When Cash is King, Albany Wants a Cut

We are excited to announce that Jonathan Miller, who has long authored the most authoritative report on the residential real estate market, is partnering with The Real Deal. Below, you’ll find his Housing Notes column, which will now run on our site several times a week. In addition, Miller’s quarterly report for New York City, which he published through Douglas Elliman for more than three decades, will now be “The Real Deal report, prepared by Jonathan Miller.” Miller’s data venture, Streetmatrix, which provides hyperlocal data, will provide statistics to TRD Data subscribers.

— TRD editors

“Never ask a barber if you need a haircut”

This is an old Warren Buffett saying that I really love. The phrase was originally attributed to Daniel S. Greenberg, who wrote it in the November 1972 issue of the Saturday Review, but it went mainstream when Warren Buffett used it at Berkshire Hathaway’s 1994 annual meeting.

The Real Deal asked the real estate industry what the proposed tax on cash purchases over $1 million will do to real estate, and it elicited a predictable response (some call it common sense). The response by industry insiders is probably not so obvious to legislators. Because the U.S. is suffering a serious housing affordability crisis, adding more taxes across all price tranches will slow sales, and the real estate industry is a transactional business. I get it. And my pithy comment on Bloomberg for the same topic: New York Plans Tax on Homes Over $1 Million Purchased With Cash.

I continue to be amazed at how little these proposals anticipate the change in human behavior to avoid a new tax

I estimated that about 75 percent of Manhattan purchases are cash over the $1 million threshold, and that about $17.4 billion in cash purchases of properties were made in 2025.

Since a majority of NYC transactions at or above the $1 million threshold are already all‑cash, the tax would reach a large share of high‑end buyers even though the absolute revenue number remains modest relative to the city budget.

Getting a mortgage
Robert Frank at CNBC made a great point:

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Taking out small mortgages to sidestep the tax was my expectation as well, and like the topic of estimating market value for the pied-a-terre tax, I was starting to get excited about all those potential appraisals we could be doing amid all the confusion about determining property valuations.

But here’s a nuance I probably missed

The rate under discussion is 1 percent of the purchase price, paid by the buyer at closing, similar in magnitude to the existing mortgage recording tax or mansion tax levels. In New York, this mortgage recording tax is based on the act of recording a mortgage and is charged once at closing, based on the loan amount, not the purchase price. If you do not record a mortgage, there is no mortgage recording tax.

The idea of this additional tax is probably to capture revenue from sales that currently avoid the mortgage recording tax. Bloomberg’s reporting indicates legislative leaders intend to include this in the state budget, too, but the plan is still subject to negotiation and has not been enacted yet. This cash tax is intended to be at the time of transfer, unlike the pied-a-terre tax, which is an annual recurring tax.

After thinking about the topic further, this 1 percent tax to be paid for cash purchases above one million dollars was probably created by legislators as a way to make up for the loss in the mortgage recording tax revenue as cash purchases became de rigueur after the steepest ascent of mortgage rates in history from 2022 to 2025. This proposed cash tax is looking more like a way to squeeze in a corrective fix for the lost mortgage recording fee while the planets are aligned in Albany.

For at least the past dozen years, the average market share of Manhattan cash sales was ±52.1 percent, and now it’s 65 percent. My assumption is that the increase in cash sales took revenue from the mortgage recording tax.

Co-ops are not exempt from the cash tax

Because co‑ops are not “real property” under NY law, a recording tax generally does not apply to co‑op mortgages, which is one reason condo buyer closing costs are materially higher than for co‑ops at the same price. Even though co-ops are exempt from the mortgage recording tax, the proposal explicitly notes that co‑ops will be taxed with this new “cash tax.”

Final thoughts

Because of the aggressive way the pied-a-terre tax was implemented (like a bulldozer without reaching out to the real estate industry for feedback), and the whining it generated by billionaires, the assumption by the real estate industry, including me, was that this was another assault on real estate, disrespecting the reliance NYC (and NYS) tax revenue has on this asset class. But the proposed cash tax should probably be seen more as a clawback of tax revenue, at least in the context of condos that had evaporated due to unusually high cash purchases, rather than as more legislative wrath from Albany.