The new bill offers exemptions to pied-a-terre owners who can demonstrate, with a private appraisal, that the fair market value of their property is less than $5 million, Hoylman said.
But that’s just another burden on owners who would have to shoulder the costs of proving their exemption, according to Saft. Because of the vagaries of the city’s methods, an assessed value of $300,000 would, in some neighborhoods, capture homes with a market value of as little as $2 million, meaning more people will be tasked with making tax appeals to the city, he said.
It’s a critical time for New York’s luxury-home market, where sales and prices have been lagging for years amid a pile up of new development and flagging interest from overseas buyers. The pandemic made things worse as those with discretionary income to buy second and third homes are choosing warmer or less-urban locations for investment.
“Just what we need on top of Covid,” said Frederick Peters, chief executive officer of Manhattan brokerage Warburg Realty, arguing the tax would further weaken the city’s sales market. Second-home seekers may instead turn to places like Greenwich, Connecticut, and drive into New York for cultural attractions, or find temporary lodging nearby.
“When you do return to a more-normalized New York,” Peters said, “this probably ends up being to the benefit of the hotel business.”
Vibrant Cities
State lawmakers attempted to impose a pied-a-terre levy in 2019, but instead agreed to increase the “mansion tax” -- a one-time surcharge on closing costs for high-end properties.
An annual pied-a-terre tax, if passed, would be the first of its kind for a U.S. city, said Jonas Shaende, chief economist with the Fiscal Policy Institute, a research group that championed the idea for New York in a 2014 paper. Other global cities that enacted a similar levy -- such as Paris, London and Sydney -- have continued to draw buyers after the fact, he said.
The vibrancy of these cities -- their arts, culture and top-notch educational institutions -- is what makes pied-a-terre markets, and their sky-high property values, possible, according to Shaende. So it makes sense for local governments to capture some of that value through taxation and use the funds to pay for services that full-time and part-time residents alike rely on, he said.
“It’s a good source of revenue to have that is uniquely available to global destination cities,” Shaende said. “Not using it would be strange.”
This article was provided by Bloomberg News.