I. The History of Property Taxation in New York City
Prior to the 1970s, property in New York State was often assessed at a fraction of its full market value,1 despite a statutory requirement that assessments reflect full value.2 This approach was contested in the 1975 case, Hellerstein v. Town of Islip. The challenge was brought by law professor, Jerome Hellerstein, and his wife, Pauline Hellerstein, who argued that the fractional property assessment of their bungalow in the Town of Islip in Suffolk County, New York, was a violation of Section 306 of the Real Property Tax Law.3 The Hellersteins’ grievances rested less on the total tax amount and more on the lack of uniformity of property assessments. Such a system of fractional assessed values also prevailed in New York City with single family homes, for example, being assessed at about 25 to 30 percent of their property’s actual full market value, while commercial and apartment properties were assessed at about 80 percent of their value.4
In 1975, the New York Court of Appeals decided in favor of the Hellersteins. The court ruled that the existing system created an unfair distribution of tax burden, and mandated that all real property be assessed at full market value throughout the state.5 The Hellerstein decision required a complete overhaul of the 200-year-old practice of property assessment, with significant implications for homeowners. The State Legislature responded to the Hellerstein decision in 1981 by essentially legalizing the then current system in S7000A.6 That legislation created a unique structure for New York City and Nassau County, dividing property into the four classes, and establishing the class share system, which allocates the tax levy amongst the four classes.7
Crucially, to mitigate the effects of the Hellerstein decision on homeowners, the bill set statutory caps on how much an individual assessment for Class 1 properties could increase annually (6%) or over a five-year period (20%).8 Over time, the result was to advantage homeowners in neighborhoods with rapidly appreciating property values by restraining assessed values from increasing in line with actual values year after year. Those benefits compounded over time. Conversely, in areas where property values have grown more slowly, residents tend to face higher tax burdens because their uncapped assessments have been closer to actual market values each year.
S7000A also required that coops and condos be valued based on comparisons to rental buildings, rather than other sales of comparable units,9 resulting in a systematic undervaluation of condo and coop units, particularly at the higher-end of the market. Together, the features of S7000A are responsible for many of the present-day disparities in New York City’s property tax system.
More recently, in 2017, a coalition of property owners, renters, and other advocacy groups known as Tax Equity Now NY LLC (TENNY) sued New York City and State, alleging that the property tax system has a discriminatory disparate impact and violates the Fair Housing Act, particularly due to assessment caps and the undervaluation of high-end coops and condominiums. The plaintiffs argued that these features shift tax burdens onto lower-value properties and rental housing, leading to disparities in the tax burdens that correlated with the racial and income characteristics of neighborhoods.10 A lower court dismissed the case, but New York State’s highest court ruled in 2024 that TENNY’s claim could go forward against the City but not the State.11
II. Exemptions, Abatements, and Geographic Distribution of Large Rentals’ Tax Burdens
When reviewing the ETRs of all large rental properties at the neighborhood level, it appears that properties in some neighborhoods pay a lower ETR than those in others (Figure 1). For example, large rental properties in Bedford-Stuyvesant, Brooklyn, and Morrisania-Crotona Park East, the Bronx, have an ETR of 3.31 and 3.41, respectively. However, those neighborhood differences are driven by properties with tax exemptions and abatements. When reviewing the ETRs of properties without an exemption or abatement, there are no geographic disparities among large rentals’ ETRs.
Figure 1:
Some of the major tax exemption and abatement programs that drive those geographic differences in ETRs for large rental properties include the J-51 and 421-a programs. In Table 1, we provide a short description and the Fiscal Year 2025 recorded expenditures for the main multifamily residential property exemption and abatement programs in New York City.
Table 1: Major Tax Exemption and Abatement Programs
| Select Major Exemption and Abatement Programs for Residential Properties (FY 2025) | ||
| Program | Description | FY25 Expenditure ($M) |
|---|---|---|
| City Programs | — | $4,899.6 |
| Housing Development | — | $2,738.6 |
| J-51 | J-51 Tax Incentive program is an as-of-right property tax exemption and abatement for the renovation of residential apartment buildings. All units are subjected to rent stabilization for the duration of the benefit. | $233.2 |
| 421-a | 421-a is a partial property tax exemption for the new construction of multifamily housing. The program has been changed several times since its inception in 1971, but the most recent version requires 25-30% of units to be income restricted. The length of benefits depends on location, commencement of construction, and affordability in the project. | $1,957.8 |
| 420-c | The 420-c tax incentive is a complete or partial tax exemption for low-income housing development using low-income housing tax credits (LIHTC). Projects must be majority-owned by a non-profit organization. | $479.4 |
| DAMP | The DAMP (Division of Alternative Management Programs) exemption provides a partial property tax exemption for buildings foreclosed for tax nonpayment, typically by qualifying Housing Development Fund Corporations (HDFCs). Buildings must comply with affordability requirements to recieve the exemption. | $55.6 |
| Individual Assistance | — | $1,089.4 |
| SCRIE | The Senior Citizen Rent Increase Exemption (SCRIE) Program exempts qualifying low-income renters who are 62 or older from rent increases or coop charges that exceed a third of their income, administered as a real estate tax credit to landlords. Seniors must live in Mitchell-Lama housing or rent regulated buildings to qualify. | $139.0 |
| DRIE | The Disability Rent Increase Exemption Program (DRIE) functions similarly to SCRIE, except instead of meeting age requirements, tenants must receive eligible state or federal disability-related financial assistance to be eligible for the program. The same portfolio requirements and administrative process from SCRIE apply. | $30.5 |
| Veterans Exemption | The Veterans Exemption reduces assessed property values for eligible veterans and their family members. Benefits start with a 15% reduction in assessed value, but can increase if applicants meet other criteria. | $33.6 |
| Class Two Coop/Condo Partial Tax Abatement | The Cooperative and Condominium Property Tax Abatement reduces the property taxes of eligible condominium and coop owners. The benefit amount varies from 17.5% to 28.1% depending on the assessed value of the residential unit. | $694.6 |
| Other State Programs | — | $1,035.6 |
| Limited-Profit Housing Companies (Mitchell-Lama Housing) | The Mitchell-Lama program provides low-interest mortgages and property tax exemptions in exchange for limits on profits, income caps for tenants or cooperative owners, and supervision by New York State Division of Homes and Community Renewal (HCR) and the New York City Department of Housing Preservation and Development (HPD). | $415.9 |
| Housing Development Fund Companies (HDFC) and Special Incentive Programs | HDFCs encompass a range of properties developed by nonprofits, and they benefit from a number of exemption programs, including the Article 11 Tax Incentive program. Article 11 provides a complete or partial exemption from property tax for up to 40 years for new construction or rehabilitation of affordable housing. Projects that receive subsidy under Article 18-A of the Private Housing Finance Law for the construction or rehabilitation of low-incomerental housing may also qualify for property tax benefits. | $453.3 |
| Other Programs | If a housing development or rehabilitation project is on land that was owned by the city and designated as an Urban Development Action Area Project (UDAAP) by the City Council, it is eligible to receive an exemption from real estate taxes on the assessed value of improvements for up to 20 years. For example, the 1,300 Nehemiah Homes that were built through the East New York I Urban Renewal Plan received this exemption. Section 422 (New York State Real Property Tax Law) grants real property tax exemptions to non-profit housing companies that own and operate housing and facilities for a target population. | $21.5 |
| Public Agencies | Public agencies are exempted from property taxes for land owned by a public authority. Some of the most notable residential property exemptions held by public agencies in FY 2026 are NYCHA ($760.7 M in gross tax expenditure), the Urban Development Corporation ($184.2 M), and the Battery Park City Authority ($157.2 M). | $1,102.1 |
| Source: NYC Department of Finance, NYU Furman Center | ||
Footnotes
- [1] Hellerstein v. Islip, 37 N.Y.2d 4–5 (1975).
- [2] Id. at 15.
- [3] Id. at 3.
- [4] New York City Independent Budget Office. (2006). Twenty-Five Years After S7000A: How Property Tax Burdens Have Shifted in New York City. https://www.ibo.nyc.ny.us/iboreports/propertytax120506.pdf.
- [5] See Hellerstein, 37 N.Y.2d at 15.
- [6] New York City Advisory Commission on Property Tax Reform. (2020). Preliminary Report. https://www.nyc.gov/assets/propertytaxreform/downloads/pdf/NYC-AdvCommission-Prelim.pdf.
- [7] Act of Dec. 3, 1981, ch. 1057, 1981 N.Y. Laws 219 (McKinney).
- [8] Id.; N.Y. Real Prop. Tax Law § 1805(1).
- [9] N.Y. Real Prop. Tax Law § 581.
- [10] Tax Equity Now NY LLC v. City of New York, 42 N.Y.3d 1–2, 2024 NY Slip Op 01498 (Court of Appeals of New York. 2024) [hereinafter TENNY].
- [11] Id. at 39–40.