As a service-oriented NY title insurance company, we’ve followed along over the past five years as New York state legislators have mulled a New York City pied-à-terre tax on multimillion-dollar secondary homes. After a record-breaking $238 million condo sale in Manhattan — the straw that broke the camel’s back — it looks as if the tax may actually become reality.
Mayor Bill de Blasio and City Council Speaker Corey Johnson both support the additional tax, which would be levied on secondary homes valued at over $5 million in New York City. The pied-à-terre tax proposal is in line with de Blasio’s other tax proposal, the so-called “millionaire’s tax” on individuals with an income over $500,000, that would provide the funds to improve NYC’s subway system.
The pied-à-terre tax would be an annual charge on any apartment or house in NYC valued over $5 million that serves only as the owner’s secondary residence. As of this writing, the most recent proposal called for a graduated tax, so a home valued at around $5 million would draw a tax of a few thousand dollars and a home of $25 million would be hit with an annual tax bill of around $370,000.
Real Estate Industry is Concerned, Really Concerned
A WSJ’s analysis that calculated the tax burden owners could face under the bill over the next 30 years found that a small number of houses, condos, and co-ops valued at $25 million or more would see close to a 50 percent reduction in value. Those valued at between $20 million and $25 million would see their value drop by around 26 percent.
According to Corcoran president Pam Liebman, the tax wouldn’t function as intended because the condos would simply become rentals and new construction would grind to a halt.
As a potential compromise, opponents of the pied-à-terre tax favor a one-time transfer tax imposed on high-priced apartments.
We’ll keep you informed as we receive updates on this story!
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