With ‘flip tax,’ a push to save affordable homeownership
Housing advpcates rallying for the "Homeowner Bill of Rights" at Kings County Supreme court on Tuesday. Photo courtesy of Cypress Hills Local Development Corporation
Homeowners united with housing advocates and local officials on the steps of Brooklyn Supreme Court this week to unveil a set of principles aimed at preserving affordable homeownership, including a measure that would tax any investor looking to make a quick buck on the borough’s booming real estate market.
“The Homeowner Bill of Rights” was unveiled on Tuesday by the Coalition for Affordable Homes. It calls for state passage of legislation including the Small Home Anti-Speculation Tax — which imposes a 15 to 20 percent tax on property that is transferred to a new owner within two years of ownership. The revenue that is raised through this tax will then be used to finance affordable housing efforts through the state’s Homes and Community Renewal program.
“We really want to emphasize how important it is for real people in neighborhoods to own homes in New York. Our homes and communities are for families and not investors,” said Christie Peale of Center for NYC Neighborhoods. “We are calling on the state and city electeds to make sure that our communities are for long-term investment by families and not short-term extraction by investors.”
The legislation aims to temper the sweeping gentrification that is running rampant through traditionally black and Latinx communities. In Brooklyn, that wave has hit seniors in the Central Brooklyn neighborhoods of Bedford-Stuyvesant, Flatbush and East New York the hardest.
Al Scott at rallying for an a speculation tax at Kings County Supreme Court. Photo courtesy of Cypress Hills Local Development Corporation
“If they are going to flip property in our neighborhoods, well then flip that money back into our community. I just heard of a senior citizen in Bushwick who was tricked into signing over her property for $500,000 get her property flipped for a million,” said Al Scott, chairman and CEO of The Homeowners Association Inc. and an East New York homeowner. “Today we are taking a stand in protecting generational wealth. We are fighting to stay and remain.”
Advocates are hoping the tax will preserve homeownership for local residents who can become financially unstable when property values skyrocket at a faster pace than their incomes. This can lead many to fall into foreclosure or into the city’s embattled Third Party Transfer program, which seizes property for unpaid city taxes.
Tax rates change every year and are calculated as part of the assessed value of a building. The state’s property tax system has been scrutinized in recent years and months for its inequities and imbalance across neighborhoods. Nearly a third of the city’s annual revenue comes from real property levies, according to Gotham Gazette.
The speculation tax was first introduced in 2017 by Assemblymember Erik Dilan, who represents parts of Bedford-Stuyvesant, Bushwick, Cypress Hills and East New York, a majority black and Latinx community.
“Let’s take these guys right out of business so that our people can have a place to own and our people will have a place to live,” said Dilan at a recent rally. “I’ve fought hard every year for the ‘flip tax’ … I want to see it passed this year.”
A city commission is currently looking at possible reforms to the outdated property tax system. The commission, which launched in 2018, is examining how property values are assessed to provide relief for vulnerable homeowners and soliciting input from the public and specialists on changes to the system.
Earlier this year, the state passed a collection of tenant protections in a bid to shield for renters across the state. But the package left out homeowners struggling to keep hold of their small family buildings.
“We haven’t forgotten homeowners,” said State Sen. Brian Kavanagh, chair of the senate housing committee. “We want to make sure homeowners are a very important part of our affordable and stable communities.”
Update (Nov. 14 at 10:20 a.m.): This article has been updated to reflect the correct spelling of Christie Peale’s name.
This is the most stupid legislation i have ever heard in my life. Flippers actually bring value to neighborhoods, fixing up Old and Run down homes. The average person doesn’t have 300-500k to renovate a 100 plus year old home. So everyone in the market place for a home is supposed to buy un renovated homes. People don’t think.
I agree with you partially. I see properties, especially vacant land, where elderly owners are offered 50%-75% for their property. (Many elderly people who, say, paid $50,000 for their home 40 years ago cannot believe it is now worth over $230,000 without renovations) So they the home for $120,000. The buyer then “flips” the home with no repairs for 230,000 then walks away with a cool $100,000 after closing costs.
Plus this will just increase prices on homes in the neighborhood.
FYI 500k for an unrenovated home flipped for 1 million is not alot of profit. It takes at minimum 300k to renovate a 2 family home. So you are talking 200k in profit before capital gains tax and closing cost/real estate taxes.
The point is there shouldn’t be any profit. People should be buying homes because they want to live in them.
Allowing investors to control the real estate market in the neighborhood totally devalues the power of the communities, many of which have been there for generations.
I bought a renovated flip home. I couldn’t afford to renovate a home myself. Its cheaper to pay a premium for something already done over the course of 30 years. Than chalk up 300k in cash and deal with shady contractors. You are talking about nyc housing that is mostly 100 plus year old homes in need of alot work sometimes full gut jobs. Ironically getting rid of flips still will push gentrification as the only people able to afford a million dollars on a un renovated brownstone to fix up themselves arent people in the community. You have no solution just pointing fingers
If passed, this legislation would not likely hold up in court when (not if) challenged. When someone buys a property and owns it outright they have a legal right to sell it. There is a better chance if the legislation is tied more to the assessment process. Having a so-called “recapture tax” on every sale where the sale price is more than 20% higher than the full market assessment. The one-time tax would be based on the sale price amount above 120% of the assessment using current tax rates. Here is how it would work: A home is assessed (full market) at 500,000 and sells for $1 million. So, 500,000×120%=600,000. The $1mil sale equates to 400,000 over the 20% threshold. If current tax rates equal 3% of the assessment then 400,000×3%= $12,000. This may not seem like much money but over time, and considering the volume of sales involved, would recapture several millions in tax dollars. A more detailed explanation of this, including a Q&A section was presented by me in testimony given in 2007 in the NY State Assembly. This idea CAN work, CAN pass challenges, and would recover tens of millions in lost tax revenue to local governments across NY annually.
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7 Responses
This is the most stupid legislation i have ever heard in my life. Flippers actually bring value to neighborhoods, fixing up Old and Run down homes. The average person doesn’t have 300-500k to renovate a 100 plus year old home. So everyone in the market place for a home is supposed to buy un renovated homes. People don’t think.
I agree with you partially. I see properties, especially vacant land, where elderly owners are offered 50%-75% for their property. (Many elderly people who, say, paid $50,000 for their home 40 years ago cannot believe it is now worth over $230,000 without renovations) So they the home for $120,000. The buyer then “flips” the home with no repairs for 230,000 then walks away with a cool $100,000 after closing costs.
Plus this will just increase prices on homes in the neighborhood.
FYI 500k for an unrenovated home flipped for 1 million is not alot of profit. It takes at minimum 300k to renovate a 2 family home. So you are talking 200k in profit before capital gains tax and closing cost/real estate taxes.
The point is there shouldn’t be any profit. People should be buying homes because they want to live in them.
Allowing investors to control the real estate market in the neighborhood totally devalues the power of the communities, many of which have been there for generations.
Omg how will people renovate 100 plus year old homes? What world do people live in?
I bought a renovated flip home. I couldn’t afford to renovate a home myself. Its cheaper to pay a premium for something already done over the course of 30 years. Than chalk up 300k in cash and deal with shady contractors. You are talking about nyc housing that is mostly 100 plus year old homes in need of alot work sometimes full gut jobs. Ironically getting rid of flips still will push gentrification as the only people able to afford a million dollars on a un renovated brownstone to fix up themselves arent people in the community. You have no solution just pointing fingers
If passed, this legislation would not likely hold up in court when (not if) challenged. When someone buys a property and owns it outright they have a legal right to sell it. There is a better chance if the legislation is tied more to the assessment process. Having a so-called “recapture tax” on every sale where the sale price is more than 20% higher than the full market assessment. The one-time tax would be based on the sale price amount above 120% of the assessment using current tax rates. Here is how it would work: A home is assessed (full market) at 500,000 and sells for $1 million. So, 500,000×120%=600,000. The $1mil sale equates to 400,000 over the 20% threshold. If current tax rates equal 3% of the assessment then 400,000×3%= $12,000. This may not seem like much money but over time, and considering the volume of sales involved, would recapture several millions in tax dollars. A more detailed explanation of this, including a Q&A section was presented by me in testimony given in 2007 in the NY State Assembly. This idea CAN work, CAN pass challenges, and would recover tens of millions in lost tax revenue to local governments across NY annually.