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Meet The Proposed Tax That Could Crush High-End NYC Real Estate
Submitted by Michael Krieger of Liberty Blitzkrieg blog,
In July, I published a post titled, Introducing Ghost Skyscrapers – NYC Real Estate Goes Full Retard, in which I highlighted many of the current absurdities characteristic of Manhattan real estate. Of all the points made, the most striking statistic from the piece is the fact that:
“The Census Bureau estimates that 30 percent of all apartments in the quadrant from 49th to 70th Streets between Fifth and Park are vacant at least ten months a year.”
There is absolutely nothing healthy about this reality. As someone who grew up less than a mile from that quadrant, I can tell you this is very negative for NYC’s long-term vibrancy. Sure, while the boom is happening and global oligarchs are parking some of their savings in newly built glass towers, you’ll get jobs, construction and sales; but when the boom stops, and it always does, all you’ll be left will are empty multi-million dollar boxes that no one can afford. When such a high percentage of properties are built solely to serve as bank accounts, and not a space to live in, you’ve got a severe case of malinvestment on your hands.
For quite some time, I have pointed out that many of these oligarchs will ultimately rue the day they made these investments. It always seemed obvious to me that once the billionaires had their fill they would become a captive milk cow for local governments. When you buy a $20 million dollar home in NYC, and the market starts to cool even a little, there is no getting out. You are completely stuck and then it will be time to come collect. No one will feel sorry for you. No one will care. If you are an oligarch and you didn’t see this coming, I don’t know what to tell you. The pied-à-terre tax is now on the agenda in New York City.
From Bloomberg:
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.
If a malinvestment boom in ghost skyscrapers is necessary to generate 40% of the city’s revenues, you boys have way bigger issues than this tax.
“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 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.
“It targets very wealthy non-New Yorkers who enjoy our services, don’t pay city income tax and pay very little property tax, particularly in buildings that got subsidies,” Hoylman said.
The city Finance Department reports about 89,000 co-operatives and condominiums owned by persons for whom the unit isn’t their primary residence. Of those, about 1,556, or 1.75 percent, would be affected by the luxury non-resident tax on units valued at more than $5 million, according to the Fiscal Policy Institute, the union-backed research group that developed the proposal.
New York’s real-estate industry accounted for $15.4 billion of the city’s $41 billion in 2012 local revenue, more than enough to pay for its 70,000 teachers, 35,000 police officers, firefighters, sanitation workers, parks and libraries, according to a real estate board report.
The industry’s reaction may be disproportionate to the tax’s chance of passage. For the idea to become city law, a lot of improbable political events would have to happen. The measure would require approval of the state legislature, whose composition will be determined in a Nov. 4 election and where the Senate, now run by a coalition of Republicans and Democrats, has been hostile to new taxes.
It also would need the signature of Governor Andrew Cuomo, a Democrat who built a campaign treasury of more than $30 million by accepting donations from corporate executives and real-estate developers. On his campaign website, he vows to “reverse the mentality of New York as the tax capital of the nation.”
More than 80 percent of the $665 million generated would come from 445 units valued at more than $25 million, whose owners would pay an average $1.2 million a year in taxes, said James Parrott, policy institute’s chief economist.
This tax may not pass this time around, but mark my words, it will pass eventually. When 80% of the tax can be collected from 445 foreign owned, vacant units, these oligarchs ultimately will be milked when the NYC economy turns south again. Whether you agree with it or not is beside the point. These taxes are coming and this is just the start.
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0.5-4.0 percent... call me when it is serious. By serious I mean appendages, not percentages.
Just burn it down.
Exactly. I know from Breaking Bad that 4% is a bargain for easy money laundering. Just part of the game.
This is indeed money laundering. And the "tax" is what happens to oligarchs when they money launder. When non-oligarchs do it, it's prison.
Chosenites are growing pot in them
Has there ever been a government or jurisdiction that focused on a plan to collect fewer tax dollars to benefit its constituents? Ever?
No Doc, & this is how twisted it is........From the article......
"very little property tax, particularly in buildings that got subsidies,”
First you subsidise it, then you levi a surtax, luxury tax, thumb tacks, whatever..
"Here, pal, put this in your left pants pocket, then give me all the money in your wallet, then I'll kick back some to your inside jacket pocket if you slip me something under the table for my next election campain, which I'll put in my sock."
Another act of agression towwards people by the government.
Any $ or % increase is wrong.
Those that argue it is not that much-you are as much a part of the problem as the government.
Draw a line and take a stand.
If they are getting taxed they are not oligarchs. The REAL oligarchs pay nothing or get money back - see the Queen of England for one example. These people are just high net worth tax donkeys like the rest of us, they just have not been yolked as hard yet. The new middle class.
Kinda like the Wall Street insider trading/fraud/theft/treason tax?
When Hedge Fund managers do it, they get charged 2 to 20. When ordinary citizens do it, they serve 2 to 20.
4% a year? Whaaaaa? Own the joint for 12 years and you've just shelled out close to 50% of the property's price in taxes to NYC to pay for a failing pension system. Brilliant investment! When did the NYC government adopt a Russian loan shark strategy!?
even in zirpland loan sharks of any persuasion (even the tbtf) charge more than 4%.
This is the problem with all real estate investments, you never truly own the land...you lease it through taxes and the local .gov can set rates at whatever they like.
When all their real estate started getting bought up by russain loan sharks et al.
And fuck real estate, you get to pay the purchase price, then you get to rent it from the gov on top of that until you sell it.
Should've bought gold, BITCHEZ!
No, should have brought Bit-apartments. I hear fonestar plaza is very nice.
The doorman is an a-hole...
Empty apartments for 10 months of the year mean apartments that for ten months don't consume much electricity, don't put kids in public schools (with their money, as if), don't add to traffic and don't buy coke (the powdered kind). These appartment owners are great neighbors who don't play their music loud at nights. Mayor DeBlasio, with his Vision Zero point one approach, will leave the rich alone as he concentrates on speed cameras, hiring incompetents, ignoring crooked criminal court judges and really acting like a cheap clone of former Mayor Bumberg. Like all politicians these days, DeBlasio is a liar.
"Like all politicians these days, DeBlasio is a liar."
These Days?
F NYC. I hope Woodie AAPedo Allen makes a new movie with dual citizen Alan Alda and some other libtard like Diane Keaton or his other faves. Alan Alda could be at her upper west side rent controlled pre-war. He will be bleeding out of his arsehole and eyes while kevetching about the bad Chinese food and his obola virus.
F NYC.
DiBlasio is an f'n idiot. These owners are EASY on the city. No cars/no city services /schools/-basically very limited expectations or needs of public services -all the while lending value to real estate and city resources otherwise. If he wants NYC to look like 1950's again-well this might be a good start.
my neighbor's ex-wife makes $77 /hour on the computer . She has been unemployed for seven months but last month her payment was $15804 just working on the computer for a few hours. go to the website... www.job-reports.com
my cousin's son sleeps in a Crown Vic for hours on end, shakes down people who have too much cash, gets together with his buddies to beat the shit out of noncompliant citizens, and after 25 years will have a pension of $125,000 a year for the rest of his life. go to the website... http://www.nyc.gov/html/nypd/html/careers/careers.shtml
Send me a keyboard...
your neighbour's exboyfriend's wife's daughter earns thrice that by being a hooker.
Next time you see her driving by in her Porsche use your hockey stick like Tiger's wife did.
That is if you can aim straight. Don't take down the fire hydrant.
ASSBOUND, get a life please
Poor brown people can multiply much faster than you can afford to tax the wealthy to feed them...
There, I said it.
Haha, leftists can't not end up taxing themselves (and everyone else) to death.
Couldn't they just cut their wrists.
You're on a roll tonight, Team Depends. So leftists = oligarchs? Have you reinserted yourself into the matrix? Miss the steak?
i think s/he means the nyc administration is leftist. it taxes the oligarchs (some of whom may be leftists or at least retired communists).
Lola always gets antsy whenever you blame leftists. Take it from where it comes.
Oligarch: One of several people who rules a country or empire together sharing the power.
Yes, the NYC (but not NY state)/Bloomburg regime as well as the Barry WH are so far left the average democrat on the street is going to vote R in November. Never saw The Matrix. Steak? Are you saying we should all be vegan? Did not junk you.
London has the same "problem" in the City of Westminster (the fashionable West End).
"Nothing healthy about this idea".
I'm not sure what "heathly" means any more.
So why is this a problem that requires at tax solution? Unbelievable!!! I can hear the price of physical gold jumping already!
Because other people work their guts out and produce shitloads of real goods and services that have real utility in the real world but still can't afford to buy any land what-so-ever. And some people have projects that they can not get off the ground due to the high price of land. And other people go bankrupt because they don't join in the debt / land Ponzi and they can not compete with the debt / land Ponzi.
Land. They're not making any more of it. Not all of it is inhabitable. Not all of it is close to income-producing facilities. THE INCREASE IN THE PRICE OF LAND IS NOT INCREASING SUPPLY AND THEREBY BRINGING ABOUT CHEAPER LAND. The basic you-beaut supply-demand feedback system that supposedly keeps the system fair DOES NOT WORK FOR LAND. But you can also blame the free-money bailed-out banksters for that problem.
What does it mean to bury your money in the ground? Couldn't it also apply to the practise of buying overpriced real estate in the hopes that someone else will pay even more money for it later? And isn't that last sentence also a definition of a Ponzi scheme? Maybe not necessarily - the devil is in the details.
Some poor working schmuck misses out on a dollar per hour pay rise just so some rich fuck can bid up the price of a piece of land from thirty million buckaroonis to forty million buckaroonis becoz it must be worth that much becoz that is wot I paid for it!!! Err, hang on. For an extra ten million, make that several schmucks. Oh hang on, freedom and capitalism and its all right and there is nothing wrong what-so-ever.
Debt. Real estate. Bankster bail-outs. Take your time to have a good think about it. Naaah, fuckit. Don't think. Be a good hamster and jump back on that wheel.
Errrr, none of that means that taxes are the answer. And none of that means that taxes are not the answer. And I will agree with you that whatever solution is chosen will not address the fundamental problems I have just mentioned.
When the taxes get bad enough people leave.
Yep, people leave, housing prices drop, and tax revenue dries up. Keep spinning your magic NYC!!!!
THAT'S THE WHOLE FUCKING IDEA. People leave. Prices drop. Poorer people can afford houses again.
Naaahhh, let the poor people go homeless while the rich have empty houses. It's capitalist so it must be efficient. How can "rich" people borrow money if they have no over-priced real estate for collateral? Rich people must be allowed to indulge in Ponzi real estate deals becoz freedom and capitalism and stuff. Those poor people need to borrow money and create their own real estate Ponzi ...
Or they find a way to avoid the tax.
Subdivide the 30 million apartment into 2 at 15 million and save a million dollars in tax.
Move an unemployed relative into the empty apartment and save all the tax. Your layabout relative now has some value to you and he gets a nice pad to smoke weed. Win win
Get the apartment rezoned (hotel room? office?).
The relative solution .... immediately fucks all the other property owners AND the city at the same time. Love it :)
But you then Have to pay double the tax when they lower they threshold.
"When the taxes get bad enough people leave."
Yup, and push mankind into the Dark Ages.
Most people are unaware that the extreme taxation of a failing and falling Rome is what precipitated the 1,000 years of the Dark Ages. As people fled the clutches of Rome, they settled in or around newly emerging city-states.
A lot of these Roman refugees were prior farmers and landowners. Their new owners/governments permitted them to farm the state's lands for a share of the production, and so feudalism, a mix of communism and fascism, was born. Feudalism destroyed individualism and the ability, and desire, to investigate or invent.
A inquisitive person who, overcoming the fact that most benefits from his ideas would flow to the landowners, would still not be permitted access to the time and resources to experiment with--Just produce, reproduce and die.
The advance of mankind was setback over 1,000 years by the violence and avarice of the Roman pols and crats.
Same as it ever was, except now we have thieving Tribe banksters to magnify the theft and violence.
An American, not US subject.
Real Estate agents collect 6% on sales. That's all you need to know about why they're opposed to this.
My ANNUAL local property taxes - living just north of NYC - come to over 3% of the value of my house AND I'm paying resident NY State income tax at the top rate of 8.82% and my house isn't worth even one million.
If someone owns a place worth $5 million, especially if they're a NON-resident not paying any income taxes, they can damn well afford 0.5% - and if they're in a place worth $25 million, they can damn well afford to pay 4.0%. Hell, you've got peopel paying $100,000 to $1 million for a PARKING SPOT in a garage.
Just because you're getting ass raped prison style by the state of NY and angry about it, doesn't make it right to escalate the pain for everybody. Glad I live far far away from such corrupt socialistic mentality!
I am opposed to big government and higher taxes, which I consider nothng more than theft by the government. But hey, if governments are going to steal, they have my full support in taking it from the benefactors of global qe and slave labor in asia, in particular.
This is 1929 on steroids.
Real Estate Industry ... translation: money launderers.
so let me get this straight people want to pay ten of million to have a place in NY but require no services. They pay property taxes like everyone else and that is a problem how? Would he rather be like Detroit where even the people that live their don't want to be there. Would it be better to have only tenanments? Or for all townhouses to be $10k? What? Leftists lie de blasio just don't get it. Is he trying to copy CubA?
Property taxxes in New York City are very low relative to the rest of New York State. Properties in NYC pay less than 1% of appraised value. In upstate New York, property taxes are above 3%.
You forgot the part where appraised values in NYC are 10x those outside of NYC.
What about Bianca Jagger's rent controlled apartment she had for 20+ years. It was on Park Ave!
The woman is a f**king Nicaraguan millionairess.B-2 visa and she was always an ugly c*nt.
http://nypost.com/2012/09/28/biancas-600g-rent-tab/
F NYC.
Keeping in mind that this tax would apply only to those high net worth individuals who do not pay new york city or new york state income taxes as it is, it seems to be an equitable way to get tax revenue from those who want the prestige and perquisites that come with theses addresses, but avoid paying taxes to the citiy/state. High net worth individuals like these probably have assured that their personal incomes are recognized in lower tax/no-tax domiciles as well.
Some "libertarian", "conservative", or "Globalist" might think such a tax to be nothing more than jealous retribution. But a lot of renters had to be driven from these streets in order to make room for these investors, while others have been priced out of the neighborhoods. New York should welcome residents who want to, live in their property. There are excellent to nearly affordable hotel accomodations for those who want to visit.
Maaaaaan, fuck da poleese!!!
Somehow I have a feeling these oligarchs will find a way to pass the extra tax on to their customers and clients. Passing through costs and cost cutting are the only part of the “Trickle Down” theory that actually does trickle down. How the fuck do you think most of these wealthy schmucks got so rich in the first place?
NY state income tax of 11% explains alot about the summer vacation homes between Park and Fifth. If they tax vacation homes in NY nothing stops everyone from buying a house in Aspen.
Cities could bring in tons of money prosecuting the crooks out there. New York City is a great place to start.
Land of the Free, Home of the Too-Scared-To-Stand-Up-For-What's-Right-And-Stop-Knuckling-Under-To-Bullies
Have any of you ever read the "Alter Or Abolish" clause of the Declaration?
It says it's a fucking duty, not an option!
There goes almost half of the revenue in NYC.
??? Think a little harder. If the property owners don't wish to pay up then they sell their properties. Yes, property values go down. Then properties are bought by those who wish to live there. Then local businesses have an increase in sales. Think a little harder.
That's the theory, anyway.
It is beyond me why anyone with real wealth would want to live in the rat-infested, commie dominated, Godless shithole called New York City. Been there. Didn't leave anything there that I need. No reason to ever go back.
And that is why those houses are empty, thus creating the problem mentioned. But those homes are bought because they keep going up in value. It is better than burying money in the ground because in 20 years you can sell to the next lot of oligarchs at inflated prices. Or you can use phoney over-priced valuations as collateral to borrow real money.
NYC ain't interested in the money. They're interested in having homes with people. The people spend money at the shops. Now the shops are worth more money. NYC is saying to the oligarchs: Either fill those houses with people who spend money or we will get that lost revenue straight from you. Look at it as residential tax revenue vs commercial tax revenue.
Aren't there like five more 100+ story buildings currently under construction at a billion dollars a pop just to meet this demand for expensive condos?
Good timing.
Did you know realtors have to sign a contract that says they are "godless scumbags" or they don't get "points"? It's a very rigorous process!
People should ideally be able to buy apartments for any reason whatsoever and use them for any purpose whatsoever...this is another incremental infringement of property rights.
If a government refuses to uphold its responsibility to safeguard private property it should get out of the way and allow people to defend their property themselves.
All well and good in the theoretical Kred, all well and good...
Are you Swiss? Vote yes on the 20% gold back on the Swiss Franc will ya?
NOT Swiss, unfortunately...but you can bet I'd vote YES.
Good on ya darlin'! My name is Rentenanstalt but you can call me 'Genossenschaft'.
"People should ideally be able to buy apartments for any reason whatsoever and use them for any purpose whatsoever...this is another incremental infringement of property rights."
Yea, when I was younger I would had the same outrage at this "incremental infringement of property rights". Unfortunately, over the years, I've realized that these folks with the $5+ million second homes are the same folks who think nothing of buying off politicians to create laws that infringe upon MY property rights. So fuck 'em.
absolutely and while low, it's gotta start at something. single digits now - double digits later...
Taxing luxury property owners just because you think they made their money by corrupt means is wrong, that is punishing all rich people just because most are corrupt. However society should vigorously prosecute any who are corrupt and if guilty they should do time and be subject to heavy fines.
Nobody's claiming it was earned corruptly. However, the government sees money. They will take it if you dug ditches all your life, or pulled a Corzine.
That's a good point. Which goes to show you that laws certainly are NOT equal. Property rights should be respected 100%, and I disagree with a property tax, period. Taxes should be levied some other way. In some other countries, it's done that way. In this country, carrying costs for homes in high tax states exceeds a social security check, so the government keeps it all after all. You own your home, but even after you pay the mortgage, you pay rent in the form of tax. In foreign countries, you lose your job, your utilities get shut off, but you only need to have food to survive. Your house remains yours. To me, that's how it should be.
Carsh NYC real estate?
I'm in!
In Jerusalem, if you don't live there full time the Arnona (Israeli Property Tax) is at lest double if not more.
Maybe not the best approach, but at this point anything to burst this fucking real estate bubble. Or we could burst the bubble by reining in Wall street, prosecuting fraud meaningfully rather than taking a cut of the profits like a mafia and encouraging the financial sector to keep defrauding people, and maybe keeping these properties out of the hands of whatever anonymous directorless offshore LLCs own them.
Yeah like that would ever happen.
In England the Labour Party (Dems on steroids) has proposed a Mansion Tax on Property above £2 million ($3.2 million) which means in London anyone with 4-5 bedroom house will have to pay the tax.
Queenie is very upset as her Palaces (dwellings) will be included in the tax.
Could Queenie leave England as a Tax exile?
The Queen pays NO tax. She's a tax haven of her own right.
“It targets very wealthy non-New Yorkers who enjoy our services"
Now how does one who doesn't spend much time in the city enjoy the city's services? At least be honest and call it what it is. It is a tax on wealthy foreigners.
You are correct, except for fire and police protection which exists even while they're gone. Fire protection needs no explanation, but police protection is protecting the property from either burglary or even looters who would be in force if not for Police.
Just imagine, soon those entire buildings will be traded for one gold coin each.
Entire floors for a silver round.
First tax, then confiscation.
Of course the goal is to turn the units into Section Ape for Deblasio's community organizers.
Every individual should be required to designate if a property is their principle domiciled residence. The designated property also becomes your tax residency status and this property is untaxed because its your home, but you will be paying income and other taxes for your domicile status. All other properties you own will be designated as 'non-domicile' and thus may be taxed as the luxury or investment properties they are. This also solves the international tax avoiding problem. If you own a home in London and New York and Spain you will need to declare which is your domicile and free of property tax but pay income and local taxes, or you'll pay property taxes if its not your domicile as you will on your other surplus houses. We could call it the BradJolina tax policy - how many homes does a movie star need?
One point of the vacant land tax is to discourage malinvestment. By discouraging construction on these white elephants, and encouraging people to actually live in them, the city will cut the number and price of empty apartments dramatically. This is a big opportunity for government to raise revenue, and correct a market failure.
I think it's a bit of a misnomer to call it a land tax when these things are just taking up air space for the greater part.
But my real question is this....if they did not buy these apartments what would they buy with their countless millions?
They cannot correct a market failure by retrospectively taxing people who made a decision based on good faith.
If they want to correct this failure then it is better that they apply this sort of tax to any new developments.
On the other hand, the respect for property rights drops the U.S. yet another notch. Real estate is becoming like beer: you don't buy it, you rent it.
Flunked accounting and economics, eh?
Yeah right, high priced land is not a problem becoz competitors just come in and build cheaper land and then the problem corrects itself. NOT! Sounds like you passed economics. No that is not a compliment. Turn your brain back on.
One point of owning property is being able to dispose of it as you see fit. You can drink your faygo or store it in your Mom's basement until the apocalypse.
One man's malinvestment is another one's dream.
There is no consistency whatsoever. People buying real estate by the zillions did not have to answer any questions as to where the money came from but now they need to pay tax for owning but not living in the property.
If it's a case of not paying for the services provided by New York then calculate what their share is based on square feet/value etc and be done with it but to charge a yearly amount of $1 million on a $25 million apartment is sheer theft regardles of where the money to buy came from.
Real estate is like trees. These properties can't uproot themselves and flee when the fire comes. Luck, y'all.
If they went to Aspen Colorado where 80% of the homes are trophy homes....only occupied two weeks a year.....but when you have billions..you have to have a house in Aspen....just to tell people at your next cocktail party...its just martini talk to them....
Let New York burn its own bridges. I have trouble enough with Taxifornia. But with regards to wealthy residents, Taxifornia dings higher earning individuals more than New York by as much as 10% more. But then most with business in other states can avoid California's draconian income taxes easily by just spending more time elsewhere and filing there.
Taxation without representation?
Does this tax cover rental property?
What if the property is owned by a corporation?
My guess is there will be many ways to avoid this tax.
It is just a political statement to make the sheep feel like the government is sticking up for them by sticking it to the rich.