For New York City’s luxury real estate brokers, a new mansion tax certainly isn’t welcome news, but it’s better than the alternative.
The tax, included in the new state budget and replacing an annual pied-a-terre levy, would be a one-time payment that’s less likely to scare buyers away, brokers say. It’s just the entry fee into New York’s exclusive market.
“We probably dodged a bullet here,” Steven James, chief executive officer of Douglas Elliman’s New York City division, said in an interview. “It’s not the catastrophe we thought was going to happen.”
New York’s powerful real estate industry succeeded in killing the pied-a-terre tax that some considered “class warfare” against the rich, and a measure likely to hurt already-slowing luxury sales. While the higher mansion tax would apply to most buyers of homes costing $2 million or more, it won’t be a deal-killer for many people, brokers say.
Counting Pennies
Elizabeth Stribling-Kivlan, president of Stribling & Associates, said a client from Europe had canceled a house-hunting trip for an apartment above $25 million because of the pied-a-terre tax, which would have been levied each year based on the value of the home. The agent is hopeful he might now change his mind.
“It’s a lot easier to pay one time than every year,” Stribling-Kivlan said. “It’s easy to look at someone who makes an enormous purchase and say they have a lot of money. It does matter to them. But a lot of people get wealthy by counting their pennies and spending wisely.”
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The pied-a-terre proposal, which had support from Governor Andrew Cuomo, collapsed after real estate professionals complained that it would damage sales and city tax officials said they didn’t have the resources to assess properties or determine who was an absentee owner.
Lobbyists also questioned the constitutionality of treating second-home buyers differently than permanent residents and whether legal challenges could arise when adjacent properties were assessed at different values.
Simpler Tax
The mansion tax has the benefit of being simple.