Key Takeaways
- Private universities in New York City, like Columbia University and NYU are exempt from property taxes, while controlling 245 and 119 properties as New York City’s largest private landowners.
- University expansion has contributed to gentrification in neighborhoods like West Harlem.
- There are movements across the country for private universities to contribute to public services.
Private universities in New York City have rapidly expanded their property holdings over the past century. Tax exemptions on universities allow them to buy and maintain buildings without paying any property taxes. Some argue these financial advantages enable universities to expand their holdings and influence city neighborhoods while bypassing taxes that fund local public services and education. With some of the highest tax rates in the country, New York’s progressive politicians are drawing attention to these policies.
Background: The Growth of the UniverCITY
As nonprofit educational institutions, Columbia University and New York University ( NYU) are exempt from property taxes. Columbia owns at least 245 properties, making it the largest private landowner in NYC. NYU, the city’s second-largest private landowner, controls 119 properties. This exemption saves Columbia $182 million annually and NYU $145 million.
The expansion of Columbia and NYU has reshaped neighborhoods to cater to predominantly upper-middle-class, often white, students. In particular, West Harlem experienced gentrification pressures tied to Columbia’s Manhattanville campus. Buildings of long-standing West Harlem residents were slated to be demolished. Community District 9, which includes West Harlem, lost around 14 percent of its Black population and 10 percent of its Latinx population from Columbia’s expansion. The area lost 6,000 rent-controlled apartments in 2022 and experienced extremely high eviction rates for the campus expansion. With no tax repercussions or monetary consequences for property expansion, private universities can displace local residents and change urban demographics in neighborhoods.
Columbia emphasizes its role as an economic driver. The University argues that its contributions indirectly benefit the city by employing local residents. A spokesperson noted: “We…will underscore that we are a world-class research university and, beyond the financial resources we provide to our local community.” While Columbia’s expansion displaced Harlem residents, they argue that they are giving back by providing many resources to their neighbors.
The Current Policy Debate and Movements: Should Universities Pay Property Taxes?
Grassroots organizations and progressive politicians, like Mayor Zohran Mamdani, argue that the resources gained through university property taxes could otherwise fund chronically under-resourced public university institutions. For example, City University of New York (CUNY) has experienced ongoing underfunding and 235 layoffs after a $155 million budget cut under Mayor Eric Adams’ administration. The grassroots organization REPAIR-NY (Repeal Exemptions for Privileged Academic Institutions in Real Estate–New York) advocates overturning state legislation that shields universities from property taxes. The organization demands that Columbia and NYU pay over $300 million in unpaid property taxes. This movement highlights a desire from New York City’s residents for a policy change. State Senator John Liu and, at the time, Assembly Member Mamdani introduced Assembly Bill A2130. The bill seeks to repeal property tax exemptions for New York’s private universities receiving over $100 million in tax relief. This proposed taxation would directly require property tax contributions. The legislation would redirect this revenue to CUNY. Redirected revenue from tax-exempt universities could significantly stabilize the system of public higher education in New York.
Alternatively, other cities have experimented with voluntary contributions from private universities. Several cities and states offer Payment in Lieu of Taxes (PILOT) programs where tax-exempt organizations choose to make payments for public services to make up for lost property tax revenue. Massachusetts’ PILOT program encourages nonprofits to pay 25 percent of their hypothetical property taxes. However, Harvard University, in Massachusetts, has struggled to meet its requirements for the current PILOT program. Harvard’s nonpayment suggests that private universities may rely on their tax exemptions. Over 200 University of Pennsylvania faculty members in Philadelphia called for contributions to local schools through a PILOT program in 2020 and 2022. These tax movements in Boston and Philadelphia illustrate a growing national momentum for taxing wealthy nonprofit universities. Reflecting the attitude of this movement, Mamdani remarked, “It is time that these institutions pay their debt to the working class of New York City.” If passed in New York, State Assembly Bill A2130 would be the first to require private universities to pay property taxes.
The Future of University Tax Exemption in New York
As New York City’s recently elected mayor, it is unclear how Mamdani’s victory will affect this debate. Mamdani’s emphasis on an affordable city could apply pressure to private universities. However, as mayor, Mamdani lacks the authority to unilaterally raise state taxes on private universities. Critics highlight that Mamdani himself benefited from Columbia’s property ownership by living in an apartment owned by the private university. His father, a Columbia professor, was given the apartment at a lower rate due to his contributions to the school, showing that Mamdani has benefited from the same system he hopes to tear down.
Conclusion
The rapid growth of private universities under tax-exempt status has profound consequences for city neighborhoods, public education funding, and socioeconomic equity. Other successful models and grassroots advocacy suggest alternatives to this system, exemplified in State Assembly Bill A2130. Legislative action can offer a viable path toward a more equitable distribution of resources within New York City’s education systems.
FAQ
- Why are private universities exempt from property taxes? Private universities are classified as nonprofit educational institutions under state law, which exempts them from paying property taxes.
- What is Assembly Bill A2130? Assembly Bill A2130 is proposed legislation in New York City that would require private universities to pay property taxes with revenue redirected to fund the public City University of New York system.
- What are PILOT programs? Payment in Lieu of Taxes programs allow tax-exempt organizations to make contributions for public services instead of paying mandatory property taxes.