When it comes to relationships, most of us look for people who share our values—so why should it be any different with property assessors? The truth is, many commercial property owners in New York are asking themselves: Do assessors share our values? Unfortunately, it seems the answer is often no.

Across New York, property assessments are increasingly out of sync with the real-world challenges landlords face. Whether it’s skyrocketing construction costs, the impact of higher interest rates, inflated insurance premiums, or uncollected rents, many property assessors aren’t factoring in these pressing issues when determining values. This disconnect leaves property owners paying taxes on inflated assessments, which can feel like being in a mismatched partnership—one where only the assessors’ “values” seem to matter.

Property Tax Rates Soaring, Yet Rent Increases Are Capped

Consider the glaring example of former New York City Mayor Bill de Blasio’s policies, which created a significant imbalance between property values and landlords’ ability to generate income. Between 2013 and 2017, the average commercial property tax bill in New York City jumped 29.3%, driven largely by increased property assessments. By 2017, the average commercial property tax bill had ballooned to $111,023, up from $85,841 in 2013.

Despite this massive increase in property taxes, de Blasio’s administration capped rent increases on rent-stabilized apartments at 1% or less. This meant that while landlords were burdened with rising costs—including a 6% annual increase in property taxes in some cases—they were not allowed to raise rents to keep up. This disconnect between soaring assessments and restricted rent growth placed many property owners in a financially precarious position, especially as they faced mounting operational costs, insurance hikes, and maintenance expenses. Property owners may ask themselves: With these escalating tax burdens not translating into improved services or support, what are taxpayers actually getting in return for these higher bills?

The Post-Pandemic Reality: Struggling to Collect Rent, But Assessments Stay the Same

The pandemic created further strains on landlords, especially those who were unable to collect rent due to eviction moratoriums or lenient tenant protections. In many municipalities, courts were more forgiving toward tenants, allowing them to delay rent payments without consequence. Yet, despite these disruptions to landlords’ income, assessors have continued to value properties based on pre-pandemic rental rates.

This inconsistency leaves landlords in a tight spot: unable to collect rents while simultaneously being taxed based on inflated values. If tenants aren’t paying rent, and landlords are forced to cut back on essentials like insurance or repairs, how can their properties still be valued as though everything is business as usual?

Construction and Insurance Costs: Skyrocketing, But Not Reflected in Assessments

From 2019 to 2023, construction costs for commercial real estate projects surged by 25-30%. These increases, driven by labor shortages and supply chain issues, are eating into property owners’ budgets and balance sheets. Developers are pausing or even halting new projects because the math no longer works—yet it seems that assessors haven’t caught up to these changes.

In addition, repairs and maintenance costs have risen dramatically. These costs take a larger bite out of property owners’ operating budgets, but again, assessments often fail to reflect the impact. While construction costs have soared, assessors are late in adjusting property values, leaving owners paying taxes based on outdated information. There is generally substantial time lag between cost increases being reflected in assessments/assessor valuations.

Another factor being largely ignored by assessors is the dramatic rise in insurance costs. Due to inflation, natural disasters, and rising replacement costs, insurance premiums have soared across New York. Property owners are facing tough decisions about cutting back on insurance or paying exorbitant rates. But these increased expenses aren’t being reflected in property assessments, even though they directly impact net operating income. There is a time lag applied to expenses and ultimate impact on assessments. Expenses paid today are not usually reflected for a year or longer in parcel assessments.

Landlords are often locked into long-term leases with tenants, meaning they can’t simply pass these rising costs on. If the weighted average lease term (WALT) is seven years and costs have only started to spike in the last two, landlords might have another five years before they can adjust rents to cover these additional expenses. This delay compounds the financial strain, yet assessors often fail to take these realities into account.

Office Buildings: The Financing Drought and Outdated Valuations

The leasing market is in flux, and financing for commercial properties is becoming increasingly difficult to secure. With rising interest rates and many banks unwilling to finance office buildings, landlords face a challenging environment. Yet, despite these clear financial shifts, property valuations often don’t reflect the new reality.

For example, a building that sold for $70 million in 2022 might now be worth just $45 million. But since assessors rely heavily on the income approach and cap rates to determine value, they may not be accurately capturing the true financial risks property owners face today. If cap rates used in assessments don’t reflect current market conditions—such as higher vacancy rates and challenges in securing financing—owners end up taxed based on valuations that don’t align with the actual financial health of their properties.

This issue is compounded by the financing drought that has hit office buildings, particularly in suburban areas. Many banks have become unwilling to finance office buildings, especially as vacancy rates rise and the work-from-home trend continues. With fewer sales and declining demand for office space, one would expect property assessments to reflect this shift. However, assessors often rely on outdated income and market data—like old lease comps, expense ratios, and vacancy rates—taken from a time when office properties were considered safer investments.

The Delayed Reaction: Why Assessments Are Always Playing Catch-Up

Assessments often trail the market by years, meaning property owners bear the brunt of changes in operating costs long before assessors catch up. Whether it’s increased property taxes, insurance premiums, or construction costs, commercial real estate owners are left carrying the financial load while their assessments reflect a rosier picture from years past.

The truth is, property assessments should align with the real challenges property owners face today. As construction costs, insurance premiums, and financing challenges continue to rise, it’s critical for assessors to take a more timely and accurate approach. Only then will property assessments reflect the real-world market conditions that property owners are navigating daily.

Conclusion: Do Assessors Really Share Your Values?

It seems that many property assessors aren’t sharing the same values—or realities—that New York’s commercial property owners face. Whether it’s outdated rental and sales comps, rising taxes, or uncollected rents, the gap between market conditions and assessed values continues to grow. As property owners in New York know all too well, this disconnect creates a financial strain that’s difficult to overcome. Additionally, it has long term consequences that lead to prolonged market depreciation and depressed valuations for years to come.  

So, the next time you receive your property tax bill, ask yourself: Do assessors really share your values? If not, it may be time to challenge the status quo with a reformed strategy and the most up to date market intelligence. At Realty Tax Challenge, we specialize in building strong cases to challenge these overvalued assessments effectively, using accurate data and expert insight to secure the reductions your property deserves. Contact us today to get started!