The Luxury Condos Mamdani’s Pied-à-Terre Tax Missed

A luminous condominium floating 49 stories above Tribeca, accessible by its own private elevator and boasting 10-foot ceilings, bearing more windows than walls, and granting sweeping views from the Empire State Building to the East River could make for a marvelous second home.While the unit’s $9.7 million price tag may not exactly sound like a steal, it boasts something potentially more valuable than a view: its current valuation at $993,000 appears to place it just out of reach of the city’s incoming pied-à-terre tax. While Mayor Zohran Mamdani has repeatedly cited a $5 million threshold for second homes subject to the surcharge on nonprimary residences in the five boroughs, in reality that number refers to duplexes, brownstones, and other properties that may contain one to three homes. A lower limit of $1 million applies to condos and cooperative units, which fall into a different tax classification.The basis for the double standard boils down to the archaic way the city values different types of dwellings. By estimating how much rent an owner could potentially earn if leasing a condo or coop and then applying a multiplier — set in the 1980s, the Department of Finance estimates whether the property is subject to one of its surcharge brackets, independent of the price the owner paid or what it would sell for if on the market.How the Department of Finance landed on $1 million as a baseline valuation in its hunt for the city’s luxury second-home apartments is one of a small mountain of questions that remain unanswered as Mr. Mamdani’s administration faces a court battle and criticism from the City Council over its rollout of the tax this summer. The agency declined to send a representative to an oversight hearing in the council chamber last Tuesday, citing the lawsuit.The department provides a one-sentence explanation of its thought process on the surcharge webpage: “Generally, under state law, a co-op or condo valued at $1 million or more by the Department of Finance is comparable to a single-family home valued at $5 million or more.” Luxury realtor Heather Domi and her colleague Alain Onesti, both of Douglas Elliman, shared with The New York Sun data they compiled on condo sales in New York City over the past six months. At least 24 condos that sold for more than $5 million could avoid the pied-à-terre charge based on the city’s current calculations. But the absurdity of the city’s condo valuations cuts both ways, Ms. Domi stressed in an interview with the Sun. “The tax was meant to capture properties worth more than $5 million, market value,” she said. While it seems the city “guessed” that rolling up every nonprimary condo and co-op residence valued above $1 million would do the trick, “ it has now swept in tons of properties that are well below $5 million.”Ms. Domi, who is also the creator of the luxury market intelligence platform Domi Data, raised the point in testimony before City Council last week, using the example of a two-bedroom condo on the Bowery, which sold in April for just a dollar shy of $3 million, 40 percent below the mayor’s $5 million baseline. Despite the price tag, the new owners received a surcharge notice, according to Ms. Domi, because the city’s assessed value of their unit is $1.7 million — nearly double that of the $9.7 million Tribeca property.Based on the math, for would-be pied-à-terre owners currently on the market, surcharge-free options are still available. A classic two-bedroom condo at 25 Central Park West, for instance, is currently listed on StreetEasy for $3.1 million but carries an assessed value just over $500,000, according to the supplemental property roll the Department of Finance published in July.On the Upper East Side, a four-bedroom with contemporary finishes on the 32nd floor at 200 East 83rd St. is available for an asking price of $9.5 million. The Department of Finance assessment is just over $860,000.But buyer beware: a FAQ on the Department of Finance’s surcharge webpage alludes to upcoming changes to the city’s determinations after “the first two years of the surcharge.” The city is considering switching to a sales-based valuation system. That could open a whole new can of worms for homeowners and city officials battling over how much properties subject to the tax may be worth.“I don’t know how you do it in two years,” Ms. Domi said, referring to the potential timeline and corresponding shift to a sales-based system. It’s “a very difficult and delicate thing to do.” Just as the pied-à-terre surcharge could force grandparents who have moved south to sell the paid-off condos and brownstones they keep for visits with their grandkids, so too would an adjusted tax system affect longtime homeowners without tens of thousands of dollars to spare.“It’s forcing these people to sell,” said Ms. Domi. “It’s hitting retired people; it’s hitting the middle class in the same way that an adjusted tax system will.”

The Luxury Condos Mamdani’s Pied-à-Terre Tax Missed

The Luxury Condos Mamdani’s Pied-à-Terre Tax Missed

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