A taxing Issue

A proposal to overhaul New York City’s property tax regime could result in super-prime buyers paying up to five times more tax on a purchase.

Mayor Bill de Blasio has welcomed new recommendations by a “high level” Commission to even out the system by assessing many more homes, including co-ops and condominiums, at full market value. It’s suggested that the current cap on how much a property’s assessed value can rise each year be ditched. The cap has meant that top-end homes in Manhattan have enjoyed relatively low tax rates, as their values have escalated while rates have not increased.

The New York Times states that this would be “a seismic change that would shift the property tax burden to wealthier neighbourhoods and lessen it for low and moderate income homeowners.”

The Wall Street Journal suggests that changes would have seen some recent blockbuster deals in the Big Apple’s best areas subjected to five times as much tax as they actually were. Hedge fund maven Ken Griffin is paying $531,797 in tax on his record-breaking $238m Manhattan purchase, reports the newspaper – “an effective tax rate of only 0.22%.”

Chart via WSJ.com. Calculation based on example provided in the New York Advisory Commission on Property Tax Reform’s preliminary report (published 30th January 2020). Top ten sales of 2019 provided by Miller Samuel.

Nothing is likely to happen anytime soon, though, with the commission suggesting that any changes should be phased in over five years – and that’s only after proposals have been finalised and then passed through the legislative process. “The Commission will hold additional public hearings in each borough to solicit public input before issuing its final recommendations,” said a statement from the NY Mayor’s office. “In addition to the next round of hearings and extensive stakeholder engagement, the Commission will work on addressing a number of outstanding issues to arrive at a set of final recommendations.”