Property Tax Post: The Idea of Pied-à-Terre Taxes Are Catching On In Unaffordable American Cities, But Will They Solve Anything?

San Francisco has become the latest major U.S. city to consider imposing additional taxes upon absentee owners of pied-à-terre homes. County Supervisor Eric Mar plans to introduce a bill in the upcoming legislative session “to address the issue of residential real estate hoarding by out of town buyers,” as he explains it.

As property prices rise and demand outstrips supply, there are approximately 180,000 properties off the market in San Francisco, half of which are second homes, as reported by CBS News San Francisco. This phenomenon has created what are called “zombie neighborhoods,” or neighborhoods largely consisting of houses that sit empty for most of the year.

48 Hills, a self-described “progressive newspaper,” conducted an investigation and found that of “5,212 condos in 23 buildings, most built after the year 2000, all of them at market rate,” 39 percent are controlled by absentee owners, with the rate rising above 60 percent in some buildings.

Sup. Mar has not decided on the exact form the measure would take. It would presumably be a relatively substantial tax on pied-à-terre homes, as he intends it to act as a disincentive for absentee owners.

Other international cities such as London, Hong Kong and Singapore already levy taxes on pied-à-terre properties, but these taxes became an issue in the U.S. last year when New York City officials, including Mayor De Blasio and public policy groups, began mulling the idea.

Proponents of argue that wealthy, absentee owners drive up property prices, making city-living unaffordable for residents and contributing very little to the city economy other than their property taxes, which are already rife with exemptions for expensive properties. A tax on these homes, it is argued, will dissuade would-be residents from purchasing them, or contribute revenue to the local economy if owners decide to keep them.

Opponents argue that the owners still pay property taxes in addition to other fees, such as the “mansion tax,” which fund services in the city. Their absence, moreover, means that they themselves are not consuming the services, leaving more public money to provide services to others, the argument goes.

Affordable housing shortages have become a problem in large metropolitan cities around the country, and whether pied-à-terre taxes are an appropriate or sufficient solution is an open question. But for cities, they have become a major part of the conversation.

Continue the conversation on Bloomberg BNA’s State Tax Group’s LinkedIn page: Will pied-à-terre taxes drive wealthy homeowners out of cities? Will they provide cities with increased revenue?

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