IF THE State Legislature wants to get credit for fixing something that's truly broken, it can work on the laws that define how condominiums are assessed and taxed in New York.
It's a complicated, irrational and unfair mess with a rather simple answer. Condos should be assessed and taxed as if they were one-family homes. Period.
For most communities, the state law requires condominiums to be assessed in a way that happens to produce too low a valuation. Instead of the assessment being based on market value -- as assessments of other types of property are -- a local government's assessor must base the value of a condo on an income approach.
The assessor must try to figure out what a condo would produce in income if it were rental property -- a typical apartment. Some assessors calculate the result is an assessment that is 25 percent to 40 percent lower than it would be if the condo were assessed the right way, with market value as the guide. Others think the spread could be even higher.
Condos, like other real estate, are readily bought and sold, so a particular unit's market value could be determined with relative ease by looking at sales prices of comparable condos. It wouldn't be tricky.
Using the income approach gives condo owners a big, undeserved break. At the same time, it unfairly shifts part of the local tax burden to other properties. Condo owners win; everybody else loses.
No wonder some owners of one-family houses are banding together with neighbors to be declared a condominium complex, an
otherwise irrational change.
The Amherst assessor, Harry Williams, believes his much-developed town loses about $150 million from its tax base because of the way the law requires its condos to be assessed. If that amount were added to the tax base -- as it ought to be -- other property owners would pay less in town taxes.
Condo taxing is even stickier in communities, such as Buffalo, that have chosen to use a dual tax-rate system, with the so-called homestead rate applying to one-, two- and three-family homes and a non-homestead rate to other properties. Commonly the non-homestead rate is substantially higher.
New condos in such places are assessed at market value and charged the homestead rate for city taxes. Great. That's exactly the right way. For county taxes, however, an income-approach assessment is used because it's necessary to coincide with the rest of the county.
But in city apartments converted to condos, units must be assessed by the income approach -- a break for owners -- and taxed at the non-homestead rate, which is very bad news for them. The law is wrong both ways.
The folks in Albany need to take a deep breath and get their senses back. Condos are really nothing more than one-family homes that happen to be attached to each other in one form or another.
They should be assessed on the basis of market sales of comparable units. Just like a regular house. And, in communities with two tax rates, the homestead rate should be used. Again, just like a regular house.
This time the simple way is the right way.