Property Tax Inequity’s Effect on Renters  <Keith Dumanski kdumanski, kpd286>
Abstract: 
This study will test the relationship between the property tax rate and the affordability of housing in New York City. The null hypothesis is that there is no relationship between the property tax rate and the share of New York City residents that are rent burdened, defined as allocating more than a third of their income towards rent. The alternative hypothesis is that there is a positive relationship between the property tax rate and the percentage of New Yorkers that are rent burdened.  
 
Introduction:
For over two decades, New York City’s political leaders and independent analysts have acknowledged that the City’s property tax system is fundamentally unfair and inequitable, imposing substantially unequal tax bills on similarly appraised properties that bear little relationship to properties’ actual market values. “The city’s tax set-up is widely acknowledged to be irrational, unjust and absurdly complex (1).”  As numerous City Council officials have explained, “the current system is rife with inequalities, with properties of similar value having very different tax bills” (2). The City’s own Department of Finance, which is responsible for the property tax system’s administration, likewise has criticized the system as a source of profound “unfairness and inequity (3).” As the Furman Center for Real Estate & Urban Policy at New York University (the “Furman Center”) recently explained, New York City’s property tax system not only “generate[s] enormous and persistent disparities in the taxes paid by condo and co-op owners across neighborhoods,” but also provides for “radically different tax treatment of equally valuable properties, depending on the use of the property and the form in which it is owned”(4).   
 
Throughout the United States, each State establishes its own conduct for ascribing and collecting property taxes.  Almost universally, the tax for each property is calculated as a measured “fair market value” multiplied by an assessment ratio multiplied by a tax rate.  States across the country do not subscribe to any uniform methods to measure these rates and therefore each variable is created varies widely.  As opposed sales and income taxes which are set on concrete values of the cost of an item or a salary, the value of property has fixed intrinsic value since its set by a market.  Therefore, jurisdictions have had to develop methodologies to value properties so they can collect taxes. This often includes measuring the size of the house, valuing how much it had previously been sold for, calculating rental income, looking at the prices of comparable properties or other artificial methods.  Due to the arbitrary nature of this, there has been significant scrutiny as to what constitutes fairness in assessing a property’s value.
 
Due to their size and complexity, New York City and Chicago are the only two city governments that establish their own property tax rates and assessment systems.  New York is the largest and most economically unequal city in the country, and New York’s property tax system is plagued by the same disparities and inequity that plagues its population.  I have spent several months assessing this data, as demonstrated in the attached visualizations. Major findings include:
 ·         The property tax system is inherently regressive and favors the owners of more expensive properties over property owners of lesser means on an increasing scale;
·         The system is structurally racist and discriminates against minorities by placing larger burdens on geographic areas with over 60% non-white population;
·         The system of assessing properties values is non-uniform and underassesses more expensive properties on an increasing scale;
·         Political adjustment to the system, such as abatements and tax caps have only further increased the inequity and caused more distress for New York City’s lowest valued property owners;
·         Since 2008, the city has continuously increased property taxes as percentage of the overall budget to unprecedented levels in modern history.  Traditionally the city has only raised property taxes as a percentage of the overall budget as an emergency measure during periods of economic recession.
 
In this study, I investigated how property taxes affect the cost of housing for rental units.  New York’s most vulnerable populations are renters since they cannot afford to purchase property. Since rental buildings pay a significantly larger portion of taxes I sought to determine whether a correlation exists between the property tax rate and the percentage of new Yorkers that are rent burdened. 
 
Data: 
I compiled a longitudinal panel dataset of tax and rent indicators in New York City using a variety of publicly-available resources. The New York City Rent Guidelines Board releases a yearly report entitled “Housing NYC: Rents, Markets and Trends” which is shared publicly on its website (5) and contains the average property taxes paid per apartment, the percentage of New Yorkers that are rent burdened, and the mean price of apartments for market rate and rental properties.  To prepare the data, I had to manually copy and paste the values into a table since it is not available through any automated processes. Historical tax rates are available through the New York City Department of Finance.
 
Methodology: 
 I ran a spearmans text to ascertain the relationship between the two variables of interest – the property tax rate (independent variable) and rent burden (dependent variable). This gave me
correlation=0.77142857142857146, pvalue=0.072396501457725942
.

 
Conclusions: 
This study fails to rejects the null hypothesis since the p value is .07 and is above .05 threshold and demonstrate with statistical significance that the correlation exists between property tax rates and rent burden level.
 
Future work: 
The findings of this test will be used to help support me effort to make property taxes equitable in New York.  

 
Bibliography/ links
1.    Dana Rubenstein, An Indescribable System, Threatened, Politico.com (Apr. 2, 2014)
2.    Michael Howard Saul, New York Council Proposes To Overhaul Property Taxes: New Commission Would Make System More Equitable, Wall St. Journal (Apr. 23, 2014).
3.    Yoav Gonen, New Finance Commish: City Property-Tax System Needs Change, N.Y. Post (Apr. 9, 2014).
4.    Shifting The Burden: Examining The Undertaxation Of Some Of The Most Valuable Properties In New York City at 3 (July 2013) 
5.    http://nycrgb.org/html/research/products.html