
Why Billionaires Don't Pay Property Taxes in New York - epsylon
http://www.citylab.com/housing/2015/05/why-billionaires-dont-pay-property-taxes-in-new-york/389886/?utm_source=SFTwitter
======
allworknoplay
I love this article (disclosure: written by friend of friend) and 421a is
ludicrous.

However, primary occupancy in the major properties under discussion here (the
three along 57th plus the Time Warner center and a few others) is incredibly
low, and basically speaks to high-end real estate bubble. These are high-
visibility properties that people think of as good investments, whether
because they can be re-sold later for similar valuations or because they're
hedges against russians or chinese having to leave their own countries for a
variety of reasons.

In that regard, it's totally worth noting that NYC does a much better job than
most cities at permitting the construction of new luxury units that keep
billionaires from pricing everyone else out of the market while extracting
concessions like low- and moderate-income housing or the building of new
parks. Imagine if each of the 104 billionaires who bought at 432 park ave had
bought their own greenwich village townhouse instead. Supply would be as short
as it is in san francisco.

That said, we can extract a lot more from builders and billionaires along the
way, and we should. NYC still needs more housing -- the small proportion of
rent regulated housing that accompanies these buildings remains insufficient
to build the quantity of housing needed to avoid pricing actual new yorkers
out, and to keep offering the services the city deserves.

~~~
bradleyjg
A few points.

First, I agree 421a is ludicrous, which is why I don't see why you credit NYC
for "extracting concessions like low and moderate-income housing". 421a and
similar programs trade billions of dollars in tax revenue that could be spent
on everyone for hundreds of thousands of dollars in rental subsidies handed
out to a few lucky lottery winners. That is terrible public policy. A park or
subway station improvement is a little closer call, but cash ought to be the
gold standard.

Second, I'm not sure I care whether billionaires buy castle in the sky in
midtown or townhouses in Greenwich Village. I wasn't going to be able to
afford the townhouses anyway. It seems like the people most concerned about
billionaires bidding up property are the centimillionaires being priced out.
100 units, even extremely large units, are a drop in the bucket for NYC. The
knock-on effects are just not that large out in the places where the middle
and lower classes live.

Finally, in terms of extracting more, I think the in-kind programs are both
inefficient and a massive opportunity for corruption. I'd much rather see all
the special deals -- parks, affordable housing, etc. eliminated and property
taxes that reflect reality imposed, with perhaps a small pied-à-terre
differential. The billions of dollars of missing tax revenue would be a lot
more valuable to NYC than a few more housing lotteries or a small park, if for
no other reason than you can subsidize rentals with cash but you can't fix
potholes with subsidized rentals.

~~~
allworknoplay
Right, but a rich person with lots of money to throw around would buy three a
three unit townhouse and price out three families just to keep it empty 80% of
the time -- This is the value of midtown luxury building construction -- it
draws a remarkable amount of the money away from pricing out actual new
yorkers.

I agree that we don't do enough -- that's why I said that twice. I was simply
adding that there is some value to construction of luxury property buildings,
and perhaps insinuating that if we went so far on taxes that none of these got
built, we would be worse off. I don't know where the actual trade off is --
again, we're well beyond it with 421a.

~~~
minot
> Right, but a rich person with lots of money to throw around would buy three
> a three unit townhouse and price out three families just to keep it empty
> 80% of the time

Sorry but what's wrong with that? We have land tax for exactly the same
reason. If someone is willing to own the expensive apartments (and the
expensive land that they build upon) and pay the taxes, why is that a problem?

I guess I don't see how gentrification is a problem at all. If Manhattan is
expensive, people should move out. This is a genuine question. Why should they
live there if they can't afford to live there? Is it a good use of public
resources (policy makers' time, potential tax income etc)? Honest question.

~~~
rtpg
Well the big thing is that most people can't just move if they want to. They
have their jobs, and (especially if they're older) it might be really hard for
them to get an equivalent job elsewhere. So moving will already cost them
money.

The second part of this is that it costs a lot of money for these people to
move/be without income. So for some, they might just be too poor to move, and
suffer with diminishing disposable income as the price of everything else
around them rises.

I think the core of the argument is that it's not like these rich people came
into a barren land and built giant apartments. There are many people in NYC
that simply live there, and why let these billionaires come in and make
everything more expensive?

I think that's the crux of the counter-argument. I think that a combination of
proper tax brackets, loose zoning regulation allowing for high-density housing
+ commercial mixes, and primary-residence rules can solve the problem.

I think the central moral argument is that having giant empty houses in the
middle of a city with a community trying to do otherwise isn't exactly useful
for society as a whole (see Detroit) , so we should disincentive it as much as
possible.

~~~
minot
>I think the central moral argument is that having giant empty houses in the
middle of a city

Raise property taxes if you don't want property to be left unoccupied.

I sympathize with people who are already living there but it just doesn't make
any economic sense to give tax breaks to benefit a small population that's
already living there. There is no benefit to the population at large to
prevent an incumbent population from getting priced out.

The goal should be to increase the supply of cheaper housing and make it
abundant. I doubt it is possible in Manhattan today. Why not do it somewhere
close by where they are not likely to be priced out? Instead, we build things
like the east rover ferry which is clearly intended to raise the rent in
apartment complexes midtown and first avenue...

~~~
rtpg
I think the trick is to raise property taxes on un-occupied/secondary housing,
because if not you're just raising taxes for everyone.

I doubt the people already living there is small. Most people don't really
move out of cities they grew up or went to college in. So we're talking about
a substantial chunk of the population. There are cultural arguments for
protecting the incumbent population.

Like I said, that's the counterargument as has been presented to me. It's not
black and white (obviously). I think the proper solution is stronger
transportation and making other areas more livable. But there's a strong
argument for making real estate not become just an investment vehicle
(literally rent seeking!), and make it more about actually housing people.

------
Spooky23
Nobody lives in these condos for the most part. They are money laundering/tax
shelter vehicles for the uber-rich, especially foreigners. The same phenomenon
is common in south florida.

A lot of the content of the article is FUD. There is no relationship between
income and property tax levy -- it's based on the adjusted value of the
property. In the case of an apartment building, the value is easily computed
as a factor of the revenue generated. Obviously, the process in NY is prone to
corruption, as the leaders of both houses of the state legislature under
Federal investigation for related issues. There are lots of stakeholders here
with different interests -- unions want construction jobs, lawyers get to bill
for title and other work, etc.

What has changed during the last 15 years is the importance of property tax in
NYC. Unlike the rest of the state, other revenue sources were more prominent.
Now, in addition to high sales tax, city income tax, special transit payroll
tax, and other costs associated with NYC, you get high property taxes too.

~~~
brandonmenc
> Nobody lives in these condos for the most part. They are money
> laundering/tax shelter vehicles for the uber-rich, especially foreigners.

If that's true, then why should they pay higher taxes? If they're not actually
living in the community, they're not using services. Seems fair.

~~~
davmre
They are using space that could otherwise be occupied by others. Doing so
would reduce pressure in the housing market and increase the productive
density of the city. Part of the point of property taxes is to encourage
productive use of space - if the value you're getting isn't enough to cover
the property taxes, you're incentivized to sell to someone who will use the
space more productively.

Also note that of course the owners _are_ deriving a great deal of benefit
from city services, both directly in that they are counting on the NYPD and
FDNY to keep their property safe, and indirectly insofar as the whole reason
these apartments are valuable in the first place is that NYC is a world-class
city where many people desire to live.

~~~
brandonmenc
> They are using space that could otherwise be occupied by others.

I'm building a tower. The sweet tax situation means I can sell some extra
units as tax shelters, so I slap on a couple more floors. Is that then space
that would've been occupied by others?

~~~
minikites
...yes?

~~~
haneefmubarak
Well here's the thing: if not for those extra tax shelter floors, he would not
have built them at all, because no one else was willing to pay for a use of
that space. Therefore, had he not built the extra floors on his theoretical
tower, the space would have gone completely unused (and likely could not be
used in the future).

Meanwhile, since there are people willing to pay to simply own portions of
that floor, he builds it. In the future, if there is a high enough demand for
that particular space, the owners of those portions of the floors could sell
the floors. For those owners, they have effectively used the space on the
extra floors as a property investment. However, the floors are still available
in use when the time is necessary.

Comparatively, if those floors weren't built, no one would have made use of
that space. If the building wasn't designed to accommodate future expansion
vertically (is that even possible at that scale), then that space would have
gone unused even when a demand for that space finally exists.

Thus, no one is being deprived of space because those extra floors were built.
If at all, that space will be more likely to be utilized in the future, since
it will have been built and ready for sale.

~~~
tedunangst
It seems unlikely that any space in NYC would go unused, let alone never be
used.

~~~
juliangregorian
You would think so, and yet...
[http://blogs.villagevoice.com/runninscared/2012/01/new_york_...](http://blogs.villagevoice.com/runninscared/2012/01/new_york_has_mo_1.php)

~~~
rbanffy
Manufactured scarcity shouldn't count. ;-)

That space is being used to drive up the prices of the space actually being
used.

------
zaroth
I assume the ability to sell these floors out as a tax shelter / investment
property factors in heavily to the financing and scale of the entire project
to begin with. Does NYC get to have a One57 Tower without duplex condos
selling for 9 figures? Probably not. Do duplex condos sell for anywhere close
to 9 figures if the annual property taxes are 7 figures? Certainly not.

When Mayer Bloomberg talked of the ultra-rich moving in, he didn't mean so
that the city could literally confiscate their assets, but rather, the city
can benefit from the _investment_ that follows. There are great arguments to
be had about how much NYC actually benefits from massive infrastructure
projects like One57, but the property tax structure is intentional because the
city benefits in other ways.

A more interesting analysis would consider the myriad costs and benefits of
the construction and upkeep of One57. Obviously there is very significant tax
revenue and expenses to the city generated through various channels for a
building at that scale. They are not and should not be taxed like single
family homes or condos.

~~~
armsmasher
(author here) To your point: "They are not and should not be taxed like single
family homes or condos."

They are taxed like condos—they are condos. I think the larger issue in this
story is that the tools for assessing tax value are crude and don't allow the
city to assert a progressive taxation. The range between 0.017 and 1.7 is
large, and the city needs to be able to find a target taxation that draws in
revenue without warding off services. There's no reason to believe the limit
there is 0.017 percent.

~~~
zaroth
I understand they are taxed under the code as a "condo" but isn't the point of
the article that they are not taxed at the rate of a normal condo vis-a-vis
their sales price?

Since the sales price is 6 sigma to the right on the bell curve, it doesn't
surprise me at all that the tax rate as a percentage of sales price would be
similarly offset to the left. I think it would have made the analysis better
to have also ranked the dollar value of tax revenue per dwelling unit, and you
would see they are paying an extremely high share under that metric. But then
the title of the article would have to be "Why Billionaires Pay the Most Per
Capita Property Taxes in New York".

Another way to look at it, is if the tax rate were 1.7% instead of 0.017% then
the building could not have been built. If the rate were 0.17% the sales price
would have been closer to $10 million than $100 million. I think there is no
scenario where the city gets the tower, the condo sells for $100 million, AND
the city takes even .17% each year in property taxes.

The article reads like the city paid to build the tower and is giving the
units away rent-free. It just seems like such a distorted view of the full
macroeconomic impact, when in fact NYC is getting _exactly_ what Bloomberg
meant when he said he hoped the billionaires to move in.

~~~
armsmasher
<i>isn't the point of the article that they are not taxed at the rate of a
normal condo vis-a-vis their sales price?</i>

That isn't the point I'm making. Ultra-luxe condos are taxed the same way as
normal condos are. It's the same mechanism. But the formula is crude and can't
anticipate that there might be condo buildings with no comparison in the
rental market.

<i>I think it would have made the analysis better to have also ranked the
dollar value of tax revenue per dwelling unit</i>

The charts I included do show the dollar value of tax revenue per 10 units
that sold for extraordinary prices. Perhaps these dollar values (e.g., $17,000
per year) do seem very high, but that is a matter of perspective. If you are
the owner of a $5 million condo, and you pay $17,000 annually in property
taxes, it will seem outrageous that the owner of a $100 million condo pays the
same. This is why it's important to compare effective property tax rates. Just
comparing numbers or digits is meaningless in a discussion about in/equity.

<i>I don't think there is a scenario where the city gets the tower, the condo
sells for $100 million, AND the city gets 1.7% each year in property
taxes.</i>

Perhaps not. I still think the burden is on the city and state to demonstrate
why the inequity is warranted.

------
bko
One of the conditions required for a condo to receive generous tax breaks
(which it passes on to the tenants) is that they build affordable housing.

>As originally designed, the program requires to allocate at least 20 percent
of their units to low-income families, in return for tax breaks of up to 80
percent. It's a badly kept secret in Manhattan that the program is often used
by luxury developers.

One57 used a popular loophole in the law that allowed the developers to take
the tax benefit for the building overlooking the park, but fund the affordable
housing units in another location. One57 bought credits or "certificates" that
helped fund those affordable housing units in outer bouroughs, according to
city records. [0]

This is all part of a misguided housing policy in New York that focuses on
"affordable" housing. This results in housing that is below market and a few
lucky people that get in. For instance, one new building that got a lot of
attention for having a separate door for the subsidized tenants (dubbed the
"poor door" by the media) has received 88,000 applications for 55 subsidized
units. [1]

In my opinion, if the government wanted to subsidize the less fortunate, they
should provide a cash subsidy for the individual to use as see fit. Forcing
someone to take the entire value of that subsidy in the form of a housing
credit is silly. For example, if you force developers to charge only $1000 for
a $5000 apartment, you're essentially transferring $4,000 from landlord to
tenant as a housing credit. I would prefer the individual receive $4,000 cash
and be able to choose how to spend that amount, or somewhere in-between. I
doubt most would use the entirety of that amount on better housing.

[0] [http://www.cnbc.com/id/49360274](http://www.cnbc.com/id/49360274) [1]
[http://www.nytimes.com/2015/04/21/nyregion/poor-door-
buildin...](http://www.nytimes.com/2015/04/21/nyregion/poor-door-building-
draws-88000-applicants-for-55-rental-units.html?_r=0)

~~~
thrownaway2424
Direct cash payment is always better than subsidies. Subsidized housing simply
transfers money to property owners.

~~~
CPLX
> Direct cash payment is always better than subsidies.

Because you say so?

Direct cash benefits have one effect, rent regulation has another. It depends
on what you are trying to achieve.

I am always perplexed when people talk about NYC housing policy and how it's
self-apparently and obviously being done wrong, they invariably fail to note
that it's the most desirable and culturally important city in the Western
Hemisphere.

~~~
bko
I think a better measure of whether housing policy has succeeded in New York
is a measure of the cost of housing. In that case, New York's housing policy
has not stopped housing prices from increasing. You could argue that the
situation would be worse without it though.

> Because you say so?

I'm not the commenter, but I think cash is better precisely because I don't
know what would be better for the recipient. It's pretty arrogant to assume
that you know what is right for someone. To say that a $4,000 transfer should
be used on housing and housing alone is an insult to the person receiving the
benefit, as though that person cannot think or make decisions for themselves.

~~~
CPLX
> I think a better measure of whether housing policy has succeeded in New York
> is a measure of the cost of housing.

Thus, we can conclude that by the same metric that the most successful civic
and urban policies are employed in rural Nebraska and West Texas.

Perhaps that's actually not the best way to measure the success of a city?

> I'm not the commenter, but I think cash is better precisely because I don't
> know what would be better for the recipient. It's pretty arrogant to assume
> that you know what is right for someone.

Perhaps. But what if, instead of making a decision based on what's better for
some arbitrary recipient, you wanted to make decisions that would increase the
likelihood of having a vibrant and diverse urban environment with people that
have various economic and cultural roles to play interwoven into the fabric of
the city's housing stock. What if you placed stability and continuity as
higher values in your trade off calculations than maximizing economic
efficiency?

Again, my argument is a plea for empiricism. New York is a staggeringly
successful city, one of the world's most desirable and influential places,
with an incredible culture of residents. I always wonder if people have
actually paused to notice that when they start evaluating housing policy.

~~~
bko
Perhaps effectiveness of housing policy could be measured by the price changes
as population grows. Texas for instance has very loose zoning regulations,
with high population growth and below median home prices. Also, Texas didn't
have the huge run-up in housing appreciation as did many other states, and
hence virtually no subsequent crash [0]. During that time Texas has grown in
population substantially. To be fair, New York didn't have much of a crash
either but the housing market is very expensive.

I love NY. I choose to live here. I don't like high rent though.

I'm just a little weary of allowing political bodies to determine the right
"urban environment" as these same bodies have used their powers for
segregation. Sure, diversity sounds good, but it sometimes leaves a bad taste
in my mouth. For instance, ~70% of Stuyvesant High School is Asian and
admission is based solely on a test. Should Asian's be prevented from
attending?

[0] [http://static.cdn-
seekingalpha.com/uploads/2015/5/11/sauploa...](http://static.cdn-
seekingalpha.com/uploads/2015/5/11/saupload_150508_RealMedianHousePricesUSvsTexas.png)
[1] [http://seekingalpha.com/article/3167336-houston-wavers-
but-t...](http://seekingalpha.com/article/3167336-houston-wavers-but-texas-
housing-still-benefits-from-economic-resiliency)

~~~
a8da6b0c91d
The high rent is deliberate policy. You are kinda missing the point. The
reason NYC is safe now whereas it was a war-zone in the 80s is all the
criminals had to move away because of higher rent. The government deliberately
got rid of most of the section 8 housing and constricted the supply of cheap
apartments. They _want_ to price people out.

~~~
bko
There are still a lot of housing projects throughout Manhattan, sometimes
adjacent to very expensive housing. An example is the largest projects in
Manhattan, Baruch Houses, 17 buildings, 27 acres. This is right across the
street from The Ludlow which most recently rented a one-bedroom for $4,485 a
month.

------
rhino369
Jesus, that article took forever to describe the problem. Inverted pyramid
guys, come on.

------
rich_tariffs
I live in a state which does something similar to this -- the sales tax is
extremely high, and property taxes are laughably low. I have never cared to
investigate it, but my hunch is it protects those who are already land owners,
and therefor the economic elite, and burdens renters and other lower income
citizens with a disproportionate tax burden.

~~~
DamnYuppie
My quibble with your assertion is that if property taxes were higher it would
also hit the lower income citizens as well. Those property taxes would just be
passed along as an increase in their rent.

Also it isn't the low income who are being taxed to death it is those who
"middle class" who are subsidizing everything. Effectively only 50% of those
who file taxes actually owe any taxes.

~~~
Frondo
Nope. If the landlords could raise the rates, they already would. This whole
"cost X gets passed onto consumers" flies in the face of basic economics: the
price is what people are willing to pay, separated from what costs/fees/taxes
are applied to the supplier.

~~~
zaroth
Nope? Who would rent property for less than it costs to carry it? If you want
to speculate on real estate there are _much_ better ways than renting to low-
income tenants below cost.

Speaking of Econ 101, when taxes shift the supply curve, what happens next?
Some renters are priced out, others get less house for more money. Under no
circumstance does some fat-cat middle man reach into their own pocket to help
a brother out.

~~~
Frondo
Sorry, but you're just saying the same thing: that the basic economic
principle of price being determined by what the market will bear doesn't apply
to housing.

Either people will pay more, in which case landlords will raise their rents
until people stop being willing to pay more, or people won't pay more, no
matter what the cost to the landlord.

Nowhere in this does the landlord show up with a tax document and say "see
folks, now you gotta pay MOAR TAX".

~~~
zaroth
I'm saying that increased taxes cause landlords to try to increase rent or
exit the rental market due to the increased expense, leading to decreased
rental supply at a higher average cost. In a competitive rental market, you
are renting the property for pretty much exactly what it costs you to rent it.
If free money rained from the sky by pushing the "rent" button, more people
would do it, increasing supply, and decreasing cost.

Similarly, lowering the tax rate would provide greater profit to landlords,
which would cause new entrants to the rental market, leading to greater supply
and a lower average cost.

That's just the basic theory of competitive markets, at least as I remember
it. It starts with the 'X' shaped chart of supply vs demand which you draw
over and over in Microeconomics 101. Macro takes the concepts from Micro and
connects the dots to get from increasing taxes -> higher rental prices.

------
joshuaheard
"The values of these new condos are being assessed at just a fraction of what
they're worth. And buyers are paying only a fraction of that fraction in
property taxes."

This is true in every state that I have lived in. The tax-assessed value is
lower than the market value, and the tax rate is a small portion of the tax-
assessed value.

The tax-assessed value is lower because the assessors use a historical
comparative market analysis, which looks to the past to determine a current
price. Free market buyers who assess the property for the purchase of making a
purchase offer look at comparative historical values, but they also look to
what the future market will be. A rising market will command a higher price
than a sinking market. The same is true of the stock markets.

This effect is especially true for unique locations or other outlier
properties that can have grossly higher market values than tax-assessed
values. I am not surprised then that this is a problem in a place like
Manhattan, New York.

Also, some states limit the annual increase of the tax-assessed value. In
California it is 1%. If the market increase is 8%, the difference is going to
be large quickly.

------
lotsofmangos
London has similar issues -

[http://www.independent.co.uk/news/uk/home-news/sultans-
tax-d...](http://www.independent.co.uk/news/uk/home-news/sultans-tax-discount-
on-london-house-shows-law-favours-rich-8229543.html)

[http://www.thesundaytimes.co.uk/sto/news/uk_news/National/ar...](http://www.thesundaytimes.co.uk/sto/news/uk_news/National/article1189018.ece)

[http://www.theguardian.com/society/2014/jan/31/inside-
london...](http://www.theguardian.com/society/2014/jan/31/inside-london-
billionaires-row-derelict-mansions-hampstead)

------
tn13
In general when you have super complex laws, the law will always help rich and
powerful simply because they will be the only once who will have the resources
to pass through the myriad laws.

------
ksec
To me, Property should not be a investment option, or Heavy tax ( 50%+ ) on
Property investment profits. Everyone deserve to have a place to live, large
or small. The property market ( especially after recent years of QE ) has
skyrocket to a point where many can not afford to live.

And if you think New York is bad, take a look in Hong Kong.

------
jgalt212
I'm no socialist, but this one line makes me sick to my stomach.

> In NYC, Billionaires Pay 1/100th the Average Property-Tax Rate

~~~
jgalt212
I guess Bill Ackman's assistant gave be the downvote here.

------
paulsutter
They need to unify taxes on residential units in a revenue neutral way. A
unified rate should be selected that reduces taxes on ordinary units by the
same amount as the extra billion from the superrich. This should make a change
more politically palatable.

The biggest beneficiaries of the current system are the property developers.
Fairer property taxes on these high end units may mean lower sales prices, and
that seems just fine.

One error in the article is the idea that landlords pass through taxes as
higher rents. That completely misunderstands landlord psychology. Landlords
will charge as high a tent as they can. Tax rates affect the value of the
property when sold by reducing the cap rate, they don't affect rents.

Fairness shouldn't impact the requirements for low income units. Those should
be traded for the right to build, not for a tax break.

The article suggests the complexity in the laws are based on the difficulties
in 1980 of calculating year to year increases in property values. Much more
data is available now and lots of work has gone into such algorithms, that
should be less of a barrier now. It's probably less important that the
algorithm be perfect than that the methodology should be apply equally to
everyone.

~~~
sokoloff
Anything that affects the cap rate also affects the marginal conversion of
that building from rentals into owner-occupant usage (especially in
jurisdictions where there's a homestead or owner-occupant partial abatement of
taxes).

It may not seem like there's a direct effect because Unit 2 on 123 Main Street
is still a rental for the same price after a $50/mo tax increase. But, some
other unit ends up being sold to an end-user (or a condo-conversion developer)
instead of staying as a rental. Across the body of rentals, I believe that tax
increases show up in rent over the long-run. Landlords aren't in the business
to give renters breaks. (Nor are they evil Scrooge McDucks; the good ones are
just smart businesspeople who can do math and put up with people... :) )

------
ende
I've got three words: land value tax

~~~
e3b0c
To mitigate the political frictions, LVT should probably be bundled with
principal residence deduction(or exemption).

~~~
ende
Yeah, there's a lot of devil in the details as far as determining the actual
formula as a function land value. I typically imagine there are ways to align
an LVT along a progressive scale, such that the little old lady who owns
nothing but her own small lot isn't burdened by the tax while generously
backed speculators buying up all waterfront property in sight are.

------
ryandrake
Simultaneously disgusting and utterly unsurprising.

------
ed_blackburn
I wonder how many of these flats are occupied. In London such flats are
investments for a balance sheet and remain unoccupied.

~~~
ChuckMcM
There has got to be a really awesome AirBnB type service in here for the rich
but not that rich types. All that unused property, all those traveling rich
people for whom a hotel is too 'exposed'. Connect those dots people! :-)

~~~
pdeuchler
This already exists in most elite social circles, albeit informally. A shared
realtor, you happen to own a yacht slip next to someone at St. Barts,
serendipitous private jet flights, etc. etc.

When everyone you know owns 3+ homes and would be able to easily cover any
sort of damages that they cause people are much more willing to loan out keys
and open their homes, especially when they aren't there.

I'm nowhere near that level of wealth, but I've been more than fortunate to be
invited on some trips that follow this pattern. I've even heard from the
horses mouth how someone literally spent two years after college traveling
across the world, staying in nothing but her parent's friends'
apartments/condos/houses with other socialites. You can get real deep into
social psychology with this, but the social rules are different for people
with such socio-economic standing. Money/assets are no longer dominant social
currencies (and thus more willing to be risked)... it's more personality,
looks/style, and tangential social connection.

i.e. I care a lot less that you drive a Ferrari and a lot more that you can
get me into X social event through Y connection, or that you can give me good
advice on popular art. Gotta keep up with the Jones' somehow, and when
everyone has too much money you have to find other social signals.

~~~
ubernostrum
_I 'm nowhere near that level of wealth, but I've been more than fortunate to
be invited on some trips that follow this pattern._

I was fortunate to end up with a bunch of scholarships and funding to let me
go to a much more expensive college than I would ever have otherwise been able
to afford. Guy who lived across the hall from me was the son of a pharma exec,
and I ended up learning a lot about how that stratum of society works.

And that's pretty close to it. I've known people who literally can say "oh,
yeah, I don't need a hotel on that Europe trip, a friend of the family has a
castle I can stay in".

------
DanBlake
The system in California is pretty ideal. I say this as a property owner
there.

Homes are assessed by the most recent sale price. Both the city and the home
owner can appeal that assessment-

So in cases where you overpay for whatever reason you can get it reduced, as
well as if your home falls in value after you buy it - In cases where you sell
a friend your house for a dollar, the city can appeal the 'last sale price' to
get a market assessment. If you do a major addition, the home gets reassessed.
Assessments are capped at something like 1-2% increase a year max, so you can
budget increases accordingly, thanks to prop 13.

This compared to florida, where my home purchase/sale price has nothing to do
with the appraisal. Instead they look at all 'comparable' homes and average
out the assessment that way. That has the disadvantage of having half the
people underpaying for their property tax and half overpaying.

~~~
brohee
"In cases where you sell a friend your house for a dollar, the city can appeal
the 'last sale price' to get a market assessment"

In France, municipalities can preempt real estate transactions as long as they
offer more than the buyer, so the city would get your house for two dollars.

This is mostly to discourage under-reporting of transaction prices, as
property ownership change taxes are a major revenue source for cities...

------
ctdonath
Nobody is discussing the fact that the people voted into power on grounds that
they would "do something about this" have been in power and re elected on
those grounds for * decades*, have done nothing about it but make more
exploitable loopholes, and whine about how something must be done and they're
the people to do it so must be re elected. Stop voting for the same group of
Democrats who keep not solving the problem.

~~~
gr3yh47
>Stop voting for the same group of *'two-party system reps-for-rent' who keep
not solving the problem.

ftfy

~~~
sukilot
Bloomberg isn't a party rep for rent. He is a billionaire who bought the
mayoralty for himself to grow his stature and pursue a fun project.

------
friendzis
I am not even from USA, but this whole thing seems a bit off to me.

As far as I understood, one of the core goals of all these subsidies (I'm
using this phrase to group all the mechanisms that change total cost of
ownership, be it tax rate or whatever) were designed to keep people from being
thrown out of their homes by rising taxes due to rising value and creating
affordable housing. I base my comment on this.

First of all property prices can rise due to [fake] economic growth/housing
bubbles. In that case most property values rise proportionally, therefore no
change here - housing gets more expensive in general.

Second, property prices can rise due to area getting more attractive or just
having more luxurious properties. And if you can no longer afford living there
due to rising taxes - this means that you just happen to live in an area that
is out of your class. Income change (e.g. loss of a job) might throw a family
into a lower class. Is it unreasonable to expect to relocate? Personally I
don't think so. The same should apply to rising property costs in a
neighbourhood.

Last, any regulation differences in the same area (housing in this case)
creates non-free, regulated market and as a consequence actual prices might
differ from expected "natural" free-market values by quite a margin or just
cancel the intended effect out. For example artificially lowering construction
prices in a new neighbourhood (tax exemptions; city funded utilities
installation: electricity, plumbing, etc.) might create demand higher than
supply effectively cancelling out the intended price reduction. Of course city
planners might want to prohibit industrial buildings in some areas, but these
are in no direct competition with living places.

I believe that the best solution is to simply have a fixed tax rate based on
property value. The biggest challenge here is to calculate real market value
without actually transferring ownership. The obvious choice of sell price is
only valid for several years, while property can be held for decades.
Valuation based on rental price is off if one can rent from wife. Yes, there
are loopholes to plug and mechanisms to adjust billable property value without
sudden spikes to place. The only way to make housing more available to the
poor I see is to lower billable property value if it contains at least x units
and maximum household income averaged over y years is less than z, legally
placing tax burden on renters.

------
forrestthewoods
Tax breaks made to protect the poor all too often benefit the wealthiest the
most. Which causes the most harm to the group it was meant to protect. Oops.

I support equality in taxing. Alas such things are labeled regressive but it's
always the poor who end up under the bus. Complicated progressive tax schemes
always benefit the rich more than the poor. Always.

~~~
danmaz74
Progressive tax schemes don't need to be complicated.

------
lsiebert
Actually it's interesting to note the parallels of the relevant laws in New
York with prop 13 in California, the idea was to encourage and enable people
to stay in their homes when inflation was high in the 1970's, but weren't
rolled back, creating issues.

------
jbhatab
Wouldn't another city just adopt similar systems and over time start to
attract billionaires? I'm sure that this effects their decision of where they
purchase real estate.

I am assuming having rich people in your city is a good thing, but I genuinely
think it is overall.

~~~
ubernostrum
Remember that real estate is about three things: location, location, and
location. You bribe your way into tax abatements for luxury condos basically
anywhere, but there's currently no way to bribe someone to move Central Park,
the museums and arts centers and all the restaurants and other New-York-
specific stuff that actually attracts people to within a few blocks of your
cheap-tax-rate tower in Wyoming.

~~~
nostromo
You're not being fair to his or her question.

Yes, most cities cannot attract billionaires like New York. But London or Hong
Kong can. And London has been much more successful at it than New York lately.

Fun fact: the states with the most billionaires per capita are... Oklahoma,
Oregon, and Ohio. New York comes in at #4.

~~~
mturmon
Hmm, your fun fact
([http://en.wikipedia.org/wiki/List_of_U.S._states_by_the_numb...](http://en.wikipedia.org/wiki/List_of_U.S._states_by_the_number_of_billionaires))
is fun, I agree, but also misleading.

According to the above link, Oklahoma has 5 billionaires, Oregon has 2, Ohio
has 4. New York, at #4 per capita, has 88; California has 111. The "surprise"
is mostly due to low counts.

For any process (like wealth) with large extremes, if you subdivide it into
bins, you are going to get local extrema just due to low counts. The only
mildly informative thing is Oklahoma (oil and gas). Ohio is a few elderly
(ages 77, 74, 70) manufacturing folks -- their count seems to have dipped to
3, according to
[http://www.forbes.com/billionaires/list/#version:static_sear...](http://www.forbes.com/billionaires/list/#version:static_search:ohio),
which would remove Ohio from the top 3 per capita.

------
emehrkay
I should become a billionaire. Any advice?

~~~
mikeyouse
[http://www.businessinsider.com/elon-musks-first-wife-
explain...](http://www.businessinsider.com/elon-musks-first-wife-explains-
what-it-takes-to-become-a-billionaire-2015-4)

------
Quanticles
>And buyers are paying only a fraction of that fraction in property taxes.

This just in, you don't pay 100% of your home's value in property taxes each
year!

------
hahamrfunnyguy
Property taxes in ALL of NY are excessively high.

------
cmurf
Unrented residential property probably shouldn't have property tax. This is an
ancient feudal carry over. Piles of retirees across the U.S., including NYC,
bought property two epochs ago and in many cases can't afford the property
taxes. Property taxes are regressive and unfair. Instead, counties should get
their money from a combination of income tax and sales tax; OR at w.orst index
the property tax to income.

Commercial property (that includes residential rental property in my book)
maybe property tax still makes sense because landlords are pretty much always
indexing rent to property value anyway.

~~~
andrewvc
Property tax isn't just about the income to the state. Property tax is about
making sure that people are putting the property to work. If you're second
mansion is costing you an extra chunk of change every year and you never visit
it you'll be more likely to sell.

Additionally, property taxes are (usually) progressive. In places like NYC
where they aren't that should be fixed.

~~~
cmurf
Property tax typically doesn't go to the state at all. It's a county
assessment. An argument for keeping property taxes is they tend to be more
stable than income or sales taxes, and since counties tend to have less float
in their budget (a large pile of county spending is on the public school
system) it probably works better for them.

The idea of an aggressive mill levy on someone's additional homes seems sane:
use it or sell it. I just think universality of property tax isn't actually
fair, just like a $200 speeding ticket isn't fair. Indexing it somehow to your
worth or income is more fair.

~~~
e3b0c
Land value tax + principal residence deduction can solve both the economic and
political problems.

By the way, property tax and land value tax are different. Land value tax is
superior than the other.

