A report says New York City and the state are thinking of hitting owners of “pied-à-terre" apartments.

Owners of New York City apartments worth $5 million or more could be taxed if they are not living in them, as City Hall scrambles for revenue to finance infrastructure spending, according to a Bloomberg report. 

The newswire said that pressure to finance a $40 billion overhaul to subways, buses and regional commuter rail has prompted city and state interest in such a tax. Last week the idea was prompted by New York Governor Andrew Cuomo’s budget director, Robert Mujica. Mujica reportedly said that a “pied-à-terre tax” on non-resident owners could raise as much as $9 billion.

With relatively high-tax states on the coasts hit by caps on how state and local taxes could be offset against federal income taxes, such a move, if it were to take effect, would be seen as yet another hit on wealthier US citizens in these parts of the state. However, the battle for revenue in a place such as New York, which arguably needs to radically overhaul its infrastructure, is likely to see calls for these measures.

The newswire report noted that NYC Mayor Bill de Blasio has preferred a millionaires’ income tax on city residents. Since that proposal has not received support in the legislature, the mayor said on Thursday that he could back the luxury-apartment tax, the report said. 

“We need to tax the wealthy more,” the mayor said as he emerged from a subway ride for a news conference to promote congestion pricing fees on motorists entering Manhattan’s central business core. “Now if the governor is saying he thinks there’s a way to additionally get a pied-à-terre tax, I’m all ears,” he added.

Groups such as the Real Estate Board of New York, the trade group for an industry that accounts for more than 30 per cent of the city’s tax revenue, have argued that taxes will cut investment and jobs by reducing demand for high-priced apartment towers.

(Editor’s note: In all major cities, particularly ones where planning laws can and do restrict the supply of new residential accommodation, affordability is a concern - and New York is obviously no exception. Even after the financial crack-up a decade ago, the price of luxury accommodation and prices further along the spectrum have risen, with a ripple effect on residential accommodation across the board. As global real estate consultancy Knight Frank has pointed out in a recent study, between 2000 and 2016 the population of New York rose by 11 per cent, while its housing stock only grew by 8 per cent. 

Even so, while it is easy at a purely political level to see the attraction of hitting high-end real estate owners with new taxes to achieve some measure of “social justice”, this is not good news either for the owners – who are being penalized for their wealth almost as an end in itself – and because New York and other great cities need inward investment. Some of that money is going to come from HNW individuals, not just corporations. This great city may be in danger of getting a bit of a negative reputation for giving the wealthy a hard time – consider how the recent pushback against Amazon’s HQ in Queens was in some ways seen as a hit against “Big tech” and the world’s richest man, Jeff Bezos. New York remains home to some of the great wealth management advisory houses of the world, but nothing is pre-ordained. The recent decision by Dynasty Financial Partners to shift its HQ from the city to St Petersburg, Florida, may not have been driven by taxes, but more wealth firms might find the allure of cheaper, less highly taxed places hard to resist in the future.)