The pied-à-terre tax that was originally proposed last March by New York State Senator Brad Hoylman. It got turned down as industry leaders rallied against it, with the fear that the tax would cripple New York City’s already-slow luxury residential market. Now, less than a year later, Hoylman told The Real Deal that he’s working on the “technical aspects” that got the bill booted in the first place and that he’s hoping to bring it back to the floor at the start of the Senate’s January session.
The booted proposal suggested an annual tax on non-primary residences worth $5 million or more. The bill was backed by Governor Andrew Cuomo, and estimates put the bill’s anticipated revenue at around $650 million a year, according to The New York Times. The funds from the tax would have been used to support and improve the city’s subway system.
In brief, the proposed tax would require all homeowners whose legal residence is outside the five boroughs to pay an annual tax on maintaining a second (or third, or fourth) residence within the city. This tax would be leveled not only on new purchasers, but on anyone whose legal residence lies outside city limits. Administered on a sliding scale, the tax would charge between 0.5% and 4% to owners whose one to three family houses have a value of $5 million or more, and 10% to 13.5% to owners whose apartments have an assessed value of $300,000 or more.
Barbara Fox, founder and president of the real-estate brokerage Fox Residential, told Business Insider that a pied-à-terre tax would be “irrevocably damaging to the Manhattan/NYC real estate market.”
“There are so many new buildings going up currently that will all be dependent on pied-à-terre buyers — who will become non-existent with the institution of this tax,” she told Business Insider in an email. “There are so very many aging baby boomers who are pied-à-terre owners in NYC who will definitely sell their current properties and leave NYC for good, or, if they wish to continue spending time in the city, they will most likely rent. We must stop this movement which will destroy the already suffering residential market.”
“If you keep adding taxes to buyers in this segment, it will eventually depress real estate values,” Cody Vichinsky, co-owner and founder of the luxury real-estate brokerage Bespoke Real Estate, told Business Insider in an email. “This move does not have the potential to drive real estate purchases, especially with the mansion tax already in effect,” he continued.
The progressive mansion tax is a one-time fee that affects home sales of $2 million or more. The fee increases with the price of the home. In line with this, a .25% transfer tax was put into place on homes that sell for $3 million or more.