Property Grunt

Wednesday, July 15, 2009

No tax for you

If it could be only be this easy.

Mondayis it was reported that the State Department took a page out of Gerald Ford's book and told the city to drop dead when it comes to the collection of property taxes from foreign governments.


Bloomberg of coursed was pissed. Here are some key takeaways.

Bloomberg Slams Clinton: She Stabbed NYC In Back

The mayor was especially upset because the Hungarian mission had already written a check for $32 million when the State Department told them to cancel it.

The mayor also complained that the State Department owes the city $66 million for providing police security for United Nations missions.

It feels like old times when New York got squat when it came to anti-terrorism funds.

What's more, the mayor predicted that -- freed of paying property taxes -- some governments would see it as a business opportunity to buy up properties and make money renting them out.

"It's just patently unfair to New Yorkers and Americans and it contravenes established policy for 130-odd years and it just doesn't make sense," Bloomberg said.

This is exactly what I was thinking when I read what the State Department did. An industry around foreign owned properties has literally sprung up from this decision. Besides countries taking advantage of the situation to invest in New York real estate, I can perceive real estate developers and landlords networking with anyone who can't speak English properly.

A real estate developer could enter into a partnership with a foreign government so that the foreign government could own the property on paper while the developer could run it. A broker could sell a truckload of condos to a foreign government which could rent it out. There are a variety of complicated ways to do this and would cost a lot of money but in the end it would be quite profitable because real estate taxes would not have to be paid. The irony is that this could revitalize certain segments of the New York City real estate industry.

There are a variety of hot spots where rich people reside and America is often the destination for the flight of quality. For instance, if the s**t hits the fan in China, a lot of rich Chinese people are going to want to park their money somewhere safe. What is more safer than the USA?

Real estate taxes are a huge barrier to entry in New York City. Mention Bloomberg to any landlord and they will start frothing in the mouth in how much they have to pay the city. Any property that is free of real estate taxes is a guaranteed annuity.