Recently, Airbnb has received a lot of heat from New York City and State officials, who have accused the company of driving up rents for residents by reducing the available housing supply. The state legislature has gone so far as to pass a bill levying fines of up to $7,500 against Airbnb users for listing their apartments “illegally” (as in, against a law pushed by the hotel lobby that prevents New Yorkers from renting out their own apartments); the bill sits on the governor’s desk awaiting his decision.
What legislators aren’t discussing is that one of the key reasons behind the high rents in Manhattan has nothing to do with supply and demand, but is government-imposed. As someone who has lived in and around NYC for much of his life, I’m well aware that taxes are high, but when my landlord raised my rent citing his increased property taxes, I did some digging and found that my landlord wasn’t bluffing: I was astounded at how high they actually are.
In Miami Beach, you can expect to pay 1.39% of your condo’s value every year. In San Francisco, it’s 1.18% for your house on the hill. If you like the thrill of gunshots on your way to work, Chicago’s tax rate is 1.86%.
But in New York City, you owe the city between 10.6% and 20.0% of your property’s assessed value, every year. For apartment buildings with more than 3 units, the rate is 12.9%.
Let’s put this in perspective. In the very residential and fairly affordable (for Manhattan) East Village, a pre-war, 5-story, apartment building with 15 1-bedroom units and a storefront may have a market value of about $5M. “Assessed values”
tend to be are lower than actual market values (both in NYC and most other cities), so you might end up with an assessed value of half the actual value, or $2.5M 45% of actual value, or $2.25M. That building would likely be subject to the Class 2 tax rate of 12.9%, meaning $290,250 in taxes every year. A typical apartment in these buildings may be $2,500 monthly, and a typical storefront may be $10,000 monthly, making annual rent revenue $570,000. In this scenario, 51.0% of your rent money goes to the city in taxes, and that’s in addition to the NYC income tax of up to 3.876%, NYS income tax of up to 8.82%, sales tax on everything you buy of 8.875%, and other hidden taxes like the MTA tax on every taxi ride you take.
But, of course, it gets better. Brand new buildings — which, these days, are almost exclusively luxury towers — get tax abatements, reducing the tax bill for the rich on their homes to pennies on the dollar. So, while $1,275 of your $2,500 rent bill for a modest 1 BR in the East Village goes to Uncle deBlasio, the multi-million dollar condo owner a few blocks down may be paying only a few hundred dollars per month.
So, we can blame Airbnb for shitty neighbors throwing parties, but let’s not blame Airbnb for our rent bills: when more than half of my rent goes into the city’s coffers — at least if you’re middle class — I think we know where the problem lies.
[Edit: Numbers updated thanks to insight from /u/Tervia regarding the assessed value.]
[Edit 2: Want to look up your building’s taxes? You’ll need to find a document that lists your building’s “Actual AV” and then multiply it by the tax rate for your building’s class (if you live in a building with more than 3 units, it’s 12.9%).