We’ve featured several high priced properties throughout the city here on New York City Luxury Living. We’ve wowed you with the features of the Rothschild mansion and its $25 million price tag. And let’s not forget the $100 million worthy 3 story apartment in the CitySpire at 150 West 56th. They’re just two among the several going for $20 million, $30 million, even $80 million and up. It seems that the higher the altitude, the higher the price. (Or, as in the case of the Rothschild, the pedigree played a big part.) But there’s something that you and every other Joe the Plumber homeowner may not know – those rich and glamorous sitting pretty in their lofty new digs probably aren’t paying full price for them when it comes to their property taxes.
Thanks to an antiquated tax code, that $88 million penthouse that sold earlier this year comes with a yearly property tax bill of just $59,000. Why? Because it’s only valued at $2.97 million, less than 4% of its actual worth. And this disparity is considered a good thing by the city, believe it or not. Back in the 80s, when the city’s real estate market was a much different creature than it is now, there were a lot more rentals, very few condos, and rising co-ops. There were stricter rental regulations, and more of them, than there are now. So the city decided that in order to keep prices down and to keep them from rising too quickly, all new co-ops and condos were to be valued based on a comparable rental property. With all those rent regulations, it worked. Property values stayed low, and property taxes remained low because of it. Then, there’s a thing called the 4421a tax abatement. Developers are given much lower tax rates in the hopes of fostering more development. They can then pass these reduced tax rates onto buyers, as they are in effect for several years after the project is finished. What began as an incentive to create more co-op conversions in older buildings 30 years ago is still in effect today.
However, there really is no comparison for a building like CitySpire, let’s say, or 15 Central Park West. Oh, the city will look at some other high rise – unremarkable, not nearly as new or stylish or desirable – and attach a tax bill to it of a fraction of what it is really worth. And the developers are still applying for that 421a abatement, claiming that their new buildings bring in jobs and help the economy. A new development with two apartments already going for $90 million each has recently applied. And they say they have to, or no one will buy.
See, it all boils down to this – the super-rich are just as careful with their money as the lowly folk are. Sure, they spend it in different ways, but many don’t spend more than they have to, or need to, to get what they want. And what they want are low property taxes on their high priced, high rise flats. Given that, and that a change to the current valuation system would mean a complete overhaul of the city’s entire property tax code, don’t expect to see those living sky high to pay even ground floor taxes in the near future. Their bargain basement private discount center isn’t in any danger of going out of business anytime soon.