Wealthier state residents who own additional homes in New York City may experience a bigger tax pinch if state lawmakers have their way. Members of the New York State Assembly recently revived plans on an annual tax of 10% to 13.5% on co-ops and condos used as second homes and are worth at least $300,000.
The tax, which targets part-time residents, represents a likely effort to overcome a projected $3.75 billion budget shortfall for next year. Lawmakers predict the levy would annually bring in $390 million. The tax also arrives as an increasing number of New Yorkers temporarily moved to other areas due, in part, to the COVID-19 pandemic.
First of its kind tax in U.S. city
Naturally, the proposal has met with some resistance. Real estate professionals claim the tax would lead to wealthy out-of-town residents avoiding investing in a part-time residence in New York, limiting the number of prospective buyers. And some of these prospective buyers may choose to permanently leave New York to remain in the suburbs. With reduced home demand, property values likely would drop. too. Homeowners contend that the tax also would harm New York City’s full-time residents.
Known as a “pied-a-terre” tax, the levy would be the first of its type in the country, according to Jonas Shaende, chief economist at the Fiscal Policy Institute. Shaende said the tax would represent a solid source of revenue for cities like New York.
Other global destination cities such as Paris, London and Sydney implemented similar taxes and reportedly continue to attract home buyers.