There’s been a lingering open question of how the city will implement a pied-à-terre tax.
After Gov. Kathy Hochul’s latest proposal to legislators, it seems the question will remain open for two more years.
The governor put forward a “two-step” plan, as reported by the New York Times. The first step will involve taxing condo and co-op second homes that have a “market value” of at least $1 million, as determined by the Department of Finance.
The governor’s office said that benchmark — calculated by the DOF using a statistical model based on comparable rental units — should roughly translate to a $5 million sales value, or actual market value.
The second step, to be put in place two years after the tax went into effect, would entail the city devising an entirely new metric to compute co-op and condo sales values.
Both steps — and the potential issues they face — seem more like fuzzy math than a well-thought-through tax policy.
The Times noted that a unit’s “market value” can often be much lower than its actual sales value, pointing to a penthouse at the Aman that sold for $135 million and had a “market value” of $4.2 million.
But that can go both ways.
For example, a unit at 21 Douglass Street, a boutique Cobble Hill condo, sold for $2 million last year and has a “market value” over $1 million, meaning it theoretically could get included in the pied-à-terre net if it were being used as a second home.
“It’s like a night at improv,” said Compass’ Jason Haber, who is also a co-founder of the American Real Estate Association. “I think when they announced the pied-à-terre tax a month ago, they had no idea about the complexity of actually implementing a tax like this.”
The latest iteration comes just weeks after the state had initially floated the idea of using a home’s assessed value starting at $5 million, which a Marketproof analysis found would capture only three homes in the entire city (a spokesperson for the governor’s office later clarified to NYT that it had incorrectly put forward that idea).
The two-step plan also makes it clear that the city and state had no clear idea of how to create a metric to appropriately capture the homes’ value. Instead, they are kicking the can down the road.
As Haber points out, two years in government time may be a lot quicker than you think.
“They can’t even pass a budget on time,” he said. “We think that they’re going to actually, in two years’ time, create a whole new system for valuing properties?”
What we’re thinking about: I had a conversation the other week about how co-ops are going luxe, swapping out podiatrists’ offices for spas in their retail units to better compete in the condo market. Is this happening in your co-op, or one you want to live in? Let me know your thoughts at jacob.indursky@therealdeal.com.
A thing we’ve learned: The New Yorker wrote about how you can find your local news on Substack now, where there’s been a proliferation of hyperspecific newsletters like the Grand Army Gazette, the Park Slope Times and Boerum Bulletin.
Elsewhere…
— It should come as no surprise, but a new report found that the average New Yorker is $40,000 short of what they need to live, Gothamist reported. The Urban Institute found that the average family with children needs to earn $160,800 per year; childless families need to make a little over $106,000.
— A set of bills proposed by the City Council would try to eliminate dynamic pricing in the city, the New York Post reported. The bills would target pricing based on shoppers’ locations, movements, browsing history or past purchases.
Closing time
Residential: The most expensive residential sale recorded Friday was $13.3 million for 297 Hicks Street. The Brooklyn Heights townhome is 9,200 square feet. It was initially listed for $14.9 million by Douglas Elliman before being sold off-market.
Commercial: The most expensive commercial transaction was a $500 million sale for a development site at 405-417 Park Avenue. Gary Barnett’s Extell Development purchased the 700,000-square-foot blockfront with plans to build office space, per reports.
New to the Market: The highest price for a residential property hitting the market was $30 million for 34 West 12th Street. The Greenwich Village townhome is 7,400 square feet. Sotheby’s International Realty has the listing.
— Joseph Jungermann
