NYC Brokers Grapple With New Pied-à-terre Tax

New York City is facing a new tax on luxury second homes — and the brokers who trade them have mixed feelings about its impact.

Earlier this week, legislators approved an annual levy on pieds-à-terre worth $5 million or more as part of the state’s budget. The tax will go into effect on July 1.

The move came after many in the industry pushed back against the proposal, expressing frustration over the lack of details shared ahead of the vote. A full copy of the legislation was released just a few days before lawmakers passed it.

“Terribly sloppy, reckless style of governance,” Compass’ Leonard Steinberg wrote in a comment on an Instagram post about the tax. “The messaging and greatness of detail is astounding.”

Jason Haber, a Compass agent and co-founder of the American Real Estate Association, said the ins and outs of the tax have sparked confusion among many of the city’s brokers, who are grappling with news of its passage while also trying to understand how exactly it will work.

Haber said he’s held two information sessions, one with Compass agents and another with the New York Residential Agent Continuum, to break down the tax, though he said its structure is complicated to explain, even for someone like him who has a background in politics.

Haber previously told The Real Deal that the tax’s implications for co-ops are particularly concerning, given that co-op boards will be responsible for enforcing the tax on relevant shareholders. Others have echoed his worries.

“What a stupid and unproductive way to structure it, seriously,” Douglas Elliman’s Frances Katzen commented on an Instagram post explaining how the city will implement the tax on co-ops.

But the outrage over the levy is likely overblown, according to Elliman’s Michelle Griffith. Since news of its passage broke, Griffith said she hasn’t heard from clients. Most of that anxiety came a month ago, when Gov. Kathy Hochul announced the proposal “out of left field.”

At the time, she said she had conversations with sellers about whether the tax would affect their price strategy and fielded calls from buyers hopeful that the news would push some owners to sell their pieds-à-terre, adding more listings to a tight inventory market.

But as with other policy decisions, buyers and sellers were more affected by uncertainty over how the tax would work than by the levy itself, she said.

“The panic happens when things first come out, and then they move on,” Griffith said, adding that New York City owners already face mansion taxes, monthly maintenance fees and other costs. “It’s not like we were easy to transact in, and all of a sudden, we’re difficult. You have to want to be here.”

As for whether the tax would change the city’s market, “it remains to be seen,” Griffith said. “We’re all sort of waiting.”

Elliman’s Ben Jacobs, who runs a team with Jessica Chestler, said the two are still wading through information about the tax with real estate attorneys. He agreed with Griffith, adding that it’s too early to know exactly how the surcharge will play out.

“It’s a little new and a little fresh,” said Jacobs. “It just happened, so we’re working on this in real time.”

While the impact may still be up in the air, Jacobs said the tax, and the discussion around it, posed a negative force in the market.

“It’s not a good thing,” he said. “A huge part of the New York City market is the secondary and third home market. This is just adding another distraction. I’m definitely not for it.”

In case you missed it…

One of New York City’s buzziest buildings is finally showing its cards. Earlier this week, Zeckendorf Development and Atlas Capital reported a slate of signed contracts to the state attorney general, allowing the office to declare the offering plan effective. Of the 22 inked deals revealed, one was for a 30th-floor condo asking $75 million.

Though the filing marked the developers’ first official acknowledgment of sales at the 112-unit building, The Real Deal previously reported that they’d snagged a signed contract in December for multiple units totaling $129 million.

NYC Deal of the Week

The most expensive deal recorded in the city rolls this week was a double-wide townhouse in the West Village, which sold for $70 million. The 13,000-square-foot abode at 105-107 Banks Street hit the market in October after a multiyear process of combining and renovating two adjacent homes, one of which was once the residence of John Lennon and Yoko Ono.

The townhouse, developed by RoundSquare Builders, is 40 feet wide and six stories tall. It has six bedrooms, an elevator, a gym and multiple outdoor spaces.

Leslie J. Garfield’s Matthew Lesser had the listing. Sotheby’s International’s Nikki Field brought the buyer, whose identity is shielded by an LLC.