Pied-à-terre Tax Push, $10K Demolition Fee Floated

16 minutes read

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Hey there, let’s get into today’s news at the intersection of policy and real estate:

Gov. Kathy Hochul is making an eleventh-hour push for a pied-à-terre tax — details remain scant.
State lawmakers are floating a “teardown tax” that would charge developers $10,000 for each New York City apartment they raze.
Building owners have a suite of new city-backed tools to comply with Local Law 97.

In this edition we mention: President of the Real Estate Board of New York James Whelan, State Sen. Erik Bottcher, Assembly Member Grace Lee, Rosenberg & Estis’ head of litigation Luise Barrack and others.

We Heard

Pied-à-terre tax push: Gov. Kathy Hochul is making an eleventh-hour push for an extra annual tax on second homes in New York City as part of the state’s already late budget negotiations. A lot of the details are up in the air but here’s what we know: the proposal would apply to roughly 13,000 properties with an assessed worth of $5 million or more that are not the owner’s primary residence or rented out to a full-time tenant, higher-valued properties would be subject to higher tax rates and the tax could be indexed to inflation each year, Hochul told reporters Wednesday. The governor is pitching the levy as a fee on the ultra-wealthy whom she said do not pay their fair share in property taxes. “They’re part of our skyline but those people are not part of our city,” she said. Hochul aims for the tax to generate $500 million each year to help shrink the city’s multi-billion-dollar budget gap. To say the proposal comes as a surprise to state lawmakers and the real estate industry is an understatement. The policy is a big shift for Hochul who has resisted pressure to increase taxes — particularly during an election year. It also comes late in budget talks — two weeks after the April 1 deadline — when details tend to be hashed out by lawmakers behind closed doors, making it tougher for lobbyists to exert influence. Real estate industry opposition was swift and fierce, as it has been with similar tax proposals in years past. James Whelan, president of the Real Estate Board of New York, argued the tax would weaken the city’s overall economy, eliminate construction jobs and lower property values. “Albany should focus on policies that encourage investment and housing production to create a more affordable city, not ones that stifle its growth,” said Whelan. Follow along for more The Real Deal coverage on the tax proposal.

Teardown tax: A new state bill aims to charge landlords $10,000 for each New York City apartment they take off the market through demolition. State Sen. Erik Bottcher and Assembly Member Grace Lee are pitching the so-called “Teardown Tax Act” as a blunt-force tool to preserve the city’s existing housing stock. “If we are serious about affordability, we need to protect the housing we have while we work to build more,” Bottcher told TRD. The mechanics are straightforward: before issuing demolition permits, the city would determine how many units a project removes and charge landlords accordingly. The revenue would flow to the city’s Landmarks Preservation Commission. There are carveouts. Projects that ultimately add units — think tearing down a smaller building to go bigger — wouldn’t trigger the fee. Nor would income-restricted developments, NYCHA-led projects or demolitions ordered by a court or government agency. Real estate attorneys who represent developers say they’re skeptical of the red tape and fees the bill would add to new projects. “They’re imposing this surcharge prior to the owner even being able to move forward with their plans,” said Luise Barrack, the head of Rosenberg & Estis’ litigation department. “Let me put it this way: owners and developers will not be thrilled.” Bottcher and Lee plan to kick off a campaign for the bill with a Greenwich Village rally on Friday.
Local Law 97 tools: The Mamdani administration on Tuesday unveiled a new suite of free tools to help building owners comply with Local Law 97. City officials, alongside members at the Sherman Terrace Co-Op in the Bronx, pitched a concierge-style service they’ve dubbed “Momentum” to co-ops, condos, property managers and owners planning green retrofit projects. The tool, developed by the climate tech startup Cadence OneFive, is designed as a one-stop shop to chart retrofits, estimate emissions reductions, project compliance and determine potential penalties. “The goal here is simple: to make it easy for New Yorkers to do the right thing and participate in our city’s green transition,” said Deputy Mayor for Operations Julia Kerson. The effort stops short of introducing new financial incentives for upgrades, which co-op and condo advocates in particular are pushing for, but industry leaders say they are at least pleased to see the Mamdani administration advance practical support to navigating the complex building decarbonization law. Peter Varsalona, executive board president of the Council of New York Cooperatives and Condominiums, said he sees the effort as largely consolidating existing resources. “The key is planning, and having a suite of tools in one place helps,” said Varsalona, who runs the building design practice at Rand Engineering & Architecture.

Have a tip or feedback? Reach me at caroline.spivack@therealdeal.com.

Bill Tracker

Around Town

Mamdani and Menin are joining a rally Wednesday with 32BJ SEIU building workers on the Upper East Side ahead of a strike authorization vote, as tense contract talks escalate over proposed health care cost-sharing and lower pay for new hires. Elected leaders and laborers will rally at Park Avenue and 79th Street beginning at 4 p.m.

The Catch-Up

Landlords view housing violations as part of a weaponized system that punishes them disproportionately for minor issues like cracked paint or loose floorboards, writes TRD columnist Erik Engquist.

Tensions are rising in Albany as Gov. Kathy Hochul and lawmakers remain deadlocked on budget policy — likely forcing lawmakers on Thursday to pass their fourth budget extender since they blew past the April 1 deadline, reports City & State.

NYCHA is trying to resolve a redevelopment standoff by offering 24 elderly residents — who refuse to leave their Chelsea building slated for demolition — units in senior-only housing, according to The City. The fate of a $1.2 billion project to raze and rebuild several dilapidated Manhattan public housing developments hinges on whether they agree to move.

The owner of Jimmy’s Corner, who is battling eviction by the Durst Organization, has joined lawmakers and community activists in backing a state bill that would extend rent-stabilization protections to small storefronts, reports Crain’s New York Business.

The so-called Sunny Act would allow New Yorkers to hang small solar panels from their windows — making clean energy accessible to renters and apartment owners, reports Gothamist.

New York state will pick a host community and seek developers this year for a new nuclear facility as it races to meet rising electricity demand, reports Bloomberg.

The Kicker

“New Jersey’s doing really well, we’re ahead of New York, Connecticut, Pennsylvania. If you’re from one of those states, then shame on you, build more housing,” said Jamie Won, a New Jersey affordable housing bureaucrat who went viral for trash-talking New York on Jeopardy, and is now on a hot streak — holding the game’s fifth-longest winning run.