businesses. When opulent residences are taxed more gently than modest flats, capital tends to cluster in high-end markets, pushing up prices and entrenching inequality.

Comparisons with cities abroad only underscore New York’s oddness. London ties its council tax to out-of-date metrics, but at least the bands are transparent and openly debated. In Berlin, property owners face annual revaluations, but assessment approaches are uniform, if not always popular. New York’s stealthy transfers—hidden in rents or shielded by weirdly low assessed values—are singularly opaque.

We reckon the calls for reform will grow only louder in the years ahead. Property taxes remain the city’s fiscal backbone, and clinging to an inequitable, creaking regime bodes ill for both social cohesion and economic dynamism. Yet real change will demand hard political choices: either redistribute the burden more equitably—wounding the well-connected—or make peace with the status quo and its multiplying distortions.

As Mayor Mamdani stares down a gargantuan budget gap, the temptation is to paper over the cracks with another across-the-board rate hike rather than address the structure itself. But New Yorkers deserve better than a tax system that rewards luck and location over logic and fairness.

If New York aspires to remain a city for all, not just the gilded and the well-located, it must finally untie the knots in its own revenue regime. Until then, property tax in the five boroughs will continue to confound, confound—and quietly, inexorably, enrich some at the expense of many. ■