A Billionaires\u2019 Row penthouse that sold for $87.7 million. Sting\u2019s pad overlooking Central Park, bought for $65.7 million. A Trump Tower apartment owned by Donald himself.<\/p>\n
These properties might seem like exactly the type of real estate that stands to be hit with a newly proposed \u201cpied-\u00e0-terre\u201d tax, which takes aim at high-priced homes that aren\u2019t people\u2019s primary residences. Mayor Zohran Mamdani<\/a> and Gov. Kathy Hochul<\/a> announced last week that the tax would apply to units worth $5 million or more and would raise an estimated $500 million a year to throw at the city\u2019s gaping budget hole<\/a>.<\/p>\n But if that $5 million worth is defined by the city\u2019s tax valuations, condos that sell for 10 times that amount and more could avoid the tax, according to experts and city Department of Finance data. To capture pied-\u00e0-terre tax revenue from them, the government would need to use a different threshold.<\/p>\n The finance department\u2019s \u201cmarket values\u201d and \u201cassessed values\u201d for condos and co-ops are notoriously low, calculated based on rents in the area rather than actual sales prices.\u00a0<\/p>\n A condo at supertall 432 Park Ave. that sold for $26 million in 2021, for example, has an \u201cassessed value\u201d of just $785,477. And the condo\u2019s \u201cmarket value,\u201d as calculated by the DOF, is just under $1.9 million, a fraction of its actual worth.\u00a0<\/p>\n The governor and state lawmakers are hammering out the details of the pied-\u00e0-terre tax proposal, so how the city might assess the tax is still unclear.<\/p>\n Hochul has said about 13,000 New York City properties would be subject to the tax. In response to an inquiry for this story, Hochul\u2019s office told THE CITY Tuesday that they\u2019d make sure the tax would apply to superluxury properties like those found on Billionaires\u2019 Row but declined to share further details.\u00a0<\/p>\n But whatever the state lands on, it would need to account for the city\u2019s loopy property tax system<\/a> in order to include many owners\u2019 glitzy second (or third, or fourth) homes.<\/p>\n Take 432 Park Ave.\u2019s 96th floor penthouse, which sold for $87.7 million<\/a> in 2016. Its \u201cmarket value,\u201d based on DOF\u2019s math, is $3.8 million, according to city tax records. Its \u201cassessed value\u201d is $1.6 million.<\/p>\n A CITY review of property records at that supertall luxury tower did not find a single residential unit that would qualify for the pied-\u00e0-terre tax under its \u201cassessed value,\u201d and only one \u2014 bought for $91 million in 2017<\/a> \u2014 that would count as a $5 million condo under its official \u201cmarket value.\u201d<\/p>\n Even radically lowering the pied-\u00e0-terre threshold would leave some luxury crash pads free and clear.\u00a0<\/p>\n A 2019 state bill<\/a> that never became law proposed using a $300,000 assessed value threshold for a pied-\u00e0-terre tax. Under that measure, about 20% of the condos at 432 Park Ave. would still avoid being hit by the tax, according to a review of DOF data by THE CITY.<\/p>\n Prelude to Property Tax Reform?<\/p>\n Hochul and Mamdani announced the new \u201cpied-\u00e0-terre\u201d tax on April 15,<\/a> an apparent d\u00e9tente in their \u201ctax the rich\u201d tug-of-war<\/a>. Soon after, President Donald Trump took to his Truth Social platform<\/a> to attack Mamdani, saying \u201cthe TAX, TAX, TAX Policies are So Wrong.\u201d\u00a0<\/p>\n Trump, who made Palm Beach, Florida, his official primary home in 2019<\/a>, would in theory be the kind of non-resident targeted by the tax. But according to the DOF, his unit No. 66N at Trump Tower is assessed at only $2.6 million<\/a>.<\/p>\n The condos\u2019 distorted valuations \u2014 and the question of how to implement the new tax around them \u2014 are extensions of the much-discussed inequities of the city\u2019s property tax system<\/a>, long the focus of calls for reform, including by Mamdani.<\/p>\n \u201cI think the pied-\u00e0-terre tax is the canary in the coal mine for property tax reform,\u201d said Manhattan Borough President Brad Hoylman-Sigal, who introduced the version of the tax in 2019 when he served in the legislature. \u201cThe owners of these trophy properties are paying a lower effective tax rate than single-family homeowners.\u201d<\/p>\n The gap between posh co-op and condos\u2019 real-world and taxable values is a vestige of the 1980s, when apartment ownership was rare. Rental buildings were converting to ownership via co-op apartments, but those buildings still kept some rental apartments, many of which were rent-regulated. That history is why state law directed DOF to consider theoretical, would-be rental income for many buildings that now have few or zero rental apartments.<\/p>\n But decades later, as superluxury supertalls came to dominate the Manhattan skyline, such condos can effectively function as overseas bank accounts<\/a> for housing vast wealth. Many are held by limited liability corporations, which mask owners\u2019 identities.\u00a0<\/p>\n Because of their low valuations, fancy condos pay lower effective tax rates than rental buildings by a large margin; rates for big rental buildings are nearly five times higher, according to an estimate<\/a> from the Citizens Budget Commission, a watchdog group. In general, lower-valued homes face a substantially higher effective tax rate than more expensive ones, a city tax commission report found.\u00a0<\/a><\/p>\n The musician Sting bought an apartment at 220 Central Park South for $65.7 million in 2019. Its current assessed value is just $1.89 million, records show.\u00a0<\/p>\n That\u2019s because its valuation, and thus its property taxes, is based on nearby aging rental buildings that house rent-stabilized apartments.<\/p>\n A City Hall spokesperson said conversations about the pied-\u00e0-terre tax are ongoing.<\/p>\n \n\tRelated<\/p>\n","protected":false},"excerpt":{"rendered":"A Billionaires\u2019 Row penthouse that sold for $87.7 million. 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