Valuation: how the number on the notice is set

Class 2 is valued by income, not by sales

Condominiums and cooperatives are Class 2 property. The Department of Finance values them by an income method, and that method runs well below open-market prices. It is why a threshold set at $1 million of city market value reaches apartments that would sell for several times that: the reported rule of thumb is that a $1 million market value corresponds to roughly a $5 million apartment.

The practical consequence is that the number that decides the surcharge is the one on the notice and on the assessment roll addendum. Not a broker's estimate, and not the price the unit last sold for.

Cooperative units: value by shares

A cooperative corporation owns the building, and shareholders hold shares with a proprietary lease rather than a deed to a unit. So the Department of Finance imputes a per-unit value: the building's market value multiplied by the unit's share of total shares, under Administrative Code 11-3205(f).

The surcharge on a covered cooperative unit is assessed against the cooperative corporation, not against the shareholder, and the corporation must forward notices to shareholders. Unpaid surcharge becomes a lien on the entire building, which is why a single unit's value is a building-wide question.

The threshold is a cliff

Once the threshold is crossed, the rate applies to the entire market value. Not the excess over the threshold: the whole value. The adopted rule states that where valuation exceeds the threshold, "the entirety of the property's value is subject to the surcharge".

One anonymized notice illustrates the size of that. Market value $5,268,000, annual surcharge $42,144.00, which is 0.80% of the full value and the first band on the one- to three-family ladder. Applied only to the $268,000 above the $5 million threshold, the same rate would produce a small fraction of that figure. Reading the value, rather than the distance above the line, is the whole exercise. Both ladders, with that worked example, are on how much is the surcharge, exactly.

July 1, 2028: Phase Two

From July 1, 2028, condominiums and cooperatives move from the income method to comparable-sales valuation, and a single $5 million threshold with the one- to three-family rate ladder applies. Two things move at once: comparable-sales values sit above income-method values, and the threshold rises from $1 million to $5 million.

The Phase One rates themselves are not what changes in 2028. What changes is which ladder condominiums and cooperatives sit on, and the valuation basis underneath it?