But there is a much simpler, more elegant solution to lowering monthly costs for homeowners: cut property taxes. This solution will not distort the market with payouts to bad actors or violate the sanctity of contracts. And it would help stimulate the economy.
There is probably no place where property tax cuts are more urgently needed than in upstate and western New York — all the territory of the state outside New York City’s five boroughs and Long Island.
Today the once prosperous upstate economy is in tatters. It’s been in an economic decline for decades, giving much of it a Depression‐era feel.
A quarter of Buffalo’s housing stock is vacant and its poverty rate is twice the nation’s. The city has lost half its population since 1950. Syracuse, Rochester and Albany have shrunk by a third. Between 2000 and 2007, the region as a whole lost 32,000 jobs. Meanwhile, neighboring Pennsylvania gained 84,000.
One reason for this is that the region has become property‐tax hell. A look at the numbers tells the story. When every U.S. county is ranked according to its average property‐tax bill as a percent of home values, nine of the worst 10 are in upstate New York.
All housing markets are local and local government policies can have an enormous impact on property values. Higher property tax rates, for example, inevitably send home values downward. Why? A $6,000 tax bill adds $500 to a monthly mortgage, and simultaneously reduces the amount a buyer would be willing or able to pay for a home. Cut the tax bill and you help struggling homeowners hold onto their houses. And lower taxes allow would‐be buyers to spend more for homes.
High property taxes also discourage investment in new homes. Builders won’t build where property taxes drive buyers away.
The problem of heavy property taxes crushing fragile upstate economies has not gone unnoticed, just unsolved. A special Commission on Property Tax Relief, supported by Democrat Gov. David Paterson, recommended in August that local property tax increases be capped at 4% annually or 1.2 times the inflation rate — whichever is less.
That wouldn’t have cut taxes, but it would have moved New York toward a less oppressive tax system. And for a moment, it seemed that the idea might even take off when the state Senate passed a tax‐cap bill earlier this year. But the state Assembly voted instead to raise marginal tax rates on incomes above $1 million and use the proceeds to pay for property tax relief for low‐income homeowners. That standoff all but killed tax reform.
The force that shifted the legislature against tax reform was applied by public employee unions. Following the Senate vote, the New York State United Teachers (NYSUT) went to war. It suspended Senate endorsements for all who voted for the tax cap and threatened Assembly members with similar treatment. Along with other interest groups, NYSUT spent $1.85 million in anti‐cap TV and radio ads.