You’ve probably heard that Albany lawmakers are considering a dangerous proposal to institute a tax on homes worth $5 million or more. The tax would apply to homes that do not serve as the buyer’s primary residence.
We are deeply concerned that this so called “pied a terre” tax would be harmful for New York and could become law without any research or study regarding its economic impact.
The legislature should first conduct an analysis to clarify the affect the tax will have on development, job creation, the condominium and rental real estate markets.
The proposal would dramatically slow new condominium construction in New York City. The result would mean a significant loss of union construction jobs and tax revenue for the City and State that results from such construction and employment.
Similarly, the residential real estate brokerage industry will be severely impacted. The level of transactions will drop significantly, thus adversely impacting employment as well as tax revenue that would be generated from such transactions and employment.
Existing owners will seek to convert their condominium units to rentals, thus flooding a rental market that already has an excess supply of units.
Keep in mind that New York City already has one of the highest transaction tax costs in the country including the local transfer tax, state transfer tax, mortgage recording tax, mansion tax, on top of existing real property taxes. Each of these taxes must be considered in conjunction with the recent elimination of state and local tax deductibility (SALT). Mayor de Blasio’s Advisory Commission on New York City’s Property Tax System should have an opportunity to suggest how this proposal would impact the entirety of New York’s property tax system.
Elected officials have cited the need for this proposed tax to fund improvements to the region’s failing mass transit system. However, no credible plan has been put forward publicly that shows how existing or new tax revenue will be more effectively and transparently spent.
A solution being proposed is to throw more tax money at problems and offered no credible plan as to how such money will be effectively spent to benefit the public.
Our elected leaders should have a conversation about reforming the failed cost structure that plagues our mass transit and public housing crises.
We are acutely aware of the dire need for a dedicated revenue stream to fund mass transit. That’s what we’re been early and strong supporters of congestion pricing to do just that.
Before enacting a new tax that would do more harm than good, everyone should take a step back and consider that this additional tax would suppress economic activity and lead to lower tax revenue for the city.