Pied-à-terre is the term used to describe an apartment that is not an owner’s primary residence and it comes from the French phrase that means “foot on the ground.” Of course, some owners just refer to them as a second home.
According to Martha Stark, a professor at NYU Wagner and former New York City finance commissioner who has examined the city’s data on second homes, properties are considered pieds-à-terre if they are not owned in an individual's name or if the owner is not receiving a tax benefit from the city that’s only given to residents.
New York City has long been a place where the wealthy park their money—take for example, the 2019 purchase of a $238 million penthouse at 220 Central Park South by billionaire Ken Griffin. It set a record for the county’s most expensive residential purchase.
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Pieds-à-terre aren’t just for the super wealthy. Some buyers are empty nesters, others are working in the city a few days a week. As well as appealing to domestic buyers, the pied-à-terre is a popular purchase for international buyers and many are just beginning to return to the city post-pandemic. In a discussion on the Brick Underground podcast, Kobi Lahav, director of sales at Living New York, says the property type makes sense for international buyers who want a safe place to park their money and paying a premium for NYC real estate is just “the cost of doing business.”
[Editor's note: A previous version of this article was published in March 2019. We are presenting it again with updated information for May 2021.]
Buildings have their own rules about pieds-à-terre. Some co-ops allow them, some do not. Some determine pied-à-terre purchases on a case-by-case basis. Stark estimates there are a total of 10,415 pied-à-terre properties in Manhattan—and about 80 percent are condos.
If you're in the market for a second home in NYC or are looking to sell your apartment and want to know what appeals to a pied-à-terre buyer, read on.
Where are NYC pieds-à-terre?
It’s not unheard of for a buyer to look to the outer boroughs—Williamsburg, Long Island City, and Park Slope are popular neighborhoods—but the majority of buyers want a pied-à-terre in Manhattan, says Victoria Rong Kennedy, an agent with Corcoran.
She has four pieds-à-terre listed around Columbus Circle and Greenwich Village and says the convenience of being located near the city’s cultural institutions and business center is a priority for buyers.
For a long time Midtown co-ops on Fifth Avenue have been on the radar for pied-à-terre buyers. Many have flexible policies that allow for second-home owners who meet their financial requirements. (For more on finding a second home in NYC, check out "Brick Underground's pied-à-terre checklist: What to consider before buying a part-time place in NYC.")
The pandemic interruption
Few international or out-of-state pied-à-terre owners probably ever envisioned they would be prohibited from using their NYC apartments but the pandemic lockdowns meant some couldn’t get to New York for significant amounts of time. It prompted some owners to sell, often at a discount, properties that had been highly renovated for the owners' use.
The potential pied-à-terre tax
There's also the looming possibility of an annual pied-à-terre tax.
It’s a tax that’s frequently proposed and opposed, especially by brokers. The main argument by those against it is that a pied-à-terre tax would put buyers off and slow deals, which would deter developers. Some say the income from the tax is overestimated. Proponents point out any revenue from real estate is badly needed.
The current proposal taxes owners anywhere from 0.5 percent to 13.5 percent annually depending on a few variables: One- to three-family homes with a market value above $5 million would qualify, as would condos and co-ops where the assessed value exceeds $300,000.
Inevitably there will be loopholes. According to Stark the proposed legislation allows for an owner to put their apartment in the name of a family member who lives in NYC. That would exempt the property from the tax. Another workaround is for the owner to rent it out to a New York City resident. In addition, Stark says if an owner can show the property is worth less than $5 million by providing a qualifying appraisal within the last three years, the property would be exempt from the tax.
“We saw that about 60 percent of the units with that threshold were in fact worth less than $5 million,” she says.
Not all brokers think buyer behavior will be affected by the tax—if it’s indeed passed by lawmakers. Aleksandra Scepanovic, managing director at Ideal Properties Group, says right now just the promise of Broadway coming back to life and all the dining and entertainment destinations being fully reopened outweighs any uncertainty about tax debates surrounding pieds-à-terre in the city.
What do buyers want in a NYC pied-à-terre in NYC?
“Pieds-à-terre need to have everything,” Scepanovic says. That means excellent amenities, privacy, and work-from-home space. She says this still applies to international buyers. “They will not buy in NYC without an added sense of security from Covid within a larger envelope of their luxury building,” she says.
Another consideration is resale value. Closing costs are high in New York City and include state and city transfer taxes, a mansion tax determined by a sliding scale, a flip tax in some buildings as well as attorney fees. If you’re borrowing money there may be additional costs.
“Your apartment has to appreciate about 10 percent for you to cover your closing costs,” Lahav says, so you really have to make sure you're buying the right apartment.
Previous versions of this article included writing and reporting by Nikki M. Mascali.
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