The Real Deal New York

How much money would pied-á-terre tax raise? No one’s sure

Research indicates charge on second apartments may bring in less revenue than expected

December 03, 2014 10:11AM

From left: Brad Hoylman and a unit at One57

From left: Brad Hoylman and a unit at One57

The proposed pied-à-terre tax has generated plenty of controversy. But at this point, it remains unclear how much money the tax would actually raise. 

City agencies, real estate executives and the Fiscal Policy Institute — the group that proposed the tax — are trying to determine the impact of the tax, including the amount of revenues the levy would raise and to what extent it would boost the local economy, according to the Wall Street Journal.

While the Fiscal Policy Institute projected that 445 units would bring in $551 million annually if the tax was implemented, actual sales data seem to indicate that that number might be less, according to the newspaper.

The current proposal would add up to a 4 percent tax on co-ops, condos and houses that have a market value that’s higher than $5 million and aren’t being used as primary residences. The top 4 percent rate, the newspaper reported, would be applied to properties worth more than $25 million.

Before the tax can be implemented, the State Senate would have to approve it. That scenario seems unlikely with a Republican majority in the state house.

In addition, developers and brokers have said the tax would stifle the luxury market.

“Taxes aren’t supposed to be a punishment, they are supposed to be for paying for city services,” Urban Compass President Leonard Steinberg told the newspaper. Those who buy expensive second homes in New York, he continued, use less than half of the services full time residents use. [WSJ] — Claire Moses

 

  • Joshua Hatzis

    “Taxes aren’t supposed to be a punishment, they are supposed to be for paying
    for city services,” Urban Compass President Leonard Steinberg told the
    newspaper. Those who buy expensive second homes in New York, he
    continued, use less than half of the services full time residents use”.

    THIS IS CORRECT LEONARD, HOWEVER, YOU FORGOT TO ADD THAT THOSE PART TIME RESIDENTS DO NOT CONTRIBUTE TO THE LOCAL ECONOMY BECAUSE THEY DO NOT OCCUPY THEIR HOMES FULL TIME, SO THEY HAVE TO SOMEHOW CONTRIBUTE AND THIS TAX WILL DO JUST THAT.

    JUST THINK THAT IF NYC WAS OCCUPIED BY PART TIME RESIDENTS ONLY, THE LOCAL ECONOMY (RESTAURANTS, SHOPS, VENUES, ETC) WOULD SUFFER, NYC WOULD TURN TO A GHOST TOWN AND THE VALUE OF THESE SECOND HOMES THAT YOU SELL, LEONARD, WOULD PLUMMET!

    SO ON A SECOND THOUGHT, MAYBE THIS TAX IS GOOD FOR YOUR BUSINESS AND FOR YOUR CLIENTS, DEAR LEONARD.

    Sorry for the capital, did not mean to scream….

    • R

      They contribute via real estate taxes they pay. They use few city services, i.e., no strain on education, welfare, . There are relatively few of these super rich compared to visitors and workers who inundate the area where they live. We’re better off with these part timers then without them. If I was one of them I would be pissed that I’m being taxed because it is perceived that I would pay whatever to have a place in NYC

      • Joshua Hatzis

        RE Taxes are peanuts and many luxury buildings have a tax abatement. In addition, you forget that NYC is a brand and any RE purchase by these part time residents will definitely appreciate in the long run – so they will get their money back two and three times more down the road when they resell. This small tax is fair and would not disrupt the luxury market.

        • JEng

          Why are non foreign owners also subjected to this proposed tax then?

          It’s going to hit rent regulalated buildings, correct?

          • Joshua Hatzis

            You have no idea what you are talking about….

          • Crian Bashman

            In at least 1 of the bills I read on the matter the language was very ambiguous and suggests the law could apply to rental buildings, since the owner doesn’t live there. That is where the concern is coming from.

        • Leonard Steinberg

          If this tax were to cut the activity levels by 5% the revenues lost from transfer and mansion taxes would far out-strip the dollar value this tax will bring in. It would be much better to look at homeowners who are paying FAR lower taxes than those with similar valued properties…..such as our beloved mayor who pays about 25% of the real estate taxes similar valued properties pay…..that’s not fair, its un-constitutional and the dollars generated from these people who are bilking the system would be much greater than any pied-a-terre tax. If you are CERTAIN this pied a terre tax does not impact the luxury market, are you and your supporters willing to guarantee that and back it up with money held in escrow to be released after 3 years?

          • Oouch

            Townhouses and other real estate owned as 1-3 res. unit homes enjoy a tax rate substantially below luxury condos, true. That is a political product, as are all rent laws, real estate taxes, and government policy. It is ingenuous to argue that because the rationale of real estate tax is to support the cost of the property draw in terms of services the city must provide, and it is obviously and patently untrue. Real estate is taxed based upon its equivalent renting counterparts according to DOF. That means that luxury condos are taxed as if they were luxury rentals. They also have their base assessment set artificially high ESPECIALLY when they enjoy multi-year tax abatements. That is because the individual condo owner is the one left holding the bag when the abatement expires, but most speculative buyers bank on being able to somehow selling before that day of reckoning arrives, sticking the next guy.

            The real question for Leonard, and our whole industry is what happens when all these 421As age out at the same time that a massive new crop comes on. Combine this with the fact that uber luxury buildings are now being under-engineered with occupancy loads that are artificially low based upon the fact many are purchased as investment not full-time high density residences, and we will have a lot of fancy buildings that can have broken elevators and garbage chutes that don’t work. How can a luxury building have one elevator and more than six tenants using it? What happens if it breaks? Leonard knows, and all of us who have sold such know, that the devil will emerge from such oversights to detail and future realities. Gravity is unforgiving.

          • Joshua Hatzis

            Very weak argument. I thought you were smarter.

            Try to answer your own question: Are YOU CERTAIN this pied a terre tax WILL IN FACT IMPACT the luxury market?

            We have a discussion about a proposed tax based on current market conditions. Obviously, we would not have this discussion back in 2008. So, no, I am not certain, Sir and I do not think you are certain either of how this tax will impact the luxury market, except of course if you have a crystal ball.

            What is amusing though is the fact that you engage in lengthy discussions on the web during work. It seems you guys are not very busy at UC after all. What else do you do during work, play video games? If I were an investor to your company, I would be questioning if this is the image you want to project as a president. I would also probably call you and tell you not to engage in lengthy web discussions with people who -apparently- are smarter than you.

    • JEng

      They’re not using the local services but are paying for building maintenance staff every month.

      The real problem is the tax somehow hits rent regulated building owners as well and that is crazy because we should enjoy special privileges and leniency when it comes to charges to balance out the fact that we are personally out of pocket subsidizing “affordable” peid de terres for some of the one million out of 8 million plus who are tenants of record of rent regulated units.

      I don’t see why tenants aren’t supporting their greedy slumlords to lower expenses if they want to hold on to their boltholes so their grandkids can attend local famously nurturing public schools while they sleep in New Jersey.

      • Joshua Hatzis

        What are you talking about? Irrelevant, what you say has nothing to do with the subject!

    • Leonard Steinberg

      Joshua:
      There are over 8.5 million people living in New York. I doubt we are at risk of all 8.5 million people coming from other parts of the world for a week every year. When anyone buys an apartment in New York for $10 million, they pay real estate taxes EVERY month for the rest of the life of that apartment. They pay about $ 285,000 in transfer and mansion taxes when they buy. The jobs and taxes generated by the construction of these apartments IS a HUGE contributor to our economy. This benefits ALL New Yorkers. I sincerely doubt we are on the path to ghost-town status.
      L

  • JEng

    I’m very scared that this is a misnamed bill meant to make it even harder to afford to run a rent regulated building. I hope the state investigates and decides not to include multifamily buildings under the tax.

  • LegalizedTheft

    Tax the rich schemes have been around forever. This is no different. Just another excuse for the government to steal and waste peoples’ money. Good luck with that.

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