Latest feature on PropertyShark: Are NYC Pieds-a-Terre Facing Additional Taxation?
New York City is always looking for ways to increase income to maintain the transit system, parks and other government facilities, which are usually funded by increases in taxes.
In fact, in July 2019, the New York State Senate passed an increase in mansion taxes on purchases of real property worth more than $1 million. What was previously a standard 1% tax on any purchase greater than $1 million, has now become an upward tax rate as the purchase price increases. According to Bloomberg, the recently revised mansion and transfer tax increases are projected to generate about $365 million annually.
But, it doesn’t end there. What were previously merely discussions to raise taxes on a purchase of a pied-a-terre are now being reconsidered – perhaps as an appeal to city officials to adopt the idea. A pied-a-terre is literally defined as “foot on the ground.” These properties are not primary residences and usually serve as a second home for those who live outside of New York City. They are often high-end condos purchased by foreign buyers or others who do business in NYC but live outside of the city.
The proposed pied-a-terre tax increase would impose an additional tax on purchasers who are buying a second home worth more than $5 million. While the new mansion tax accounts for this price range, as well, condo developers are now concerned about their potential revenue and sales – and whether this pied-a-terre tax will be imposed on top of the new mansion tax.
New York City real estate has always been a “safe” investment, whether developing a new luxury condominium or investing long term in a low-income building with potential “upside”. But, today, with the new mansion tax, transfer tax and rent stabilization laws, investors may not have anywhere to turn.