When news broke in January that Ken Griffin bought a $238 million penthouse at 220 Central Park South, the transaction didn’t just set a record for the county’s most expensive residential purchase. It also renewed interest in passing a pied-à-terre tax.
That's because part-time residents like the billionaire hedge fund founder, who owns other record-breaking houses around the world, don't pay state or city income taxes here, which support the services and institutions that make NYC so desirable to second-home buyers in the first place.
Elected officials are eyeing a yearly pied-à-terre tax aimed at apartments or houses worth $5 million or more that are not the owner’s primary residence. Note that it would be an annual tax—as opposed to to a one-time tax, like the New York State mansion tax, which hits buyers as part of their closing costs. Some NYC brokers say creating a new way to tax the rich every year will make luxury second-home buyers look elsewhere, while economists and others disagree.
If it passes, the tax would be a “big negative for the NYC real estate market,” says Wendy Arriz, and agent at Warburg. She says that the additional tax would hurt buyers who feel they don’t use the services of a building, or the city for that matter, “as much as full-time resident owners,” she adds. “Why should they have to pay a tax more for something they use less of?”
The bill was first introduced in 2014 and blocked by the State Senate, but is under consideration again since Democrats took control in November. New York state’s budget director mentioned it as a possible alternative to help fund MTA fixes if marijuana legalization does not happen.
If you're in the market for a second home in NYC, or looking to sell your apartment and want to know what appeals to a pied-à-terre buyer, read on.
Pied-à-terre, pronounced “pea-ay-dah-tare,” is a French phrase that means “a foot on the ground.” It’s used to describe an apartment that is not an owner’s primary residence.
Is pied-à-terre really still said in NYC?
While the term does sound fancy, it’s a bit outdated for clients of Gill Chowdhury, a broker at Warburg Realty. “No one really calls it a pied-à-terre these days,” he says. “‘Second home,’ ‘vacation home’—those are terms you’re more likely to hear in everyday conversation.”
Other buyers use the term to sound more like an "in-the-know" New Yorker, says Martin Eiden, an agent with Compass, while still others, especially clients from Europe and Asia, find it a "very elegant" way to refer to their second home, says Victoria Rong Kennedy, a Citi Habitats broker.
Where are NYC pieds-à-terre?
It’s not unheard of for a buyer to look to the outer boroughs—Williamsburg, Long Island City, and Park Slope are popular neighborhoods, brokers said—but the majority want a pied-à-terre in Manhattan for the shopping and culture, says Rong Kennedy.
Nearly all pied-à-terre sales Chowdhury has done were Downtown, particularly in the West Village, while fellow Warburg agent Karen Kostiw sees Gramercy/Flatiron, Murray Hill, Kips Bay and the Upper East Side and Upper West Side as her clients’ desired destinations.
What do buyers want in a NYC pied-à-terre in NYC?
Yes, location is key, but size matters to pied-à-terre buyers, too.
“The trends now are smaller apartments and price points, $2,000,000 or less,” says Eiden. “Two-bedroom condos seem to be the most common. The second bedroom can be used as an office or for a lot of beds for families, i.e. two sets of bunk beds.”
Chowdhury currently has a client signing contracts on a West Village two bedroom that will double as an investment property. Though the client wanted something move-in ready with great light and exposure, location and size “was of the greatest importance to him,” he says.
Many buyers Kostiw works with are thinking smaller—a studio in a good location with low maintenance. “Second would be light, followed by size/floor plan,” she says. “Amenities are great, but less important to these buyers.” (But when amenities are a factor, the No. 1 thing buyers want is rooftop access, she adds.)
For some international clients of Ideal Properties Group, "a swimming pool option may be mandatory, or a spectacular view of the city or the river is a must," says Aleksandra Scepanovic, managing director.
Another consideration is resale value. Rong Kennedy's clients avoid studios because "they are the hardest to sell and live in,” says Rong Kennedy. “A one-bedroom is easier to resell or rent out, so they’ll get a very decent return.” (But some luxury buyers who travel to NYC often want studios in amenity-laden buildings. Here's what a $1.6 million luxury studio apartment looks like.)
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