Cash is king in New York City residential real estate, and could spell the next frontier for state lawmakers looking to levy new taxes.
News circulated on Thursday that New York legislators have been considering a tax on homes in the five boroughs bought for $1 million or more without financing, a measure that would require buyers to pay an additional 1 percent on the deal price.
The proposal is projected to bring in $160 million annually, and it joins other moves by the state to help fund the city’s budget deficit with a $4 billion package.
However, other details about the plan remain unclear, which has frustrated some in the industry who are still grappling with news of another controversial tax plan, an annual levy aimed at second homes in the city valued at $5 million or more. Hochul’s office only just released more specifics about the pied-à-terre tax earlier this week, though it was announced in April.
“Everything about this policy is not going to help, it’s going to hurt,” said Compass’ Leonard Steinberg. “You have government officials throwing out policies that haven’t been well thought through,” he added, pointing to the move as a sign of “incompetence.”
Steinberg raised concerns that the proposed tax would chill transactions in the city.
Last year, cash deals accounted for 65 percent of sales in the borough, the highest share since appraiser Jonathan Miller began tracking the metric more than a decade ago. For sales over $1 million, the cash purchase share climbed to 75 percent.
Miller echoed Steinberg’s frustrations, adding that the chatter about the tax coinciding with news about the pied-à-terre tax has created confusion among those in the residential industry.
“I’ve had brokers email me in a panic because they don’t know what to tell their clients,” Miller said. “The devil is in the details here, and there are no details.”
Miller said the expected revenue from the tax is also likely to fall short of lawmakers’ expectations, as it doesn’t factor in how the increased tax could impact the behavior of buyers and sellers. If the levy chills activity in the market — or if it pushes savvy buyers to find ways around it — the state won’t hit its revenue target.
Unforeseen taxes can cause issues elsewhere in the market, according to several industry players. Those looking to resell their homes may have to reevaluate their asking prices to accommodate the increased expense, while developers will have to decide whether to adjust theirs or foot the bill for the tax, which will impact their projected sellouts.
“This session has completely gone off the rails,” said Compass’ Jason Haber, who previously worked for Scott Stringer when he was an assemblymember. He called the legislature “dysfunctional” and compared it to the early 2000s. “One hand isn’t talking to the other.”
Haber added that he’s already getting calls from clients concerned about the tax.
“Clients can deal with bad news, but they can’t deal with uncertainty,” he said. “Now you have uncertainty and you have bad news.”
In case you missed it…
Earlier this week, Mayor Zohran Mamdani announced his $125 billion budget for New York City, the proposal for which revealed he’d abandoned his plan to raise property taxes by 9.5 percent. Mamdani floated the idea back in February, and though he cast it as a “tool of very last resort,” he sparked significant criticism from both the industry and City Council leadership.
NYC Deal of the Week
The most expensive deal logged in city records this week was for a penthouse at Naftali Group’s 211 West 84th Street, which closed for nearly $29 million. The 6,700-square-foot condo traded for $1 million more than its asking price when it entered contract in 2024.
The apartment is in The Henry, a 45-unit building designed by Robert A.M. Stern. Unit PHA has six bedrooms and six bathrooms and features an eat-in kitchen, terrace and views of Central park.
A team with Compass’ development marketing arm, led by Alexa Lambert, Alison Black and Lib Goss, head sales at the project. Compass’ Ben Glazer represented the buyer, an entity known as Salmira Residences.
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Politics
New York
New York eyes tax on $1M+ all-cash home purchases
Politics
New York
Kathy Hochul announces $268B budget with pied-à-terre tax