Pied-a-Scare

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Two elected officials representing Lower Manhattan are pushing for a tax on high-value New York City apartments owned by people whose primary residence is outside the five boroughs. For the past five years, State Assembly member Deborah Glick has sponsored and passed legislation, “to impose a modest, graduated ‘pied-a-terre’ tax on the most expensive non-primary residences in New York City.”

Before the current legislative session, this proposed law was consistently blocked in the State Senate, which was controlled by a Republican majority until last November’s election. With Democrats now in control, however, the measure (sponsored in the Senate by Brad Hoylman) has a realistic chance of passage. Whether Governor Andrew Cuomo would sign such a bill into law, even if it does pass both houses of the State legislature, remains unclear.

Deborah Glick

Such pied-a-terre taxes have become increasingly common around the world, with similar policies in place in Paris, and throughout the United Kingdom. They are predicated on the fact that non-residents don’t pay local income taxes, thus limiting their contribution to local government services from which they benefit, such as fire and police protection, parks, transportation infrastructure, and garbage pickup, along with public schools (which contribute to property values, even when an apartment owners does not send children there).

In New York, supporters of the proposal add a further, urgent reason for a tax on homes that are used only part-time: Official estimates say that nearly 75,000 residences are owned by people who do not live in New York — a figure that has grown by more than 25 percent in just the last five years. During the same period, multiple developers have erected new, luxury apartment towers that were specifically intended for foreign buyers. Faced with a critical shortage housing, advocates hope to remove (or at least diminish) the financial allure of homes meant to be occupied only sporadically. In a bitter irony, many buildings in the recent wave of lavishly priced apartment developments were built, in part, with subsidies and tax abatements that were originally intended to encourage the creation of affordable housing.

Ms. Glick’s and Mr. Hoylman’s proposal would levy a yearly tax of between 0.5 percent and 4.0 percent on homes valued at more than $5 million that are not the owner’s primary residence. The Fiscal Policy Institute estimates that this tariff would generate in excess of $600 million in annual new revenue for the City. (This is more than half of the estimated proceeds — between $810 million and $1.1 billion — that Governor Cuomo hopes to collect from his congestion pricing plan.)

Margaret Chin

On the local front, City Council member Margaret Chin is co-sponsoring a resolution in the municipal legislature that would support the proposed State measure. “Millionaires who purchase second, third, or even fourth homes should not escape paying their fair share,” Ms. Chin said.

Ms. Glick  notes that in recent years, “the available stock of affordable housing has further dwindled, while ownership of non-primary luxury units has kept apace. Affordable housing space is not the only casualty of this real estate trend. Public services like our subway system also suffer when non-primary residents purchase homes without contributing toward our local economy as residents do. With the recent record-breaking sale of the most expensive residence ever sold in the country here in our city for $238 million to a non-primary residence owner, I am reminded of the importance of ensuring that wealthy non-residents are contributing their fair share of tax revenue to the city we call home.”
Matthew Fenton

Comments

  1. Eileen says

    Don’t all homeowners pay property taxes & school taxes based on their property value? Why did the NYS Lottery, which was supposed to fund education, wind up in the “NYS General Fund”? Really, how many taxes are they trying to squeeze out of investors?

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