Lawsuit aiming to fix unfair NYC property taxes gets go-ahead from top state court

Parts of a long-running lawsuit challenging New York City’s “regressive” property tax system can move forward, the state’s highest court ruled on Tuesday — a move that could lay the groundwork for transforming how the city handles its largest source of revenue.

A coalition of real estate and homeowner groups called Tax Equity Now New York, or TENNY, originally sued both the city and the state. It claimed, among other things, that the taxation system “drastically” overassesses and overtaxes properties in communities of color compared with white ones.

In a 4-3 decision, the state Court of Appeals found that a lower court had made an “error” in dismissing the complaint in its entirety. The new ruling means some of TENNY’s original claims against the city — but not the state — have a legal path forward.

“Today is a great day for millions of New Yorkers who have been treated unfairly by the city’s unconstitutional property tax system,” TENNY Policy Director Martha Stark said in a statement.

“Finally, after decades of avoiding responsibility to fix a universally acknowledged problem and a seven-year legal battle, city and state leaders will be required to create a property tax system that is equitable and just for millions of renters and homeowners in lower-income and minority communities,” she added.

Politicians have long failed to deliver on promised property tax reforms. In Tuesday’s decision, Judge Jenny Rivera pointed out that the city and state “do not dispute that the system results in disparities,” but that “while these officials bemoan the situation, the city fails to act.”

One of the key TENNY allegations that the Court of Appeals said should “survive dismissal” was that renters — disproportionately people of color — pay higher rents because their owners have to cover higher taxes compared with condo and co-op owners, who are mostly white — and that the “disparate impact” violates the Fair Housing Act.

Another disparity TENNY pointed to was comparing properties in different parts of Brooklyn: namely, that homes in Canarsie are assessed at more than three times the rate of the same properties in upscale Park Slope. TENNY argued the setup benefits wealthier taxpayers “in neighborhoods with rapidly increasing property values.”

TENNY first filed its suit in 2017. It was thrown out in 2020 but in 2022, the highest court agreed to hear the case after an appeal.

Benjamin Williams, an attorney with Rosenberg & Estis, said Tuesday’s decision “will produce winners and losers.”

“Some property owners will see their property taxes go up, especially homeowners in more white areas. Others will see them go down, especially homeowners in more nonwhite areas,” he predicted. “This decision is certainly a step in the direction of property tax equality.”