Featuring real estate articles and information to help real estate buyers and sellers. The Nest features writings from Georges Benoliel and other real estate professionals. Georges is the Co-Founder of NestApple and has been working as an active real estate investor for over a decade.
There are NEW MANSION TAXES in place. It all started a couple of months ago with the record sale of the penthouse at 220 Central Park South. Costly real estate deals are nothing new in NYC but this one woke up a behind-the -scenes discussion that had been happening for a while. Just to give you an idea, this purchase not only broke the city’s record for most expensive condo sale but it broke it with an astounding difference of $138,000,000 from its runner up.
What came after was a debate of how the city had become a playground for the rich; the subway is in desperate need for repair and a pied-à-terre tax seemed like an easy fix. “When over six million New Yorkers are dealing with a crumbling and dysfunctional subway and the crisis in public housing, to see this opulence in the sky by someone who doesn’t even live here, struck a chord“, the City Council speaker, Corey Johnson, said.
A good headline combined with a political movement that resulted from the anti-Amazon/anti-corporate feelings in Queens resulted in talks to find ways to collect more taxes.
Pied-à-terre taxes are common in cities like Paris, Vancouver and Singapore. Locally, both houses of the state legislature and Governor Cuomo supported the legislation, their argument: The financial impact could be significant. New York City has about 75,000 pieds-a-terre, according to a city estimate in 2017. Of those, about 5,400 residences were sold for $5 million or more, the threshold where the proposed pied-à-terre tax would begin to kick in.
The new budget had to be approved by April 1st. A few days before the deadline, during a press conference, Governor Cuomo said the pied-à-terre was off the table (for the moment). He promised though they were coming up with an alternative. That alternative became the new mansion tax.
The new Mansion Tax is a one-time payment. The percentage increases as the price does. The 1% that was previously in practice will apply to homes between $1 and $2 million. From there on it starts increasing progressively; 1.25 percent on ones valued at $2 to $3 million, and so on; it ultimately tops out at 4.15 percent for homes valued at $25 million or more.
This, coupled with a one-time transfer tax, is expected to generate $365 million annually, which can then be put toward funding the MTA.
To Pamela Liebman, president of brokerage Corcoran Group, the mansion tax is damaging to the whole market and a loud-and-clear message from officials that it doesn’t matter if the barrier to entry becomes unreasonable for big-spenders. In the past weeks, the brokerage has lost deals in the $25 million range over concerns about taxation.
At Nestapple we predict the opposite: there will be almost no impact to the city’s luxury market. There was already a barrier to entry; this makes it a bit harder. If you can afford 6 digit properties the increment will not be significant and we don’t think it will derail buyers from investing or staying in the city. A pied-à-terre tax would have been significantly more damaging. Overall if this means the subways will run on time and be more efficient we think it’s a good solution.