With budget deficits looming as a result of the pandemic and a Democratic supermajority in the State Senate, a pied-à-terre tax, which would tax owners of second homes in New York City on an annual basis, is looking increasingly like it might become a reality.
Real estate taxes play a huge part in the New York economy and it’s very possible they will be used to plug the city's financial holes.
The most recent pied-à-terre tax proposal, which was ditched last year in favor of a scaled mansion tax, targeted owners of condos and co-ops with assessed values of $300,000 or more. Not surprisingly, brokers are fiercely opposed to a pied-à-terre tax, saying it will dent an already crippled market.
However, Democrats see their success at the polls last month as a validation of left-leaning policies. State Senator Brian Kavanagh, who chairs the housing committee, says New Yorkers can expect to see "ambitious progressive proposals" out of Albany next year.
He points out that for years there have been generous tax breaks given to developers and passed on to owners through the 421-a and J51 tax abatement programs with arguably very limited public benefit.
"We’ve seen a lot of changes in the last two years and I expect we will see more. Tax policy as it relates to the real estate industry is an area where you are likely to see a very different approach," he says.
It’s possible a work-from-home culture and the rise of co-primary homes—where you're spending an equal amount of time in two places year-round—may complicate what is considered a pied-à-terre.
One of the biggest criticisms of the tax, however, is that it will bring prices down and lower the income generated by other real estate taxes like the transfer tax and mansion tax. Speaking on The Brick Underground Podcast, Jonathan Miller, CEO and president of the appraisal firm Miller Samuel, says the proposal is "catastrophic," would result in a net loss in tax revenue and ignores an important fact that tax policy changes human behavior. As evidence, he says when the scaled mansion tax was brought in last year there was a sharp drop in sales activity.
Miller also says the pied-à-terre tax would "collapse development" and the income generated from it.
It's a sentiment echoed by many in the real estate business. Becki Danchik is a broker with Warburg Realty, and says New Yorkers understand the need to raise money, but "by implementing an additional tax, it will only discourage people from investing in real estate here, and the city will lose more revenue than it could have gained from welcoming a part-time resident."
Gill Chowdhury, another Warburg Realty broker, says it's sellers who'll be the first to feel the consequence of a pied-à-terre tax. "The larger consequences will be to pile on supply onto an already hurting market, which will cause a drastic fall in prices over the coming years."
For his part, Kavanagh says he and his colleagues in the State Senate are open to all ideas from the real estate community.
"Short term we will have to do a broad tax package to increase revenue and then longer term we will have to evaluate all of these taxes and figure out what the public benefit is—in terms of affordability or sustainability or any other goals that are their ostensible purpose," he says.
You may be familiar with 3D printing as a means for creating things like prosthetics, cameras, and even food. The process can be used to construct houses too—and in what feels like a game-changing development, the very first 3D printed home has been listed for sale on Long Island—even before ground has been broken.
The 1,400-square-foot house, to be created by 3D printer manufacturer SQ4D, will feature three bedrooms, two baths, and a two-and-a-half-car garage. It will be built on a quarter-acre in Riverhead, NY, and is listed at $299,000 on Zillow—far lower than the $550,000 median sales price for houses in that part of Suffolk County, according to the Elliman Report.
So is this the way of the future? Could 3D houses become the norm? Yes, according to the folks at SQ4D, who say that additive manufacturing—the technical term for the process of adding layer-upon-layer of material—offers affordability, durability, and endless customization.
"There is a huge global demand for affordable housing along with a movement toward sustainable construction," says Kirk Andersen, SQ4D's director of operations. "We wanted to be under the comps in the area and we can be with how we build. It's as simple as that."
Stephen King, associate broker at Realty Connect USA, says he is getting lots of inquiries for the house from a range of buyers, including first timers and retired empty nesters.
"When you have a $300,000 new construction on Long Island, it seems to check every box, and then there's the added draw of it being 3D printed," he says.
According to Andersen, the company's XXL printer is as much as three times faster—taking mere days rather than months to lay the foundation—and far cheaper than traditional construction methods, thanks also to its proprietary concrete mix.
The technology for 3D printing a home is essentially the same as for other 3D printed items, only on a (much) larger scale.
In fact, SQ4D started as a manufacturer of 3D desktop and custom printers but in 2017 began focusing entirely on home construction, eventually building one of the largest 3D printers in the world with on-site portability.
Andersen says they can set up their patent-pending Autonomous Robotic Construction System (ARCS, aka the printer) at a build site in six to eight hours. The machine then extrudes concrete through a nozzle, layer by layer, to create the foundation as well as the interior and exterior walls and even the utility conduits (watch it in action on the company's website). This represents about 40 percent of the total work on a house.
The robot extrudes the concrete through a nozzle, layer by layer, resulting in a textured finish both inside and out.
SQ4D
Fascinatingly, the robot has no idea of the shape or look of the house, it's just being told to go to specific spots by following the floorplan. For techno-nerds, here's how that works: The CAD file with the design is run through a "slicer" that breaks the model up into layers and then outputs those in a G code, which is the instructions on the coordinate plane as to where the machine should go. "There's definitely some secret sauce in that software that allows us to do that," Andersen says.
All the rest, meaning windows, doors, roof, and all fixtures and fittings, are handled in the traditional way, though Kevin Paul, deputy discipline director of architecture and the point person on the project for H2M Architects + Engineers (who helped ensure the design was code compliant) says the logical next step in the technology is for those elements to also be 3D printed.
Generally speaking, the 3D printer-slash-robot does the bulk of the "hands-on" work, replacing a traditional construction crew and consolidating the labor-intensive tasks.
For example, the SQ4D method requires only three on-site workers for the entire print. So having a robot take instructional code and accurately extrude concrete significantly reduces the costs and risk of error. It is also a safer work environment, with reduced risk of on-the-job accidents (and no need for worker's comp for the robot).
Most of all it drastically cuts down on the build time and the labor costs that would normally accrue.
Case in point: It took only 48 hours of print time over a period of six to eight days for SQ4D to construct the 3D part of its proof-of-concept house—the world's largest permitted 3D printed home (at 1,900 square feet), in Calverton, NY. So basically that initial build time is one week rather than the usual six to eight weeks. And then the rest of the house was completed within 30 to 40 days.
Potential buyers of SQ4D's Riverhead home can tour this demo home in nearby Calverton to see and touch the concrete walls.
SQ4D
Andersen expects the print time for the listed house to be even shorter.
Putting this in perspective, King says local comps are closer to $450,000 and that it would cost a contractor over $500,000 just to build a new house on Long Island.
Andersen says some non-New York buyers don't think the price of the Riverhead house is all that affordable. But he says half of the price is to cover the cost of the land, which doesn't come cheaply on Long Island. That means in other areas where land is cheaper, the price of the house will be lower too.
According to Andersen, concrete is cheap (the materials for the demo print above totaled $6,000), abundant, and strong; SQ4D's mix has a super-high tensile strength, above and beyond what's normally used as a building material.
"Concrete is not the easiest thing to 3D print but our method of extruding it through a nozzle allows us to output a large volume of it quickly and it will hold its shape enough to be stacked," he says.
On a practical level, using concrete for the exterior walls eliminates the need for painting or siding, with minimal upkeep. Same for the interior, though buyers have the option of adding stucco or drywall. And concrete has long been a go-to material for the footing and foundation.
Andersen acknowledges that concrete has a rather large carbon footprint and that there is a global movement toward being carbon neutral. For that reason he foresees one day using a hybrid mix of recyclable materials that would have the same strength but be better for the environment.
However, since SQ4D's construction essentially involves setting up a concrete "plant" right on the job site, rather than trucking in materials from a giant factory, the process eliminates much of what contributes to the carbon load.
And in terms of electricity usage, the printer-robot runs on what is equivalent to using a hairdryer.
New York State is known for having some of the most stringent building codes in the country—and each town has its own department to contend with.
"Any town would have difficulties with technologies that are not recognized in the building code and would therefore require the design professional to offer proof that it would be code compliant and meet all the town's concerns around life, safety, and health issues," Paul says.
So when Andersen was scouting the locale of SQ4D's second print, he and King put out calls to lots of municipalities in the area. "Riverhead was amazingly open and accepting and saw it was the future," King says.
Not that it was a done deal. As Andersen says, "it took a long year of Covid-19 and legwork and red tape but we've got the permit in hand, the building plans are approved, we own the land outright, and we'll be breaking ground in the next two months, whenever the weather breaks."
The demo house proved especially instrumental. "There's a big difference in seeing and touching and experiencing the technology and having a conceptual idea on paper," Paul says.
Going forward, having two prints under its belt may be persuasive in convincing other municipalities to accept SQ4D plans—and even paving the way for a more general acceptance of 3D printed homes.
The easy answer is yes. SQ4D's machine can, for example, 3D print a round wall as cheaply as a straight wall, which is not the case in traditional construction.
"You are only limited by the constraints of the technology and at this point there aren't many," Paul says.
That said, SQ4D's machine is only set up to build single-story structures, though taller 3D prints have been built in other parts of the world (and likely where there is no building code or oversight).
For its first for-sale print, SQ4D wanted to stick with the ever-popular ranch, by far the most common type of house on Long Island, to show what could be done with a familiar type of housing and make comparing prices easier. Plus King says there is always a tremendous demand for ranch-style homes.
SQ4D opted for a familiar design that would fit in well with the neighborhood and show how 3D printing is just another way to build traditional homes.
Rendering by H2M Architects + Engineers
Still, Andersen says they can create custom, high-end houses.
And Paul explains, "The technology allows you to push this beyond how you typically construct the home, so why not design in a way that actually accentuates the fact that we aren't using two-by-fours or lumber in the walls?"
Soon this might very well be another option for second-home owners who are looking to build (cheaply or not) on raw land.
Andersen is a fan of modular construction (such as Boxabl) and does not see those companies as direct competition but rather as trying to accomplish the same thing—to put people in houses without having to break the bank.
"There are cost-savings and quality controls they see that we don't and vice versa," he says. Namely, SQ4D builds everything on site and so there's no need for a factory or transportation, whereas modular homes are built in a climate-controlled facility and then the components are delivered to the job site.
He sees 3D printing as being particularly ideal for large developments of land, where he could set up one or multiple machines to print one house after another. "There is efficiency of scale in that situation."
Other advantages of 3D printing over modular include greater customization and superior build quality, with concrete being stronger and more stable than the standard-grade compressed boards and sawdust and glue. (Not that all such modular companies rely on those materials.)
Lots of companies around the world are building homes with 3D technology, but the playing field is limited within the U.S.
According to Andersen, there are a couple big players in the industry with different machines, processes, and concrete mixes, each carving out its own niche.
Austin-based ICON is one such company. "I love their machine design and their global mission to house the homeless," he says.
This proof-of-concept 3D printed house by ICON in Austin, TX was the first to get permitted in the country.
ICON
He sees more companies entering the market now that universities are teaching courses in how to apply additive manufacturing to the construction industry.
"At the end of the day we are all trying to have robots and the technology to program them replace antiquated methods," he says.
Like a lot of New Yorkers, Deborah and her family made the decision to leave the city in the early part of the pandemic. But now, as NYC takes steps toward fully reopening, her family decided to stay put in a house in a small town in southern Connecticut that they bought in July. They’re not turning their back on NYC permanently but remaining in place for another year to avoid uprooting their children and dealing with the uncertainty of whether classrooms will remain open. Here’s her story.
Until the pandemic arrived, my family—my husband Paul and our two elementary-school-aged kids, Hayley and Jonah, were living in a two-bedroom rental on the Upper East Side that we liked a lot. But the first few months of remote learning and both of us parents working from home—we work in media and tech—were daunting and an apartment that was really quite roomy during normal times became claustrophobic.
We had always hoped to buy a house to use as a weekend and summer retreat and were pretty sure that we wanted it to be in a certain small town in Connecticut where I spent summers when I was growing up. I had a strong attachment to the town; my husband didn’t have that same history but he liked the area. It was near a beach and two hours from NYC.
Editor's Note: Brick Underground's Inside Stories features first-person accounts of interesting, real-life New York City real estate experiences. Have a story to share? Drop us an email. We respect all requests for anonymity. The names in this article are pseudonyms.
We started looking for a house in May 2020 and found one: A Cape that was well under $400,000 and we closed on it in July. It has four bedrooms with a huge basement that we are converting into an office/family room. Lots of pine and maple trees and flowers and grass surround the house and the back deck faces what is best described as a mini-woods.
When we bought the house, we never thought that we would live here full-time for a year and now, for another year! But when we made the decision to stay the first year, the pandemic was running everyone’s lives. We moved in August and the month was like a whirlwind—getting the kids enrolled in school, unpacking boxes, figuring out what’s involved in running a house after being used to NYC apartment living.
Once we were settled, we had time to enjoy what so many New Yorkers were craving in the pandemic—space, quiet, a room for each kid, an overall feeling of calm, and the beauty of the grass and trees or, as one New Yorker put it, “having nature on the first floor.”
There were financial considerations, of course. Because we lived in a NYC rental, we had to make sure that we could break our lease, which was scheduled to be up in February. That was easier than we thought; all we lost was the security deposit. Our apartment was renting for below market rate, so I think the owner was pleased with the idea of bumping it up. (However, on a recent visit to NYC, we went by the building and it looked like the apartment was still empty.) We could have been really stuck because the building doesn’t allow subletting.
We had always wanted to buy some real estate so we could build equity but didn’t think it would happen so soon and so quickly. The cost of buying in New York City made that option impossible so we figured that a weekend/summer place would be perfect. We just never thought it would become a permanent home for two years.
When the first year was almost over and it came time to think about what middle school our daughter would go to in NYC and what would be involved in making the move back to the city (because we definitely plan on coming back) we decided to spend another year in Connecticut.
We’re not afraid to come back to the city. Of course, I would feel more comfortable if Covid wasn’t still a threat. We lived through the worst of the pandemic in NYC so it’s not fear, it’s practicality that’s keeping us here. We’re not convinced that school will be back to normal in the fall in NYC—we don’t want to live through the uncertainty, the starting and stopping that could happen. The kids’ school here hasn’t had to close at all. They’ve got big classrooms and lots of outdoor space that they use as much as they can.
It took some time to decide but both of us were pretty much onboard with the idea of staying, so ultimately it was an easy enough decision. We floated the idea of a second year by kids, not because they were going to make the decision, but as a way to gauge whether they were okay with it. And they were. If we hadn’t thought that they were having a good experience in the first place we wouldn't have considered staying. The school here is excellent and they have adapted to it very well. Kids are resilient.
One downside is that because of Covid restrictions, there hasn’t been any chance to meet people and socialize, except for our wonderful and amazingly helpful next-door neighbor. We’re looking forward to being able to do more socializing next school year. Everyone tells us what a warm community it is. We’ll find out. What’s most important to us is for the kids to have a good social life.
Of course we all miss our friends in NYC—we had an active social life in the city. And friends are one of the big reasons that we plan to go back to the city to live. Friends and the energy that’s uniquely New York are what we miss the most. On a recent one-day round-trip visit to the city, we could feel the New York vibe and I realized how much I really love it.
But my husband doesn’t long for the New York vibe as strongly as I do, but that may be because he’s not a native New Yorker like me, a certified city kid. Our oldest daughter also considers herself a city girl and our son is the type of kid who seems to be happy wherever he is.
When we go back, I know the change will be jarring but it will be exciting and since we are hoping to keep this house, too, we’ll have a place to escape to when we need it. And there’s always the option of renting it.
The exact timing of when we go back depends on whether and when I need to go back to the office full time. Now, if I need to spend some time in NYC, I can take the train and stay overnight. Fortunately the old room in my parents’ apartment on the Upper West Side is available.
When we do go back, we would likely go back to our old neighborhood but we’re flexible. We’d be open to other places too. It’s all about the schools. Schools and costs. No one can tell what the rents are going to be next year.
Financially, it’s worked out well for us. Our monthlies are half of what we were paying in the city, where a big chunk of our salaries went towards our rent. We like the idea of saving money for another year and recouping some of our costs.
Was the decision to stay another year hard to make? Not so much. I mean there are a lot of moving parts and things to work out (mostly about my work and my daughter’s middle school next year) but everything seems doable. And one year doesn't feel like such a big commitment. We think that it's all stuff that can be navigated somewhat easily, it all seems doable. I feel certain that we've absolutely made the right decision to stay here.
