Assemblymember Wallace: Abuse of Condo Tax Loophole Increases Taxes for Erie County Residents

Developers claim condo tax deduction for free-standing, single-family homes, shifting the cost of millions in owed taxes from wealthy homeowners and developers onto everyone else

Today, Assemblymember Monica P. Wallace (D-Lancaster) announced the introduction of legislation (A7608) to combat the abuse of a condominium tax loophole, which has allowed free-standing, single-family homes to receive property and school tax breaks of 40 percent or more.

Condominiums have enjoyed special tax status since the 1960s. Originally adopted to promote homeownership in the New York City area, that status allows condominium associations to be taxed based on the units’ potential rental income rather than the sale value of each home.

But in recent years, developers have begun exploiting that tax status to designate single family homes as “condominiums,” allowing those homeowners to shift their property tax burden to the rest of the community.Currently, more than 100,000 condominiums across upstate New York enjoy condominium status, including tens of thousands of single-family homes. Many of these homes are classified as “estate” properties due to the size of their homes and lot.

“When developers exploit this loophole, they effectively shift the property tax burden off of these wealthy estate homeowners and onto every other taxpayer in our region,” said Assemblymember Wallace.Yes, when those homeowners exit their condominium community, they still drive on our town and county roads, rely on local firefighters and police officers for protection, and send their children to the same schools. But they are paying substantially less to do so, causing everyone else to pay more.”

This misuse of condominium status occurs across New York State, but there are particularly egregious examples right here in Western New York.On Blackstone Court in Lancaster, for example, estate homes located on multi-acre lots are being sold as “condominiums” and afforded significant tax reductions. Some of those homes have sold for over $1 million, but are being taxed at a fraction of that value. When that happens, everyone else in Lancaster picks up their tab. 

“In some cases, owners of million-dollar mansions are receiving as much as 50% off their assessed value, which raises the taxes on everyone else,” said Assemblymember Wallace. “It’s time we put an end to this unfair practice and stop soaking working-class households in order to subsidize luxury housing developers.”

To end this abusive practice, Assemblymember Wallace has introduced legislation to allow municipal corporations to assess free-standing single family “condominium” homes in the same manner as other types of residential real property.Thus, single family homes would be assessed at their fair market value, just like any other home in Lancaster, Cheektowaga, or elsewhere.

Wallace’s proposed legislation is supported by local assessors, who agree that the existing practice is unfair to other homeowners. “As the assessor for the Town of Lancaster, my job is to produce an equitable assessment roll each year, ensuring that all property owners pay their fair share of the tax burden,” said Town of Lancaster Assessor Rebecca Baker. “Yet the condo tax loophole unfairly gives some homeowners a large tax break at the expense of all other taxpayers. These property owners drive on the same roads, use the same fire departments, attend the same schools, as all other single-family property owners, yet they are seeing a reduction in their assessments between 35% and 50%.”

“This misuse of this tax loophole is grossly unfair and actively harms working class families and seniors by raising their tax burden,” said Assemblymember Wallace. “My legislation is intended to stop the misuse of this tax break. I urge my colleagues in the Legislature to join me in moving this legislation forward.”