REAL ESTATE: No Relief in Sight

Into Manhattan’s Hotel Commodore last week swarmed 750 members of the National Association of Building Owners and Managers. Coming from 70 U. S. cities, they were hornet-mad about a politico-economic national scandal. The scandal is that urban property taxes are so high that they drive population to suburbs, so that city real estate and city governments face bankruptcy together. Of the gross annual income of $7,000,000,000 derived from U. S. real estate, $4,500,000,000 goes for taxes.

New York’s peppery little Mayor Fiorello LaGuardia sympathized with the owners and managers, then added, “In my usual spirit of frankness, no local relief [is] in sight.” He also inferred for the first time that some emigration from New York City is caused by high city taxes.

Speeches indicated that revolution is in progress in real estate. N. A. B. O. M. nabobs pondered these signs of unrest:

> High taxes based on high property assessments have been driving mortgage-holding institutions to accept sacrifice prices in order to clear their books of doubtful “assets” in foreclosed property. From January through May, unloaded Manhattan properties had plummeted from 80.6% to 73.3% of their assessed values. (Yet New York State Superintendent of Insurance Louis H. Pink, “handling the largest real-estate investment liquidation program in the history of this country,” declared that 80% of those investing through New York certificate-issuing houses had not lost a cent.)

> Tax delinquency sales have been growing. Typical was Atlantic City, N. J., whose Controller Bessie Townsend described the problem as a race to sell properties to private buyers and put them back on the tax rolls faster than they come into the city’s hands.

While almost everyone from President Roosevelt down has acknowledged that N. A. B. O. M.’s complaint is just, there was little agreement as to where money for municipal government was to come from if it was not taken out of real estate’s well-plucked hide. N. A. B. O. M. panaceas had drawbacks:

> “Put a ceiling on real-estate taxation” makes little sense to anyone familiar with the workings of a 2% property-tax ceiling in Brooklyn, where it is evaded through an over-assessment sometimes as high as 200%.

> A heads-I-win-tails-you-lose proposal would base tax valuations on earning power of the property. Thus unimproved land having no annual income would pay no taxes. Sometimes called the “British System,” it would up the value of vacant land, cause further urban decentralization because it puts no penalty on speculators’ withholding city land from use.

Meanwhile many a builder and architect (but nary a N. A. B. 0. M.-er) wondered whether Pittsburgh and Scranton, Pa. did not have the right idea in taxing land at twice the rate of property improvements. This tax tends to depress price of vacant land, make it readily available to builders. Early this spring, Scranton had taken title to 6,000 unsalable, tax-delinquent properties, hoped to make up for its tax losses by renting them itself.

Stemming decentralization by placing tough tax odds against speculation, the Pittsburgh-Scranton plan is an approach to Henry George’s Single Tax. If followed to its logical conclusion (as is being done in certain California Irrigation Districts) owners of vacant land have to get busy and improve or sell their land. Via tax delinquencies the State becomes a land lord.

While N. A. B. O. M.-ers were boarding trains for their 70 overtaxed cities, Manhattan’s tax rate was suddenly upped to $2.84 per $100 worth of assessed property, the highest in its history. Alarmed at the prospect of more industrial and residential exodus, the angry little Mayor declared: “The increased rate is not only a surprise to me, but I believe it is unnecessarily high. … I will spend only that amount of the tax money brought in by the old tax rate of $2.82.”