New York lawmakers want to close a legal loophole that allows deep-pocketed real estate investors to avoid paying taxes.
Sen. Julia Salazar (D-Brooklyn) and Assemblyman Harvey Epstein (D-Manhattan) hope to raise millions to fix the state’s public housing by expanding the mortgage recording tax to capture a percentage of the billions of untaxed dollars real estate bigwigs use to bankroll property acquisitions.
“Faced with a yawning budget gap, we must seek out new sources of revenue to provide for the state’s public programs,” Epstein said. “Right now, some of the wealthiest corporations in the world aren’t paying their fair share for the privilege of doing business in our state –– they need to step up and contribute so we can make badly needed improvements to the public housing that hundreds of thousands of New Yorkers call home.”
Institutional investors who purchase properties with the goal of turning a profit often use bonds and certificates of deposit to finance their deals. Doing so allows the investor to skirt the recording requirements and taxes that accompany traditional mortgages, Epstein said.
A New Yorker taking out a $200,000 mortgage would likely pay at least $1000 in mortgage recording taxes, but real estate financiers backed by private equity loans are not responsible for any such levy and the terms of their debts are not part of the public land record.
“Closing this tax loophole and requiring private equity groups to pay the same mortgage recording taxes everyday homeowners do is only fair and will level the playing field for families seeking to buy a home to live in,” Salazar said. “This bill also guarantees public transparency regarding high-level financial transactions that up to now have often been secret.
“Our state needs to stop encouraging the use of limited housing stock as an investment vehicle instead of as a place for people to live,” she added.