There are only two things that are absolute and certain in life, and that’s death and taxes… Here on Long island, we residents pay way more than our fair share in property taxes as compared to the rest of the nation. Nassau County ranks #5 in the country with regards to property taxes, and Suffolk is #16. Nassau county has recently declared that it will be reassessing every property in the county, thereby changing what everyone pays in taxes. All in, that’s about 400,000 properties in total. It is said that 52% of the properties in the county will have higher property taxes, and 48% will get property tax reductions when this is all said and done.
To understand why our taxes are so high to begin with, I think it’s important to know where most of our tax dollars are going.
Most of those property taxes go towards the schools, which to be frank is a great reason to pay taxes (if we were searching for reasons to pay taxes, that is). Most of Long island is an end user real estate market, meaning that people come here to lay down roots and raise families. One of the most important things to consider when raising children is where those kids are going to go to school. Here in Nassau county, we have the number one rated public high school in the county, Jericho. Our public schools rival most top private schools around the country. It’s not until you reach The Hamptons where you’ll see property taxes drop to almost nothing. You can buy a multimillion-dollar home in the Hamptons with property taxes of under $10,000. The reason for that is simple, the public-school system is very small. That market is a secondary home market, and most people just are not sending their kids to school out there. So outside of clean towns, paved roads, garbage pick-up, and anything else you can think of that your taxes should be paying for – our school systems are the main driver of that national statistic.
So, what’s Laura Curran and her administration up to in Nassau County? To understand why she’s doing what she’s doing you first have to understand how things worked previously. Since the freeze of the tax roll in 2011, homeowners would grieve their taxes every year to pull them down. Most homeowners who practiced this with a tax grievance lawyer every year, ended up paying far less than others in their neighborhood who weren’t doing this. So, within a given neighborhood, you could have two people that live right next to each other with the same house. Let’s say one neighbor grieved every year and the other never grieved. The neighbor who was grieving every year could be paying five, ten, fifteen thousand less – depending on the neighborhood. Is that a fair system? I don’t believe it is. So what Laura is trying to do, is to make everyone pay their fair and equal share. Makes sense, but it comes at a terrible time.
With the recent tax plan change I believe this is going to be a problem – Specifically in the higher end of the market. It is my belief that the higher end homes were likely the ones that were grieving. The reason being is that people with more money are typically more efficient with their money. They have better accountants and lawyers that make them more efficient. They’re just more likely to be paying attention to something like this rather than not knowing about it at all. So, if they’re the ones who were paying lower property taxes because they knew how to play the system, then they’re going to be the ones who are going to see the highest jumps in assessments. If they have the higher jump in assessment, then it’s likely they’ll have greater property tax bill increases.
The luxury market on Long Island has been hurting for a little while now. There are many different reasons people have proposed as to why this may be the case. One of the most common reasons for believing that the luxury market is where it is; is because of the $10,000 Cap on SALT deductions. Like I mentioned earlier, people who have money are very strategic about where they put their money. If there is no more tax benefit to owning highly taxed luxury property, then the result is that people just won’t buy high end property (unless there is an emotional or personal reason to do so). Their money will flow into a different asset class that has tax benefits.
Taxes in our luxury market can get to be insanely high. I’ve personally seen taxes of $50,000 all the way up to $250,000 for certain very high-end properties on the island. In a town like Garden City, if taxes go from 25k to 30k or 30k to 40k, that’s a problem. This is going to drive the prices of these assets down, over time. Taxes are a fixed cost to owning a home – and what buyers can afford or what they’re willing to pay is usually a fixed number. If the taxes add $500-$1,000/month to someone’s monthly carrying costs, that’s going to be factored into buyers offering prices.
What Nassau County Legislation is doing is the right thing. I believe they’re trying to hit the reset button so that everyone pays their fair share. What they’re not considering is that it’s being done at a bad time when we no longer can deduct our taxes. Will it influence home values? I think it’s very likely. Politicians may be able to balance their county budget through this reassessment, but they’re ultimately going to devalue the mid-higher end range homes in the near term.