Capitalizing on public outrage over a billionaire’s purchase of a $238 million Manhattan penthouse as a part-time pad last month, City Council members are urging the state to pass a pied-à-terre tax, which would levy annual fees on secondary homes worth $5 million and up.
Council members Mark Levine and Margaret Chin on Monday said they planned to introduce a council resolution supporting a state bill that was originally introduced by State Senator Brad Hoylman in 2014.
The next step is for the City Council to adopt what is known as a “home rule” provision allowing the state to pass the bill, since it will only affect New York City.
Interest in the tax, which has been floated by City Council members over the years, surged almost immediately following hedge fund tycoon Ken Griffin’s record-breaking purchase at the exclusive luxury building at 220 Central Park South. To deal with the crises around affordable housing, the New York City Housing Authority, and the subway system, there has been increased urgency for the city to create additional revenue streams. On Tuesday, Governor Andrew Cuomo and Mayor Bill de Blasio announced their support for another long-sought tax proposal, that of traffic congestion pricing, which would force drivers to pay to enter the busiest parts of Manhattan.
The plan would impose a graduated tax starting at 0.5 percent on non-primary residences valued at more than $5 million and increasing to as much as 4 percent on those worth more than $25 million. For example, under the proposed tax, Griffin could be asked to pay $8,890,000 a year to the city for maintaining his part-time residence at 220 Central Park South.
City Comptroller Scott Stringer has estimated that a pied-à-terre tax would generate at least $650 million a year. However, an analysis by the city’s Independent Budget Office in 2015 resulted in a more conservative figure, putting the tax revenues at well below $380 million.
State Assembly member Deborah Glick said in a statement, “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.”
In the past, state Senate Republicans consistently blocked any efforts to tax second homes in the city. But with Democrats in control of the legislature, the pied-à-terre tax appears to have the clearest path toward approval. The city’s real estate industry, although seen as less influential these days, is still expected to oppose the plan.
Reached for comment, John Banks, the president of the Real Estate Board of New York, issued the following statement: "New York City has one of the highest transaction tax costs in the country. An additional tax like the one proposed will suppress sales activity and lead to lower tax revenue for the city."
Holyman as well as policy experts have dismissed claims that the tax would scare away wealthy investors from New York City. “The amount of money is so small compared to the value of the apartment that I don’t think [the tax is] going to make an appreciable difference,” Hoylman told Curbed. “And individuals who use New York City to stash their cash should pay a premium on it.”