It seems that America is just bursting with excitement these days at the chance to show its penchant for income inequality. Maybe you’re still absorbing the college admissions scandal starring parents paying hundreds of thousands of dollars to bribe soccer and sailing coaches. Or the one about Paul Manafort getting little more than a drug-possession sentence for his million-dollar white-collar crimes.
Add in the record-setting $238 million purchase of a Central Park South penthouse announced amid a New York City affordable housing crisis.
News of that sale to billionaire hedge funder Kenneth Griffin, who has multiple million-dollar homes, broke in January.
The pricey (unfinished) penthouse is now Griffin’s, but the astronomical transfer seems to have stirred up another round of consideration for a so-called pied-à-terre tax.
The idea, sponsored in the State Senate by Manhattan Democrat Brad Hoylman, would allow NYC to add a graduated property tax on non-primary residences whose market value is $5 million or more. It would start at 0.5 percent of the excess over $5 million, going up to 4 percent of the amount over $25 million.
Basically: someone from out of town who has a second home in NYC and is unlikely to be paying state or city income taxes would be dinged for $5,000 on a $6 million place.
Those who park their money on Billionaires’ Row and never even really plan to show up there would get taxed, too.
City Comptroller Scott Stringer’s office estimates that the tax would raise more than $650 million annually. Here’s a sense of the size of buyer it would apply to:
Stringer’s office used primary residence tax abatement eligibility to estimate that the city has around 5,400 non-primary residence units whose sales-based market value is above $5 million. The largest chunk of those – 2,230 – fell in the $6 to $10 million valuation. The number of residences drops when you get to the $15 million range, but there’s plenty of company up there in the stratosphere. Stringer estimates 505 units with a value of more than $25 million.
Pied-à-terres have long been a subject of fascination for New Yorkers who would love to have an extra bedroom and half closet, let alone a whole other spot to crash (the Hoylman bill doesn’t apply to residences lived in by the owner’s parents or children). News articles throughout the 1980s memorialize debates about tenants living outside the city who still retained rent-regulated pieds-à-terres within, even as apartments grew more expensive.
Hoylman’s bill was first introduced in 2014 on the heels of a study of the issue from the left-leaning Fiscal Policy Institute, and hasn’t gone far in Albany since.
But last week, Gov. Andrew Cuomo’s budget director Robert Mujica floated the tax as one way to help get money to the MTA – a real concession considering that the fiscally moderate Cuomo has been firm on not raising taxes in the age of limited state and local tax deductions.
Other corners of the political sphere have been less bullish. Real Estate Board of New York President John Banks has called the tax a “dangerous proposal,” one of too many taxes on high-end real estate that he says could slow down new condominium construction and the residential real estate brokerage industry.
Yet Hoylman’s office contends that the target is narrow: The bill would only apply to around 7 percent of the second or third homes in NYC, itself a tiny slice of New York residences.
Where are these swanky, empty units? Stringer’s office didn’t provide location information but Hoylman’s bill cites Census data suggesting that in one 42-square-block quadrant of central Manhattan, some 30 percent of the apartments are vacant 10 months in the year.
If only those on NYCHA’s waiting lists could sublet.
