Just how bad is New York City's second-apartment-as-foreign-tax-shelter problem? The New York Times looked at the number of Midtown apartment owners who use the City's resident-only 17.5% tax abatement, and found that 57% percent of the units from East 57th Street to East 59th between Park and Fifth Avenue are empty for at least 10 months out of the year. From East 59th to East 63rd, 628 out of 1,261 homes are vacant most of the time, and at the Trump Tower on 721 Fifth Avenue, less than half of the units are occupied by New Yorkers.
“My district has some of the most expensive land values in the world—I’m ground zero for the issue of foreign buyers,” State Senator Liz Krueger told the paper. “I met with a developer who is building one of those billionaire buildings on 57th Street and he told me, ‘Don’t worry, you won’t need any more services, because the buyers won’t be sending their kids to school here, there won’t be traffic.’"
Krueger added, “He said it like this was a positive thing."
And it is! (If you're a middleman who is collecting fees off these transactions.)
Earlier this month, when State Senator Brad Hoylman proposed a graduated 4% pied-à-terre tax on units worth more than $5 million, the real estate industry defended the right of rich foreigners to use our flawed tax structure to enrich themselves and their property values to the detriment of the poor mortals who are unlucky enough to call New York home.
“I think it’s in the interest of New Yorkers and the New York tax base to attract as many people who invest in real estate and go to restaurants and go shopping as possible,” the president of Brown Harris Stevens told The Real Deal. “This is going to scare them away.”
Thankfully, the abundance of multi-million-dollar safe deposit boxes is pissing off the people lucky enough to pay the highest rate of taxes in town.
“The pied-à-terre tax is seen by New York’s wealthiest 1 percent as a question of fairness,” said James Parrott, the chief economist at the Fiscal Policy Institute, who first made the proposal for the tax on which Mr. Hoylman based his legislation. “Here they are in the top tax bracket paying the top New York City and New York State income tax rates, but these non-primary residents are just paying property taxes, and the effective property tax rates are so incredibly low.”
Before Mr. Parrott released his proposal earlier this year, “I heard more about the need for a pied-à-terre tax from high-income New York City residents than anybody else.”