A political battle is brewing at the apex of New York’s property market.
The real-estate industry is mobilizing to kill a proposed levy on non-resident owners of apartments valued at more than $5 million, seeking to ensure the world’s biggest city doesn’t follow London, Hong Kong and Singapore in extracting extra cash from trophy properties.
The industry’s lobbying arm, the Real Estate Board of New York, says the measure will scare off investors who fuel a business supporting more than 500,000 jobs and generating 40 percent of the five boroughs’ revenue. Brokers warn of economic calamity if officials slap a luxury tax on apartments owned by someone who lives in the city less than half the year.
“The first e-mail I woke up to yesterday was from a gentleman about to sign a $25 million contract who said, ‘I’m not signing this until I understand better what the implications are of this new pied-a-terre tax,’” Pamela Liebman, chief executive officer of the Corcoran Group brokerage firm, said in an Oct. 8 interview.
The idea runs counter to the “reputation of New York as a city that welcomes citizens from around the world,” she said.
The measure would raise about $665 million annually by requiring part-time New Yorkers to pay a 0.5 percent surcharge on dwellings valued at more than $5 million. The tax would rise incrementally to 4 percent for units valued at more than $25 million.
New York Mayor Bill de Blasio, 53, who has called income inequality a defining issue and has already lost one fight over raising taxes on the wealthy, said he’s considering the proposal and remains undecided. The first Democrat to run City Hall in 20 years, de Blasio lost a bid to tap those with incomes above $500,000 to pay for universal all-day pre-kindergarten. The plan was rejected by the state legislature, which must approve changes to the city’s tax policies. It was instead funded within the state budget.
The most-populous U.S. city wouldn’t be first to zero in on the trophy real estate market to derive revenue from absentee homeowners and slow spiraling prices. People living outside the U.K. will have to start paying capital-gains tax on home sales starting in April 2015. Hong Kong and Singapore charge higher purchase taxes on non-residents.
Targeting the Rich