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.

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.