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Senator Sean Ryan passes bill to eliminate exorbitant late fees on property taxes

AMHERST, NY – Today, June 28, 2024, New York State Senator Sean Ryan announced that his bill (S.967A) to reduce interest rates on delinquent property taxes has been passed by both houses of the New York Legislature. The bill changes the guidelines that dictate the amount of interest counties can charge homeowners who are behind on their property taxes. This is intended to ensure that interest rates on property taxes remain reasonable regardless of changing economic conditions. The bill now awaits Governor Kathy Hochul’s signature.

The minimum interest rate a municipality can charge on delinquent property taxes is currently 12% annually under state law, and some counties – including Erie County – charge as much as 18%. The new legislation would eliminate the 12% minimum rate and establish a maximum allowable interest rate. The new cap would adjust every five years to the federal prime rate, but could never exceed 16%. Municipalities would only be required to change the interest rate they charge if the maximum allowable interest rate falls below the rate currently charged.

The current minimum rate of 12% was introduced in 1983, in the midst of a five-year period of the highest base rate in the country’s history. Although the base rate has not been above 12% since October 1984, the minimum rate on delinquent property taxes has never been adjusted. As a result, for four decades, municipalities were forced to charge interest rates that were not tied to the economic conditions of the time and were often comparable to credit card interest rates.

Exorbitant interest rates make it difficult for homeowners who are behind on their property taxes to catch up, contributing to a vicious cycle of debt and poverty for low- to moderate-income homeowners. Research in collaboration with the Western New York Law Center in 2021Hannah Drexler, a High Road Fellow at Cornell University, found that 20% of homeowners in low- to moderate-income zip codes in Erie County who owed property taxes owed more in interest than in taxes. On average, accrued interest accounted for 41% of the total amount these homeowners owed.

Lowering the interest rate to a more reasonable level will make it easier for New Yorkers to pay off their tax delinquencies and avoid foreclosure. This will provide much-needed stability to families and save homeowners from being trapped in a perpetual cycle of debt, allowing them to build generational wealth. It will also be beneficial to homeowners who are behind on their property taxes – studies have found that even one delinquent property in a neighborhood leads to declining property values ​​for surrounding homes.

Senator Sean Ryan said, “For a generation of New York homeowners, excessive property tax rates have meant that even a small financial setback can have a major impact on their future prosperity. Eliminating these exorbitant rates will save people from cycles of debt that are difficult to get out of. Importantly, it will also help maintain the vibrancy of neighborhoods by keeping homes on the tax rolls and reducing the number of zombie properties that are springing up in cities across the state.”

MP Karen McMahon said, “Owning a home is a major milestone in people’s lives and a central part of the American dream. This bill will help homeowners and families by allowing those who are behind on property taxes to get back on track. This will make it easier to own a home in New York State while reassuring those who are in a financially strained situation. It will also help our communities grow and thrive by reducing the number of zombie homeowners. I am proud to have helped pass this bill in the Assembly.”

Brian Kulpa, Amherst City Councilor said, “I want to thank Senator Ryan for this bill that protects taxpayers while recognizing the important process by which municipalities collect taxes for our operating budgets. This bill allows us to help taxpayers better navigate a difficult situation without impacting the city’s tax collection efforts. Taxpayers are still responsible for paying their debts, but this bill recognizes the greater harm caused by excessive interest rates.”

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