Bedford + Bowery: Should We Smack an ‘Oligarch Tax’ On Out-of-Towners With Sick Crash Pads?

Seizing on the opportunity that comes with a massive advantage in both houses of the state legislature, Democratic lawmakers are making a renewed push for a tax on pied-à-terres, non-primary residences favored by the super-rich who’d rather pop in to a penthouse for a weekend visit than crash on their friend’s couch. Yesterday afternoon, the bill’s Albany sponsors and city politicians linked up to urge support on both the city and state level.

The bill would let the city levy an annual property tax on non-primary residences that cost more than $5 million. While the measure was first floated by state Senator Hoylman in 2014, the question of what the city can do to reap value from empty high-rise penthouses was revived when hedge fund billionaire Kenneth Griffin paid $238 million for a weekend crash pad off Central Park South in a building that replaced apartments full of rent-stabilized tenants.

Hoylman and the bill’s co-sponsor, Assembly Member Deborah Glick, were joined for a City Hall press conference by Assembly Member Harvey Epstein and Council Members Mark Levine, Mark Powers, and Margaret Chin, to lay out the case for the tax and argue that it would hit only a small amount of real estate owners in the city. (Chin and Levine are co-sponsoring a City Council resolution calling for the pied-à-terre tax.)

“If you have a $5 mllion condo or co-op and it’s your permanent residence, [the tax] doesn’t affect you,” Glick said, going on to list people like celebrities, athletes and real estate moguls who she said “dislocated” the city’s luxury real estate market with speculation and investment-property second homes.

From left: Harvey Epstein, Margaret Chin, Brad Hoylman, Mark Levine, and Deborah Glick. (Photo: Dave Colon)

The tax, per Levine, is a way for the city to get value back from people who go as far as “managing their schedule to make sure they’re only in the apartment 182 days or less” in order to avoid paying New York City income tax (something tax experts say they have to be very careful about), as they still get the benefit of city services like fire, police and sanitation. In 2017, nearly 75,000 units were unavailable for rental or sale due to “occasional, seasonal, or recreational use”– up from 55,000 in 2014, according to a city survey.

Hoylman also pointedly talked about the benefits that pied-à-terre owners got from the city, without paying in to a satisfactory degree. “I like to call it an oligarch tax,” Hoylman said. “There are foreign owners currently purchasing property in New York City, not contributing to city services, not contributing to the security of their money. It’s not just our firefighters and police that make our city safer, it’s our laws. And they are benefitting from the rule of law by knowing that their dollars are kept preserved well in the United States of America and New York City in particular,” he said.

While Kathryn Wylde of the Partnership for New York City told the Times that raising taxes on the wealthy was “playing with fire” in this era of reports that the rich are leaving New York, Hoylman and Glick were resolute. People who would face this tax “want to have access to coming and going in New York to see a show or pass through on the way to a board meeting,” Glick said, while Hoylman said that the “amount of money is so small compared to the value of the apartment that I don’t think this will make an appreciable difference.”  (For pieds-à-terre over $25 million, the tax would max out at $370,000, plus 4 percent of the price over $25 million.)

The city’s political leadership also supports the bill. Mayor Bill de Blasio told Albany legislators he was in favor of the idea when he testified in front of lawmakers on the city’s budget needs in January. Comptroller Scott Stringer tweeted that the law could raise $650 million per year for the city. City Council Speaker Corey Johnson, who supported Hoylman’s bill when he was merely a humble Council Member, called for the bill’s passage after Griffin’s home purchase, and also told state lawmakers he supports the passage of the bill.

While Hoylman’s bill died in the Republican-controlled State Senate, Vancouver passed a somewhat similar tax on empty homes in the years since New York first tried to pass a pied-à-terre rax. The difference between the Vancouver law and the New York proposal, though, is the price threshold on the second homes: to avoid the tax, every property owner in Vancouver has to show their home is occupied for at least 6 months of the year by the owners or rented for at least 30 days at a time for six months. The result, according to the Times, has been a 15 percent drop in vacant properties in the city.

As for what would happen with the money if the bill becomes law and the city can levy the tax, Levine told Bedford + Bowery that there’s no one place it’s legislated to go. “A lot of us like the symbolism of this being reinvested into affordable housing, so the folks with ultra-high-end luxury housing can help some people who are struggling to get any decent home,” Levine said after the conference. But with a number of needs in the city, Levine said “the important thing is to levy the tax to acquire the revenue to give us the options to meet the many needs we face.”