Pied-à-terre is the term used to describe an apartment that isn’t an owner’s primary residence. It comes from the French phrase meaning “foot on the ground.” (Some owners prefer to say “second home” instead.)
According to Martha Stark, a professor at NYU Wagner and a former New York City finance commissioner who has examined the city’s data on second homes, properties are considered pieds-à-terre if they are not owned in an individual's name or if the owner is not receiving a tax benefit from the city that’s only given to residents.
New York City has long been a place where wealthy international buyers safeguard their money by owning a pied-à-terre or three. (It’s something that has come under increased scrutiny with Russia’s invasion of Ukraine and some lawmakers have proposed seizing oligarchs’ luxury condos to put pressure on the Putin regime.)
[Editor's note: A previous version of this article was published in May 2021. We are presenting it again with updated information for March 2022.]
In a discussion on the Brick Underground podcast in May 2021, Kobi Lahav, director of sales at Living New York, says the property type makes sense for international buyers who are prepared to pay a premium for NYC real estate as “the cost of doing business.”
This phenomenon isn’t limited to foreign buyers—take for example, the 2019 purchase of a $238 million penthouse at 220 Central Park South by billionaire Ken Griffin. It set a record for the U.S.’s most expensive residential purchase.
Of course, pieds-à-terre aren’t just for the super wealthy, either. Some buyers are empty nesters, others are working in the city a few days a week.
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Buildings have their own rules about pieds-à-terre. Some co-ops allow them, some do not. Some permit pied-à-terre purchases on a case-by-case basis. Stark’s most recent estimates put the total number of pied-à-terre properties in Manhattan at 10,415—and about 80 percent are condos.
If you're in the market for a second home in NYC or are looking to sell your apartment and want to know what appeals to a pied-à-terre buyer, read on.
Where are NYC pieds-à-terre?
Some buyers head to the outer boroughs for a deal—Williamsburg, Long Island City, and Park Slope are popular neighborhoods—but the majority of buyers want a pied-à-terre in Manhattan, says Victoria Rong Kennedy, an agent at Corcoran.
She says the convenience of being located near the city’s cultural institutions and business center is a priority for buyers.
For a long time Midtown co-ops on Fifth Avenue have been the top choice for pied-à-terre buyers. Many have flexible policies that allow for second-home owners who meet their financial requirements. (For more on finding a second home in NYC, check out "Brick Underground's pied-à-terre checklist: What to consider before buying a part-time place in NYC.")
Challenges of international apartment ownership
Few international or out-of-state pied-à-terre owners probably ever envisioned they would be prohibited from using their NYC apartments but the pandemic travel restrictions meant some couldn’t get to New York for an extended period. It prompted some owners to sell, often at a discount, properties that had been highly renovated for the owners' use.
Another uncertainty are the sanctions imposed as a result of the Russian invasion of Ukraine. In spite of the difficulty of moving money between Russia and the U.S., might oligarch owners or those who fear association with oligarchs want to offload their NYC condos in an effort to liquidate their assets? Conversely, will financial instability in Russia increase the attractiveness of Manhattan condos as a safe investment?
In answer to questions about whether the war in Ukraine will impact New York City real estate, Jonathan Miller, president and CEO of appraisal firm Miller Samuel, says in his blog that “No, it won’t.” He says the idea that Russian oligarchs are propping up the market is not based in fact.
“High profile, high-end transactions are not a proxy for the balance of the market much like a handful of high-profile Russian purchases are not a proxy for some sort of Russian real estate dominance.” He wrote this analysis back in 2014 when Russia annexed Crimea and says it still holds true.
A potential pied-à-terre tax
There's also the looming possibility of an annual pied-à-terre tax.
It’s a tax that’s been championed by lawmakers and opposed by brokers. The main argument by those against it is that a pied-à-terre tax would put buyers off, discourage developers, and slow deals. Some say the income from the tax is overestimated. Proponents point out any revenue from real estate is badly needed.
The current proposal taxes owners anywhere from 0.5 percent to 13.5 percent annually depending on a few variables: One- to three-family homes with a market value above $5 million would qualify, as would condos and co-ops where the assessed value exceeds $300,000.
Inevitably there will be loopholes. According to Stark the proposed legislation allows for an owner to put their apartment in the name of a family member who lives in NYC. That would exempt the property from the tax. Another workaround is for the owner to rent it out to a New York City resident. In addition, Stark says if an owner can show the property is worth less than $5 million by providing a qualifying appraisal within the last three years, the property would be exempt from the tax.
“We saw that about 60 percent of the units with that threshold were in fact worth less than $5 million,” she says.
And not all brokers think buyer behavior will be affected by a pied-à-terre tax—if it’s indeed passed by lawmakers.
Aleksandra Scepanovic, managing director at Ideal Properties Group, says the excitement of New York City post pandemic outweighs any uncertainty about tax debates for these types of buyers.
What do buyers want in a NYC pied-à-terre in NYC?
“A pied-à-terre needs to have everything,” Scepanovic says. That means excellent amenities, privacy, and work-from-home space.
Another consideration is resale value. Closing costs are high in New York City and include state and city transfer taxes, a mansion tax determined by a sliding scale, a flip tax in some buildings, as well as attorney fees. If you’re borrowing money there may be additional costs.
“Your apartment has to appreciate about 10 percent for you to cover your closing costs,” Lahav says, so you really have to make sure you're buying the right apartment.
Previous versions of this article included writing and reporting by Nikki M. Mascali.
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