A home-buying spree by the uber-rich is “out of control” and “dangerous,” Mayor Bill de Blasio fumed last week over hedge fund mogul Ken Griffin’s $238 million purchase of an apartment at 220 Central Park South.
It was cheap talk by the mayor, who never misses a chance to pander to the “income inequality” crowd. But he isn’t stupid, and knows better than to mess too much with the real-estate free market — which props up the city treasury as nothing else does.
That’s why he’d surely block a “pied-a-terre” tax proposed in the City Council last week. One sponsor, Mark Levine, ripped Griffin’s purchase as “grotesque” and blasted “this kind of extreme wealth moving into our cities without it benefiting the people that live there.”
But that’s baloney based on zero understanding of economic reality and knee-jerk resentment of the rich. Griffin and his ultra-wealthy ilk pay the city a fortune in taxes to occupy extravagant homes like his. An additional “pied-a-terre” tax on those who don’t live here full-time might deter future purchases, driving down prices and leaving the city with far less revenue from those properties.
Yes, it’s only human to be taken aback when a single person spends so much for a 25,000-square-foot home that’s 30 times larger than the average Big Apple apartment. But the implication that his extravagance somehow comes at the expense of the space-squeezed millions is just plain dumb.
While The New York Times chortled that $238 million exceeds, in one particularly inapposite comparison, the annual GDP of the Marshall Islands, the situation requires context.
In a nutshell: It’s deals like Griffin’s at 220 Central Park South that keep the city from going broke.
And with the ultra-high-end condo market plunging — condo sales of $5 million and up fell 28 percent in 2018, The Wall Street Journal reported — de Blasio ought to pray for more buyers like Griffin.
The apartment purchase is linked to the expansion of Griffin’s Citadel hedge fund’s offices here, which likely will keep him in town more than previously. (Citadel’s based in Chicago). Both investments will bring the city a tax windfall.
The penthouse buy alone should reel in $10 million or more for city coffers right off the bat. That estimate includes more than $6.7 million is paying for the Real Property Transfer Tax and the Mansion Tax.
Then there’s the mortgage transfer tax — 2.175 percent of the value of all home-purchase loans over $500,000. Unless Griffin’s footing his entire purchase with $100 bills, the transfer tax will bring in several million dollars more depending on how much he borrowed.
Moreover, as the owner of a condominium, Griffin must also pay annual city property tax — likely in the neighborhood of $850,000.
Meanwhile, Citadel leased more than 400,000 square feet at 425 Park Avenue, a new office tower rising at East 55th Street.
Citadel is growing into more space than it has at several locations it’s leaving behind. Its new digs are much more expensive — meaning the city will reap a revenue bonanza through the Commercial Real-Estate tax, an occupancy tax that companies in Midtown pay.
Based on an “effective” CRT rate of 3.9 percent and on earlier estimates of Citadel’s rent — including a portion priced at an all-time high of $300 a square foot — Griffin’s outfit could be paying the city up to $2 million a year for that tax.
The boost to the city treasury shouldn’t come as a surprise. The real estate industry pumps much more dough into city coffers than any other business. In 2018, 52 percent of all city tax revenue came from real estate and real estate-related taxes. The total $29.5 billion easily topped taxes on personal income ($11.8 billion) and corporate income ($6 billion).
It might not seem “fair” for one individual to spend so much money for a four-story castle in the sky when millions of New Yorkers struggle to afford basic housing. But what’s truly “grotesque” is the scandalous condition of NYCHA, home to more than 400,000 of the city’s poorest residents. Discouraging the ultra-rich from buying here won’t help any of them.
Meanwhile, if de Blasio and his ilk actually cared about public-housing dwellers, they’d use some of the fortune in tax dough they already get from guys like Griffin to buy some new boilers.