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Long Island Housing and Tax Solutions (Part 1 of 2)

Affordability and Long Island are two words that are rarely used in the same sentence anymore. Taxes have been increasing by a large percentage each year, and home prices are still very high compared to other parts of the country. At the current pace, we could be facing a crisis in our local workforce in the not-too-distant future. So what are the solutions?

First and foremost, the tax situation needs to be remedied in short order. In September, I wrote a post about Long Island Tax Relief, which discussed how Senator Dean Skelos is working on a plan to alleviate the tax burden that Long Islanders are facing.

New York State Comptroller, Tom DiNapoli, revealed in his recent report that school property taxes are nearly tripling the inflation rate, showing an increase of 7.6% and 8.1% annually between 2002 and 2005. This is in spite of an increase to the amount of money being funneled into the STAR (School Tax Relief) Program.

In Suffolk County, the school property taxes account for 75-85% of residents' annual tax bills. On Long Island, we are paying higher taxes than virtually every place else in the state because our schools rely more heavily on local property taxes than state aid. We are receiving a disproportionate amount of state aid because of a formula that has unfairly deemed our wealth ratio higher than other locations. This is because the ratio is determined by income level and property values, and therein lies the problem.

Because property values have increased rapidly, homeowners are now sitting on equity which is skewing the wealth ratio. This equity, however, is not a liquid asset. To tap into the equity, a homeowner would either have to refinance their current mortgage, or take out a home equity line of credit or second mortgage. Seniors that have been in their homes for a number of years could be forced into selling their homes or taking out a reverse mortgage.

If there is one thing that we learned during the seismic shift that has taken place in the mortgage industry this year, it is that people should act responsibly when it comes to tapping into the equity in their homes. But if taxes keep rising at a rate that is much faster than salary increases, homeowners will only be left with the choice to sell or to use their equity to pay their property taxes. Neither choice is ideal for a homeowner that wants to remain on Long Island.

Out of the 31 school districts in the state of New York that relied on property taxes to generate more than 90% of their revenues, 25 of them were located on Long Island. The majority of this money is allocated to teachers' salaries.

We are fortunate on Long Island to have desirable schools, and teachers deserve to be paid a wage commensurate with their experience based on their contracts. However, there is a rule called the Triboro Amendment that allows teachers to receive step increases even when there is no new contract in place. This burden falls squarely upon the homeowners, while teachers get the best of both worlds. Teachers receive their salary and the increases from their previous contract while they are still negotiating their next contract, thus putting all of the leverage during contract negotiations on their side. After all, what incentive do teachers have to give in on any issue when they are at least guaranteed to do no worse than they were doing before the negotiations started? It doesn't make sense.

New York State Assemblyman, Fred Thiele, is proposing a cap on school property taxes at a rate of 4% or the rate of inflation (whichever number is lower). He is also looking to consolidate some of the functions of school districts, and even combining some smaller districts.

Suffolk County Executive, Steve Levy, is working with school district superintendents, and the state comptroller's office, to try and get things like health insurance and purchasing power pooled county-wide, so that things run more efficiently. This will help to keep taxpayer costs under control.

According to Fred Thiele, the plan that he is proposing has proven to be effective in Massachusetts already. When they instituted a cap of 2.5% in 1983, they went from first in the nation in taxes to thirty second, while the quality of education was never sacrificed.

As a relocation specialist, I can tell you with authority that many people are choosing to leave Long Island because of the property tax situation. Many of these people are choosing to buy their first home out of the area. If this continues, there will be less demand for teachers, because Long Island will no longer have enough young people having children to send to our schools.

In addition to the tax reforms that are being worked on, there are also plans in the works for more affordable housing. This will be addressed in part 2 of this post later in the week. Please check back for part 2.

About The Author

Adam Waldman is a Long Island Residential Real Estate and Relocation Specialist that can assist you with the purchase and/or sale of real estate on Long Island or any place else in the country by connecting you with a relocation professional in your destination of choice. Many Long Islanders have chosen to relocate to other parts of the country, but often times they don't have anyone to turn to for assistance. Realizing that this was an underserved market, Adam Waldman has created a team of professionals throughout the country to ensure that relocating Long Islanders enjoy a smooth transition to their new area. These professionals are experts in the field of relocation and can serve many purposes beyond a simple home search. Please visit www.TheLIReloGuy.com for your relocation needs and www.AdamWaldman.com for your local needs.

Adam Waldman - RE/MAX Best - 631-357-2036 - adam@AdamWaldman.com

Posted by Adam Waldman - Long Island REALTOR® on 11/24/2007 08:06 PM

Comments (17)

long island real estate, long island realtor, long island property taxes, star program, fred thiele, steve levy

This post has been included in New York Information

17 Comments on Long Island Housing and Tax Solutions (Part 1 of 2)

Adam:

I see you face some serious challenges in your market. I hope that the homeowners see what an awesome job you do to keep them "in the loop" with their local economy.

Have you ever thought about running for a local office?

11/24/2007 08:31 PM

by Jessica Horton (Brio Realty)

Adam- I think that it is more the waste of money on the school district level more so than the teachers. Teachers do not get paid well, but the powers that be do! They waste so much money on things that the school district does not need to spend money on. I homeschool and I pay school tax but receive no benefits from doing so, we don't complain because we don't want government involved in our children's education and if they give us a tax break they may in turn control us. Katerina

11/24/2007 08:35 PM

by Nestor & Katerina Gasset, Realtors® Wellington Florida Luxury Homes (International Properties and Investments, Inc.)

Adam, The tax situation on the Island, and the high cost of heating oil and utilities is what is sending even dye-hard Islanders down our way. In our area, a newer 2000 sq' 3/2 home in would pay a property tax bill of about about $1350. Heat/Air and electric bill average about $120-150 a month.

Ginger

11/24/2007 09:28 PM

by Wilmington NC Real Estate Ginger & Roger Sala Keller Williams (Keller Williams Wilmington North Carolina)

Adam ~ I hear ya! Unfortunately, my children will never be able to live here, and I'm sure that I will be moving a couple of more times in my lifetime (probably to follow them).

11/24/2007 09:38 PM

by Kathy Passarette, L.I. Staging/Decorating (Creative Home Expressions)

Adam~ As you know New Jersey is up there with Long Island in property taxes. New Jersey is losing many high wage earners to out of state. We all need desperately to reform property taxes.

11/24/2007 10:57 PM

by Lisa Ryan~Selling Princeton,West Windsor and Montgomery Township New Jersey (Prudential NJ Properties)

Adam, what good work you do for the consumer and for the forum. I just took a little tour through your most recent posts and I am in awe at the good work you do. You truly are the most positive force I know in the RAIN. Thank you for your dedication and for all the support you provide to others. You carry the standard high for us all. Thank you. Very relevant post for your consumer. Your comprehensive coverage of your topic is so commendable. Great job! I have got to work harder!

11/25/2007 07:04 AM

by Jeanean Gendron ~ Redding & Shasta County Specialist (Real Estate Professionals--GMAC)

Adam: Great post & great information.

11/25/2007 10:26 AM

by Kelly Sibilsky ~ Lake Zurich RE/MAX Real Estate Agent (RE/MAX Unlimited Northwest)

I vote you all just homeschool your kids.

Adam, it's terrific that you're providing this info to your community. You should run for office....

11/25/2007 01:01 PM

by Portland Oregon Real Estate Broker * Jennifer Bukaty * (RE/MAX equity group, inc.)

JESSICA: Part of me would like to run for office, but I don't think that I'd really enjoy it. I'm not a big fan of bureaucracy and gridlock. I would probably make a better mediator, where I could put my negotiating skills to better use. Thanks for your support, Jessica.

11/26/2007 08:31 AM