2025 Theses Master's

Building Under Burden: Measuring the Effects Of New York City's Property Tax System on New Rental Construction

Ernestus, Marc-Eric

The real property tax is the single most important revenue source supporting cities in the United States and a window into the political machinations that underpin how a municipality functions. In the fiscal year 2024, New York City’s Department of Finance collected nearly $32.7 billion from property taxes, representing 30 percent of the city’s total revenue.

New York City property owners have paid taxes based on a fraction of their property’s real market value since the practice of levying taxes against first began in 1654. In a city of renters, the long-held practice of fractional assessments has produced unequal tax burdens that favor coops, condominiums, and one- to three- family homes. The city has relied primarily on tax exemptions to incentivize much needed new rental supply by alleviating the outsized operating cost borne from the city’s tax system.

This paper will study the burden that New York City’s property tax places on the city’s ability to produce new rental housing by modeling the yield on cost from different rental developments across NYC. Next, the model will measure the new 485-x tax exemption and the economics required to make it an effective incentive.