property tax break designed to reduce the differences in tax burdens between coop and condominium apartments and one-, two-, and three-family houses does a poor job of delivering benefits to the apartment-owners who most need relief. It is providing significant tax breaks to some apartments-primarily in Manhattan-where burdens were already lower than, or nearly as low as, the burden on homes before the benefit was enacted.

The abatement program was instituted three years ago as a stop-gap response pending development of a more comprehensive solution to long-standing complaints about the favorable tax treatment of class 1 (one-, two-, and three-family homes) compared with coops and condos in class 2 (larger residential buildings).

Another motivation for the current abatement was to assist coops, primarily outside of Manhattan, that were having financial difficulties in the wake of the collapse of housing prices during the last recession. However, with more than three-quarters of all tax abatement dollars flowing to Manhattan, where tax burdens on coops and condos are already much lower than in the other four boroughs, the disparities among city neighborhoods in property tax burdens for apartment-owners have grown wider as a result of the program.

As reported in IBO's fiscal brief, The Coop/Condo Abatement and Residential Property Tax Reform in New York City, $29 million of the $156 million spent on the abatement in fiscal year 1999-nearly one dollar in five-is unnecessary. Of that, $19 million flows to Manhattan coop and condo owners who were already being effectively taxed below the class 1 level before the abatement. Another $10 million in unnecessary benefits goes to apartment-owners whose abatements are larger than is needed to bring their property tax burdens down to private home levels.

To better understand how the impact of the abatement varies across the city, consider the following example:

• Before the abatement, a typical $200,000 apartment in Brooklyn had a tax bill of $3,160-or $1,424 more than it would have been if it were taxed as a single family home. In contrast, because of the distortions caused by under-valuation, a $200,000 apartment near Central Park would have a tax bill of $1,500-or $236 less than it would have been if it were taxed like a single-family home.
• After the abatement, the tax on the same Brooklyn apartment is reduced to $2,607-still $871 over the class 1 level, while the bill on the Central Park area apartment is lowered to $1,238-or $498 less than it would pay in class 1.

In light of the waste and inequities associated with the current abatement program, IBO finds that in the near term, the inefficiencies could be mitigated by reducing tax abatements for coops and condos in some Manhattan neighborhoods. The long-term solution would require changing how coop and condo buildings are valued and assessed.