Property Tax Partner Warns NYC's 1981 System Faces Multiple Threats That Could Affect Commercial Real Estate

Written by:

Steve Marcinuk

Date:

31 Dec 2025

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New York City’s property tax system, in place since 1981, is facing growing pressure to be overhauled. David Wilkes, a partner at Cullen and Dykman, warns that the system’s days in its current form are likely numbered, with significant changes now appearing more probable than ever.

“Something’s going to happen,” Wilkes says. “We just don’t know exactly when or exactly how the city is going to change things.”

Why the 1981 System Is Nearing Its End

The current property tax framework was established in 1981 to address fairness issues identified through prior litigation. For a time, it was seen as a remedy to longstanding inequities. But Wilkes says the system itself has become outdated and unjust.

“The system that’s in New York City was created in 1981,” Wilkes says. “Over time, since 1981, that system has become unfair, and it’s sort of like it’s outlived its useful life basically.”

This assessment is not limited to outside observers. The city government has repeatedly admitted the system’s flaws. “For many years, the New York City government has been through successive administrations. They keep saying, ” We’re going to address this. We’re going to fix the property tax system, and they’ve issued reports and things like that, and they still have not done it,” Wilkes explains.

Despite years of study and promises to act, no administration has pushed through comprehensive reform. This pattern of acknowledgment without action has left the system in a state where its shortcomings are universally recognized, but the political will to fix them has been lacking. Wilkes suggests that this stalemate is now being challenged from several directions.

Litigation Challenges the Status Quo

One of the immediate threats to the existing system comes from ongoing litigation. The advocacy group Tax Equity Now has filed suit, arguing that New York City’s property tax framework violates principles of fairness and equity.

What makes this lawsuit notable, Wilkes explains, is that it survived an initial motion to dismiss—a result that most legal observers did not anticipate. “Recently, New York State’s highest court allowed that litigation to go forward, which was unexpected,” Wilkes says. “Most people thought the litigation would be dismissed.”

The court’s decision to let the case proceed signals that the issues raised are being taken seriously. “The courts are saying not that they agreed necessarily with the claims, but the claims were legitimate claims that should be heard,” Wilkes notes. The case is now in discovery, and its outcome could force significant changes if the court finds the system unconstitutional.

Legislative Reform Gains Traction

In addition to legal challenges, there is evidence of renewed legislative interest in reforming the property tax system. Wilkes points to a comprehensive reform bill introduced in the New York State legislature last year. While the bill was eventually withdrawn, its introduction indicates that lawmakers are considering structural changes.

The fact that legislators are actively discussing reform, Wilkes says, is a shift from previous years when the issue languished despite widespread acknowledgment of problems. The convergence of pending litigation and legislative proposals increases the likelihood of change in the near future.

“The probability of significant change has increased substantially,” Wilkes says. “The question is no longer whether the system will change, but when and how.”

Risks for Commercial Real Estate Investors

For institutional investors with large stakes in New York City real estate, this uncertainty introduces significant risk. Wilkes emphasizes that the direction and magnitude of reform are unpredictable, making it difficult for investors to plan.

“If I’m an investor in commercial property, I can’t look at the system and become confident that it’s a stable system,” Wilkes says. “I have to look at it and say there’s some real unknowns here.”

A key complication is the political sensitivity of shifting tax burdens. The focus of reform discussions often centers on residential properties—single-family homes, condos, and co-ops. If reforms increase taxes on residential owners, political resistance is likely to follow.

“The changes could end up putting a much heavier tax burden on the residential class, and because this is very political, likely, the legislature is not going to want to put heavier taxes on homeowners, and so the legislature is going to step in to try to redirect some of those taxes to the commercial class,” Wilkes says.

This dynamic means commercial property owners—office buildings, hotels, retail, and industrial operators—could see their tax burden increase if the legislature seeks to shield residential owners from higher bills. The uncertainty around who will ultimately bear the cost is a central risk for investors.

Fiscal Constraints Limit Reform Options

Wilkes also points to the city’s fiscal realities as a constraint on how reform can proceed. “The city has to raise the budget that it has to raise,” he says. “It’s still going to have to raise that money from somewhere.”

New York City already imposes what Wilkes describes as “an extremely high property tax burden” on commercial owners. The city’s annual budget is substantial, and property taxes make up a significant share of revenue. Any redistribution of the tax burden could have immediate and long-term effects on commercial property values and investment returns.

Given these constraints, Wilkes cautions investors against assuming the current system will remain intact. “I’m not able to predict exactly how that will play out. There are a lot of variables in that, but if I’m an investor in commercial property, I can’t look at the system and assume it’s stable,” he says.

A Near-Term Timeline for Change

While the specifics remain uncertain, Wilkes believes that change is likely within the next few years. The ongoing litigation, legislative activity, and repeated acknowledgments of dysfunction by city officials all point toward an environment where reform is increasingly unavoidable.

This is not a distant or abstract risk. Wilkes suggests that the effects of any significant change could take more than a decade to stabilize, as property owners and investors adapt to a new system.

For institutional investors with significant exposure to New York City, Wilkes’s analysis makes clear that the property tax system is a fundamental source of uncertainty. The system is being challenged in court, debated in the legislature, and acknowledged as broken by city leaders. For now, assuming the status quo is no longer a safe bet.