Luxury real estate brokers have derided it as “class warfare.” Advocates have praised it as a long-overdue chance to “soak the rich.” Many politicians, including the governor and the mayor, say it will provide valuable funds to fix New York’s crumbling subway system. And now the Wall Street Journal has done an analysis that suggests the controversial pied-a-terre tax on rich absentee homeowners would – gasp! – slash in half the value of homes worth $25 million or more.
The tax languished in Albany since it was first introduced by State Senator Brad Hoylman in 2014. When Democrats assumed majorities in both houses of the state legislature early this year, the moribund tax was revived, with a boost from multi-billionaire Ken Griffin’s purchase of a condo apartment on Central Park South for $238 million. The tax aims to levy an annual fee on those who own second (or third or fourth) homes in New York valued at $5 million or higher and would be part of the state budget for the fiscal year that starts on April 1.
If enacted, the tax would have the largest impact on a small number of houses, condos, and co-ops valued at $25 million or more. These properties could see a roughly 46 percent drop in value, while those worth between $20 million and $25 million could see a 26 percent dip, according to the Journal’s analysis, which calculated the tax burden owners could face under the bill for the next 30 years.
“It is not unreasonable to ask those who can afford to buy a $238 million second home in New York to pay a little more to keep our subways and schools running,” Hoylman said. But the real estate industry is rigorously lobbying against the bill in favor of a one-time transfer tax that would be imposed on high-priced apartments.
Analysis by the paper found that the tax would drum up a total $471 million annually – about midway between the high-end estimate of $660 million and the low-end estimate of $372 million. Half of the revenue would come from 280 homes valued at $25 million or more – 24 co-ops, 40 houses, and 218 condominiums. The 923 property owners with apartments valued between $5 million and $6 million would hand over $2.1 million a year. That’s $2,275 per year per wealthy homeowner. Beer money.
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