New York City Mayor Bill de Blasio is considering a property tax proposal that would impose a surcharge of up to 4 percent on “pied-a-terre” residences owned by foreign owners, according to reports in the Wall Street Journal and New York Post. Merriam Webster’s dictionary defines pied-a-terre as a temporary or second lodging (literally “foot to the ground”), but this tax would be aimed at something a bit more luxurious—co-ops and condos worth $5 million or more, and would not apply to New York City residents.
A concern that prompted the proposal is that foreign owners are using city residences and associated city services, but are not subject to income tax in New York. The New York Post dismissed this concern, arguing that if the owners are only using their pied-a-terres infrequently, the same can be said about their drain on services. Rather, this tax would be an easy way to raise additional revenue (an estimated $665 million) from owners who can’t vote the measure down, the Post suggests.
The WSJ reported that the real estate industry responded to de Blasio’s proposal with warnings that the tax could jeopardize demand for hundreds of expensive luxury condos currently being built. The mean property tax rate as a percentage of owner-occupied housing for New York state is 1.4 percent, according to data from the American Community Survey compiled by the Tax Foundation, so a 4 percent surcharge would be quite substantial.
Continue the conversation on Bloomberg BNA’s State Tax Group’s LinkedIn page: Is New York City’s proposal to tax foreign luxury condo owners an unfair revenue grab?
Sign up for a free trialof the Bloomberg BNA Premier State Tax Library and see a detailed discussion on state property taxes.
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