NYC Should Tax High End Absentee Apartment Buyers

The New York Times has been running a great series about high end real estate ownership in the city titled “Towers of Secrecy”. The upshot is that much of it is owned by people who are rarely if ever here. I believe there should be a special tax on apartments that owners spend very little time in and that tax should be heavily progressive, meaning get a lot more expensive the higher the purchase price.

The tax should be high enough to actually deter some of these purchases. Why? Because it is not healthy for the city to have a lot of empty high end real estate. First, the prices paid a the highest end while somewhat disconnected still pull up the rest of the market (if only through signaling effects) making New York City less affordable. Second, entire high rise buildings with few lights on in them at night have a kind of ghost town effect.

We have seen this firsthand for years in West Chelsea. The tower at 200 11th Avenue has a lot of out of town celebrity apartment owners. Hardly any of them are ever there with maybe a couple of lights on at night. It feels dark and vaguely post-apocalyptic. Parts of London, such as Belgravia, show what this can look like in the extreme.

For whatever purchases it does not deter the tax would produce income for the city of New York, which wouldn’t be a bad thing either. For instance, we could invest it into better better and more affordable broadband for all.

PS Jonathan Glick rightly points out that if the deterrence is too successful there will be less taxes in aggregate. I replied that I expect there is a Laffer curve here. But in any case this is an example of taxing an activity that has negative externalities which is exactly how taxes should be levied.