Proposed NY Real Estate Tax Called 'Disaster' for Already Lagging Market

'Pied-à-terre' tax backed by de Blasio introduced by 'radical' state senator

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March 28, 2019

A plan to tax wealthy apartment owners in New York City is being called a "disaster" for an already struggling real estate market.

The "pied-à-terre" tax, part of Democratic state lawmakers' budget proposals, would target out of state residents and some New Yorkers who buy property valued at over $5 million. Mayor Bill de Blasio and Gov. Andrew Cuomo support the tax.

State senator Brad Hoylman, a fan of socialist Alexandria Ocasio-Cortez and co-sponsor of legislation that legalized abortion in New York up until the moment of birth, originally introduced the tax in 2014.

The proposal comes at a time of lagging real estate prices. Last year, the real estate market had its worst year since the financial crisis, as sales fell by 14 percent. In 2018 the median price for an apartment in Manhattan "fell below $1 million for the first time in three years," CNBC reported.

The pied-à-terre tax would further cause a "dramatic drop" on real estate values in New York, according to an analysis conducted by the Wall Street Journal.

The tax ranges between 0.5 percent to 4 percent on homes valued at $5 million and above. Proponents of the tax say it would raise up to $650 million in revenue per year, though the Journal's analysis found it would raise just $471 million.

"The tax is a disaster," one apartment owner told the Journal. "If you actually put the tax in place, you would massively reduce the value of real estate."

Real estate brokers told Bloomberg a pied-à-terre tax is "class warfare" on the rich.

"The international buyer has basically gone away over the past two years," one real estate broker said. "There's only so much that people will take—they'll either go somewhere else or they'll just get a hotel room."

Another broker, Rachel Ostow Lustbader, said out-of-state apartment owners do not pay income taxes, but make up for it in sales taxes and driving business to the city.

"They don't just buy a hotdog," she said. "They go to all the high-end restaurants, Gucci and Chanel, and are paying millions of dollars in sales tax."

"If the real-estate market suffers, everybody will suffer," Pam Liebman, president of the real estate broker the Corcoran Group, told the Journal. "The condos will become rentals, the construction trades will lose out. Nobody will build another building."

De Blasio, who believes "there's plenty of money in the world, it's just in the wrong hands," eyes the tax as another way to soak the rich.

"I believe that millionaires and billionaires are not being taxed at a high enough level," he said of the proposal.

Hoylman, who introduced the proposal, has heaped praise on Ocasio-Cortez and endorsed her "radical" ideas, such as the Green New Deal.

"Big ideas change the world," Hoylman tweeted in January. "Radical politics aren't so radical compared to a system rigged for the few."

Hoylman is a left-wing critic of President Donald Trump, and wants to remove the president's name from a closed New York state park, the land for which was donated by Trump in 2006.

He accused the president of "treason" before the election in July 2016, and has introduced legislation to make it more difficult for Immigration and Customs Enforcement agents to arrest illegal aliens.

Hoylman co-sponsored the late-term abortion bill, supports legalizing prostitution, and was forced to apologize over an anti-Catholic tweet he sent last year. He never apologized for calling on people to "spit in the face of the NRA."

The pied-à-terre tax is part of other proposals in the 2019 budget, including "congestion pricing" that would tax New Yorkers for driving on its roads.

Supporters of taxing New York drivers have likened it to the "Green New Deal," which also aims to get cars off the road, and planes out of the sky.