De Blasio Mansion Tax May Keep Prices Below $1.75 Million, Audit Says

New York City mayor-elect Bill de Blasio and a group of newly-elected mayors from across the country speak to the media outside of the West Wing of the White House in Washington, D.C., U.S., on Friday, Dec. 13, 2013.

New York City mayor-elect Bill de Blasio and a group of newly-elected mayors from across the country speak to the media outside of the West Wing of the White House in Washington, D.C., U.S., on Friday, Dec. 13, 2013.

Photographer: Pete Marovich/Bloomberg

New York Mayor Bill de Blasio’s proposed “mansion tax” increase might induce sellers to offer apartments at $1.75 million or less, the city’s Independent Budget Office reported.

De Blasio proposed the measure last month, saying it would raise about $200 million annually to finance about 37,000 affordable apartments. The mayor has a goal of building or creating 200,000 such units by 2025.

New York state and the city already have mansion taxes. A residential property selling for more than $1 million and up to $1.75 million is subject to a combined surcharge of 2.825 percent, said the IBO, a public fiscal monitor.

Under de Blasio’s plan, once a price exceeds $1.75 million, the city would assess an additional 1 percent on the entire purchase price and 1.5 percent on any amount over $5 million.

For example, a property that sold for $1.75 million would be charged $49,437.50, while owners of a property that closed for $1.76 million would pay $67,320. So, an added $10,000 in the price would result in an increase of $17,882 in the tax -- an inducement to keep the price at or below $1.75 million, the IBO said.

Properties priced just above $5 million wouldn’t be similarly affected because the higher 1.5 percent rate that kicks in at that level is marginal, meaning it applies only to the amount above $5 million, the IBO said.

The measure must overcome opposition from tax-averse Republicans who control the state Senate. It won support from the Real Estate Board of New York. That group also backed a plan, opposed by Governor Andrew Cuomo, to grant property-tax abatements to developers who reserve at least 30 percent of a project’s units at below-market prices.

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