IPTI | Property Tax in the News – January 2025

USA

California: Wildfires – how homeowners can receive financial help

Property owners whose homes or buildings were damaged or destroyed by the extreme windstorms and wildfires may qualify for temporary tax relief, L.A. County officials announced.

Under the Misfortune and Calamity Property Tax Relief program, property owners can receive temporary tax relief with adjustments made to reflect the reduced value of the property until repairs or rebuilding are completed, according to the County Assessor’s Office.

The damage must exceed $10,000 in the current market value of the property, and claims must be filed within 12 months of the date of the damage. To download claim form ADS-820, or obtain more information, property owners can visit assessor.lacounty.gov/tax-relief/disaster-relief or call 213-974-3211.

“Our hearts are with everyone impacted by this disaster. The Assessor’s Office is here to help and we remain committed to providing the resources and support those in need. Please do not hesitate to contact us with any questions,” County Assessor Jeff Prang said in a statement. “Together, we will overcome these challenges and work toward rebuilding stronger, more resilient communities,” he added.

The Assessor’s Office has ceased all in-person operations at their sites through the end of the week to ensure the safety of employees and county residents. Services can be accessed online at assessor.lacounty.gov.

Prang said staff will be present at local assistance centers established by the county, which will provide guidance and resources to property owners. The office will also work to expedite Misfortune and Calamity claims for property tax relief.

Meanwhile the California Department of Insurance has shared tips for evacuees. Residents under mandatory evacuation because of wildfires could be eligible for evacuation-related expense reimbursement under their current insurance policy.

State officials remind Southern California residents to obtain a complete copy of their insurance policy, take note of additional living expense limits, track all additional expenses and document all conversations with their insurer/adjuster.

Councilmember Traci Park called the wildfires a “tragic and devastating reminder” of how the city and county of LA has not invested enough in critical infrastructure.

Additional living expenses coverage typically includes food and housing costs, furniture rental, relocation and storage and extra transportation expenses, among other costs.

New York: Property Tax Incentives and Abatements Make Development Feasible

The authors write “Commercial investors in real estate value predictability. New York is a notoriously challenging environment for development, where the entitlement process and taxes are the most common culprits. Investors ask, what is the likelihood the project get approved and how long will it take, and what will the carrying costs be in terms of real property taxes?”

New York also competes with low- to no state income tax states like North Carolina and Texas, which provide benefits for corporations and the employees they may relocate. Property taxes can be a tremendous disincentive to commercial development, especially where locations can be fungible depending on the use. Amazon, for example, does not need to locate its East Coast headquarters in Long Island City when Virginia can offer comparable educated and skilled work force for a fraction of the tax burden (not to mention an overall more business friendly environment).

Incentives can mitigate the chilling impact of high property taxes in New York especially by providing more predictable escalations over time. There are various types of incentive programs across New York based on property type and geographic location. The implementation is as nuanced and location specific as property taxes themselves. Virtually no large project gets done anywhere in New York without deploying some type of property tax related incentive.

To characterize incentives as a corporate giveaway is myopic, ignoring the fact that taxes are much higher than in other parts of the country and incentives are an important means of stimulating job creation and the local economy. Most of all, these incentives combat the net loss of residents to other states, considering that New York is top of the list in emigration.

Amazon was offered $3 billion in tax incentives for its Long Island City project yet chose northern Virginia where little to no incentives were offered. The incentives were the primary reason New York remained in the conversation for as long as it did. Once Amazon experienced political pushback over the incentives and a lengthy and likely losing public relations effort loomed, Amazon abandoned the Long Island City project altogether. For those who would argue that the Amazon story is unique and that New York does not need to offer incentives to spur new development, recent history proves the contrary.

Section 421-a of the New York Real Property Tax Law (RPTL), entitled “Affordable New York Housing Program”, was a long-standing exemption which provided relief to developers of certain multifamily dwellings that expired in 2022. The expiration chilled the number of permitted units and proposed new multifamily units at a time when New York City’s housing crisis is widely recognized. It has been widely reported in publications from The Real Deal to The New York Times that new project filings dropped precipitously after the expiration.

However, after Governor Hochul and state lawmakers agreed to extend the deadline for completion of projects entitled under 421-a and a replacement program under a new RPTL Section 485-x, stalled projects restarted and new filings increased. Section 485-x was one component of some recent New York City-focused legislation meant to incentivize the creation of additional dwelling units. A so-called “moonshot” goal of 500,000 new residential units over the next decade has been set.

Section 485-x, like its predecessor, provides exemptions based on a minimum percentage of affordable units, with affordability being tied to a calculation of average median income (AMI) in a certain area, and makes rent stabilization permanent for certain limited units.

The State Legislature also passed a new section RPTL 467-m, which provides substantial multidecade exemptions for the conversion of commercial buildings into residential units that include an affordable component. This sits at the crossroads of dual crises affecting many parts of the state: the lack of sufficient affordable housing and the obsolescence of traditional office buildings in the age of remote work. The law provides enhanced incentives for applicants who secure permits prior to June 2026, emphasizing the acute nature of the housing crisis, and sets formulae tied to AMI.

Density bonuses have also been provided under the recent City of Yes zoning amendment legislation, specifically the Universal Affordability Preference. Bonuses will be permitted if the extra space is exclusively for permanent affordable housing, and if the bonus is more than 10,000 square feet. Twenty percent of the units must be for households making only 40% of the AMI, which broadens the scope of who can afford these units.

Recent incentives activity has been dominated by New York City’s efforts to improve both market and affordable housing stock. Legacy incentive programs available across the state include traditional payment in lieu of tax (PILOT) agreements offered by local industrial and economic development agencies and business improvement exemptions under RPTL Section 485-b.

A common, and sometimes controversial, mechanism for providing new development incentives statewide is through local industrial and economic development authorities created by the General Municipal Law and Local Authorities Law. Bonds are sold to finance approved projects, which are technically owned the authorities and thus exempt from real property taxation.

Other inducements given to developers include sales tax exemptions and mortgage tax abatements. Agreements are entered into with the developer to make payments in lieu of taxes. The PILOT payments may be less than market taxes but are almost always more than the taxes being paid on a vacant or underdeveloped parcel. Temporary construction jobs and permanent new jobs are also created and are a statutory and contractual prerequisite to the agreement. There are also benefits derived to the area of the redevelopment, which often spurs additional improvements and generates additional new jobs

The controversy involving these projects lies in the exemption and the fact that the PILOT payments are less than what the taxes would otherwise be for at least some part of the agreement term. Press critiques occasionally result, and school districts may sue over “lost” revenue, citing the delta between what the taxes would have been “but for” the PILOT agreement. However, this ignores the reality that most large projects will not be built due to the high rate of New York taxation. On whole, PILOT agreements can bring transformative change and certainly increase competition.

Section 485-b of the RPTL provides a business improvement exemption for new construction or enhancements to existing property. It is a declining 10-year exemption measured against the increased assessment resulting from the improvement that exempts 50% of the increased assessment in year one, 45% in year two, and so on. This is an as-of-right exemption if a minimum of $10,000 is spent, the application is filed within one year of the issuance of a certificate of occupancy/completion and the improvement results in an increased assessment.

The most significant limitation on the efficacy of this exemption is that the statute provides opt outs for local taxing jurisdictions, so that the exemption is not necessarily available in a particular jurisdiction for any property within the district. If, for instance, a school district has opted out, and because school taxes can often be some eighty percent of the tax burden, this can significantly dilute the benefits.

There is also some crossover between Section 485-b and PILOT agreements. Some local industrial development agencies have adopted a 485-b type structure for PILOT agreements, in which the inducement takes the form of an amended schedule. For instance, a payment schedule longer than 10 years may decline year over year more generously than provided by 485-b. This effectively allows taxing districts that have opted out of 485-b to opt back in on a particular project by contract.

The state has also used exemptions to foster development of certain project types of larger public interest. Exemptions for solar and green projects are available under the RPTL, mainly Section 487. These inducements can make this type of investment economically viable where they otherwise might not make sense. These investments can even be imposed on owners as New York City has done with Local Law 97 (carbon emission targets for buildings over 25,000 square feet beginning Jan. 1, 2024). The RPTL’s solar exemptions can serve to mitigate these costs.

New York is among the highest cost, highest regulation states. Property owners and their counsel should be familiar with the range of incentives options available to enhance the viability of projects and improvements.

 

North Dakota: Governor Armstrong unveils bold property tax plan
North Dakota Gov. Kelly Armstrong unveiled a plan Tuesday that aims to eliminate property taxes for most homeowners within a decade.

In his first State of the State address, the Republican also signaled support for education savings accounts and public charter schools, pledged to address overcrowded prisons and jails and committed to prioritizing behavioral health services.

Reforming property taxes ought to be the Legislature’s first priority, Armstrong said, to ensure home ownership remains affordable. Key points of his plan include:

• Increasing the primary residence tax credit from $500 a year to up to $1,550 for the first year.
• Funding the program with Legacy Fund earnings. As the fund grows, homeowners would see
  larger refunds each year, putting most homeowners on a path toward zero property taxes
  within a decade.
• Establishing a 3% annual cap on local property tax budgets. The cap applies to all types of
  property, not just residential.
• Cities, counties, schools and park districts could carry over unused increases for up to five
  years in order to plan for larger projects.

Armstrong addressed pushback the caps are likely to receive from local government leaders.

“And to those who say the state shouldn’t be capping local budgets, when this package is approved, the state will be paying for over 50% of the local share of property taxes,” Armstrong said. “We absolutely have a say in their budget growth.”

The proposal follows a citizen-led effort that sought to eliminate all property taxes based on assessed value. Although voters rejected the ballot measure in November, they have continued to complain about property taxes being too high.

“Recognizing the frustration of our constituents and using the expertise and background of our legislators, we are offering the most aggressive, durable and responsible plan to reduce property taxes that has ever been proposed,” Armstrong said.

 

Lawmaker reaction

Rep. Craig Headland, R-Montpelier, chair of the House Finance and Taxation Committee, called Armstrong’s property plan a “great start.”

Headland said he doesn’t know if a 3% local property tax cap will be in the final legislation, but his committee will begin to iron out the details.

The North Dakota Association of Counties has traditionally opposed capping property taxes, citing concerns that the limits infringe on local government.

Aaron Birst, executive director, said being able to carry over unused increases “seems to be moving in the right direction. I’m interested in exploring how that could be done.”

Rep. Scott Louser, R-Minot, who also has been working on a property tax reform bill, said he has sensed momentum building for property tax caps. “What this does is encourage prudent spending,” Louser said.

Sen. Josh Boschee, D-Fargo, assistant Senate minority leader, called Armstrong’s property tax proposal “progressive.” Boschee, a real estate agent, said he’s pleased the plan would eliminate the need for homeowners to apply every year.

 

EUROPE
France: Revaluation of property data used to set local taxes delayed in France but concerns
continue

A reform of the valeurs locatives cadastrales, a theoretical annual rental value assigned to every property, has been planned for several years

A major reform of local property tax has been postponed again but worries continue over this–especially for homeowners whose local councils have put up their rates in recent years.

The reform concerns the calculation of the valeurs locatives cadastrales (VLC), a theoretical annual rental value assigned to every property.

It is eight years since we first reported on trials into re-evaluating VLCs, meant to lead to nationwide changes from 2018. In 2021, a new deadline of 2026 was set, now moved to 2028.

For many owners, it will mean higher bills for taxe foncière (TF) and waste collection as well as taxe d’habitation on second homes or tax on empty properties, although some will see reductions.

VLCs form the basis for the taxes, with local council percentage rates being the other element.

While VLCs are meant to relate to rental values, no proper revaluation has been carried out since 1970.

They rise each year nationally, based on the previous year’s inflation. Otherwise, they are only adjusted for a property when work is carried out, such as an extension or new pool.

This means that in many cases they bear no real relation to property values, and discrepancies exist–owners of some small new houses might pay more TF than some owners of grand old maisons de maître.

TF is also low in parts of some cities that have been gentrified.

 

Increases set to be phased in

A 2020 study by the IPP institute estimated that revision would see rises of up to 15% on average for properties built before 1950, reaching 20% for some built before 1920, and reductions of up to 16% on average for properties from the 1960s-70s.

In 2016, an official said the aim was not to set VLCs at market rates, but to ensure they reflect fairly the desirability of a property or area today.

The latest plans include ‘coefficients’ meant to smooth out the difference between real market value and the old VLCs. The aim is to stop “an explosion” in tax bills, said Sylvain Grataloup, president of property owners’ group UNPI.

Those facing significant changes should also see them phased in over a number of years. “But even at this stage, there are no rules set out on how this will be applied,” Mr Grataloup said.

The new VLCs will be based on an assigned value per square metre, which will vary by geographic area and property type. Current plans suggest only ‘exceptional homes’ will be assessed individually, which raises questions as existing VLCs take account of comfort and amenities.

From 2025, landlords will be asked to declare actual rents they receive, and this data will be used for the recalculations. In future, VLCs are meant to continue to evolve in line with rents. UNPI figures show that TF bills have risen 32.9% on average over the past 10 years.

United Kingdom: Supermarkets blast ‘punitive’ business rates

• Retailers face an increase in business rates in April
• Barrage of other costs imposed by Chancellor will also kick in
• This includes increase in NI paid by employers and rises in minimum wage

Britain’s biggest supermarkets have ramped up pressure on Rachel Reeves to overhaul the ‘punitive’ business rates regime. Retailers are facing soaring costs in the wake of the Chancellor’s Budget in October.

And now, the bosses of Tesco and Sainsbury’s said looming increases to the levy – which is based on the value of a property and therefore hits bricks-and-mortar stores harder than online operators–could make large sites unviable.

Retailers, from independent shopkeepers to nationwide chains, face an increase in business rates in April alongside a barrage of other costs imposed by Reeves.

This includes the increase in National Insurance paid by employers and inflation-busting rises in the minimum wage. In total, retailers are facing a £7billion rise in costs and are calling on Reeves to ease the burden by reforming business rates.

Announcing a bumper set of Christmas trading figures, Sainsbury’s chief executive Simon Roberts described the levy as a ‘fundamentally difficult and unfair tax on retail’.

He said it will have to ‘look very carefully’ at future hiring decisions given the increased costs the business is facing.

‘The size and scale of costs coming at the industry is a real concern,’ said Roberts. ‘We’re going to do everything we can to mitigate the impact, but there’s no doubt that there’s a lot of inflation building in the system.’

Ken Murphy, his counterpart at Tesco, warned ‘onerous’ rates bills were putting ‘the integrity’ of the High Street at risk – particularly in the poorest areas.

The issue has been highlighted by the Mail’s Save Our High Streets campaign. Reporting a 6.8 per cent rise in sales at Sainsbury’s for the six weeks to January 4, Roberts sounded the alarm over the Chancellor’s plan to whack up the business rates charged on larger sites so smaller shops pay less. The idea is to snare big warehouses used by the likes of online giant Amazon.

But it is feared the move will backfire as it will also hit large stores. Roberts said: ‘There are big parts of the UK where the supermarket plays a fundamental role at the heart of a community, and we need to make sure that the reform of business rates makes the ongoing viability of those locations really clear.

‘This is a fundamentally unfair tax, which all retailers would expect and ask the Government to look at urgently and across the sector to make sure that we don’t see the continued burden that this brings.’

Murphy said big grocers and department stores, from Tesco and Morrisons to Marks & Spencer and John Lewis, are ‘anchor tenants’ that attract shoppers to the High Street.

‘Those anchor tenants are often critical to maintaining the integrity of that High Street,’ he said. ‘The risk is that more and more of those large retail sites become unviable.’

This is a particular concern for the poorest areas with a struggling High Street, he said.

Sainsbury’s celebrated its ‘biggest ever Christmas’ as party food and bottles of fizz flew off the shelves. The supermarket will increase staff pay by an inflation-busting 5 per cent this year, which will see the minimum annual pay for a full-time worker outside London increase from £22,882 to £24,026 by August.

Bleak figures recently showed more than 13,000 shops closed for good in 2024 – an increase of 28 per cent on the year before.

Industry experts at the Centre for Retail Research (CRR) warn this will get even worse in 2025, with around 17,350 shops are predicted to shut down.

This would be the highest figure since the CRR started compiling its records in 2015.

 

Compliments of the International Property Tax Institute – a member of the EACCNY