Two town houses in gated Smithtown communities offer similar features and amenities such as a pool and clubhouse -- but one costs less than half as much in property tax as the other. The reason? It's a condo.
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(Newsday) -- In Mount Sinai, an enclave of single-family homes offers good schools, ready access to a golf course -- and, because they're condos, less than half the tax bill paid by a comparably priced house outside their gate.
In Southold, officials have reluctantly decided only people 55 and older may live in a planned Cutchogue subdivision, because its 130 homes will pay less than half as much in school taxes as their neighbors do. That is because they're condos. After years of pleas from frustrated local officials about New York State's rules for taxing condominiums, state lawmakers in the waning days of the current session hope to give them the power to at least put the brakes on building any more homes with tax breaks like these. That legislation is ready for final passage, but it has powerful opponents -- developers and condo owners -- and its fate is unclear.
"We need relief for this -- it's not fair to the other property owners," said Southampton tax assessor Edward Deyermond.
Smithtown's assessor Gregory Hild agreed: "I've been shouting on this thing for years."
New York State passed its law for co-ops and condos in 1964, as people began converting urban high-rise rental apartments to private ownership. The law was meant to protect them from being taxed more heavily than their former landlord, by assessing them by the entire building's potential rental value instead of each unit's market value.
New York City and Nassau County do not experience the current disparities because they later adopted a tax code that taxes commercial property more than homes and classifies high-rise condos as commercial, explained Thomas Frey, executive secretary of the state Assessors' Association. Later changes to that system taxed condos of three stories or fewer like other homes.
But the rest of the state, including Suffolk County, did not adopt that system, Frey said. And only gradually did developers elsewhere realize the condo law could be used to cut tax bills by up to two-thirds on all kinds of new developments and even existing subdivisions, from Montauk to the Adirondacks to Buffalo. Those tax savings have allowed them to market the homes for much higher prices than they could otherwise get.
"Condos are a relatively new phenomenon outside of New York City until the past 15 years," Frey said. "You never heard of a problem in western New York with condos until five years ago, but it's a major problem out there now."
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