Originally proposed in 2014 by Senator Brad Holyman, Senate Bill S44A - or the ‘pied-à-terre tax,’ as it has become known - was introduced to the New York Assembly in January 2019, partly - according to the National Law Review - in response to hedge fund manager Ken Griffin’s record-breaking $238 million condo purchase at 220 Central Park South, the then-latest addition to the multibillionaire’s vast real estate collection.
The annual property tax surcharge was proposed to help subsidize city services, and would apply to one- to three-family second residences worth $5 million or more, as well as condos or cooperative units with assessed values over $300,000. These secondary residences, known by the French term “pieds-à-terre” (literally “feet on the ground”) are typically owned by out-of-towners or suburbanites who want a place in the city to serve as a commuting crash pad or a home base for occasional weekend visits. The National Law Review notes that a large segment of the pied-à-terre market in New York City is considered ‘luxury’ - high-end co-op and condo apartments located in some of the city’s most sought-after neighborhoods.
According to projections in a 2017 NYC Housing and Vacancy Survey, the city’s 75,000 such pieds-à-terre would generate an estimated $650 million from the tax annually— the equivalent of $9 billion in bond revenue. The proposed bill did not pass, however. According to the Law Review, its failure has been attributed to several factors: the cumbersome fashion in which the tax was to be imposed on cooperative apartment buildings, the perceived difficulties in determining whether a unit was a “primary” or “secondary” residence; and finally, strong opposition from the New York real estate industry.
But now that the COVID-19 pandemic and its economic fallout have hit the state with a $14 billion budget deficit—with projections of up to $30 billion by 2022, according to Governor Andrew Cuomo—state legislators are looking to revive the “pied-à-terre” property tax surcharge. In August 2020, Senator Holyman introduced an amendment to Senate Bill S44A that attempts to resolve the co-op taxation issue. The proposed legislation, summarized below, is currently under deliberation by the state legislature. If it passes, Governor Cuomo will be required to cast the final decision to ratify or veto the legislation.
Senate Bill S44A proposes that cities with populations greater than one million be allowed to impose the following tax surcharges on non-primary residences (or at least those that are not the primary residence of at least one owner of the property or dwelling unit; not the primary residence of a parent or child of at least one owner of the property or dwelling unit; or rented on a full-time basis to a tenant or tenants for whom the property or dwelling unit is their primary residence), beginning on July 1, 2021: