Asbury Park Needs A “Pied-a-Terre” Tax Right Now

Pied-a-Terre: noun  (pē-ā-də-ˈter).  A house, condominium or apartment  used seasonally or on weekends, rather than as a primary residence or domiciliary

To refute any argument that I am proposing something unheard of here, please know that New York City just passed this exact tax which took effect in July.

Here is what happened in NYC:   They have a City personal income tax.  Wealthy people were claiming a house in Connecticut or NJ as their primary residence. Their NYC pad, no matter how large or expensive, was listed as a second home.

This allowed them to avoid paying that NYC income tax, and the City was losing $Billions.  Also, because second homes reduce housing supply, all real estate in NYC became more expensive, inflating housing costs for the poor and middle class.

To combat that upper crust trickery, NYC passed the Pied-a-Terre tax.  It taxes peoples’ second homes annually. It works like this (if Asbury passes this we don’t have to use these numbers; we can supply our own):

If your NYC property is NOT your domicile, rather a second home, the following yearly taxes apply:

·  Condominiums and Co-ops (Valued over $1 million):

·       $1 million to $3 million: 4.0% annual tax

·       $3 million to $5 million: 5.25% annual tax

·       Over $5 million: 6.5% annual tax

·  Houses (1, 2, or 3 families valued at $5 million or more):

·       $5 million to $15 million: 0.8% annual tax

·       $15 million to $25 million: 1.05% annual tax

·       Over $25 million: 1.3% annual tax

Here are the 3 ways to get out of paying the Pied-a-Terre tax:

1.     Proof that it is your legal primary residence

2.     Proof that it is the legal primary residence of an immediate family member

3.     Proof that the unit is leased for at least 12 months to someone who can show it is their primary residence

NYC projects it will collect $500 million yearly from Pied-a-Terre taxes.

This tax passes the constitutional test of being “rationally related to a legitimate government interest.”   The government interest was the loss of City income tax revenue and the unaffordability of real estate due to second homes limiting supply.  The Pied-a-Terre tax addresses both.

Now let’s apply this to Asbury Park.   We start by looking at the problems these expensive second homes are causing:

1.     Gentrification.  In the short time Asbury has built more than 1,000 condominium units, population has shrunk from over 17,000 to under 15,000 people.   Rising property taxes, rents, and real estate speculation are forcing long-term owners, low-income tenants and fixed-income seniors out of their homes, some risking homelessness.

2.     School taxes: Since the State passed the new school funding formula infamously known as “S2,”  property taxes have doubled or tripled for nearly everyone in Asbury.  Thanks to PILOT programs, the new condos pay $0.00 to the schools.  People are fleeing.  Asbury can no longer limit its school funding choices to just budget cuts and tax hikes.  Instead, alternative revenue streams like this must be explored to fund schools.

3.     Rent prices.  Just 15 years ago Asbury Park was still a refuge for the poor.  The focus on second home condo construction has caused rents to rise considerably.  Asbury Park’s median rent is now 41% higher than the median rent in New Jersey (the nation’s second wealthiest state).  Asbury Park rents now equal Monmouth County (the 49^th wealthiest of 3,000 US counties).  The middle class is struggling to keep a foothold here; poor people are being replaced by the new gentry.

4.     Winter economy.  Tourism plummets after Labor Day and does not return until school recess in June.  The shrinking population makes operating a business in the Winter unsustainable. This affects businesses that close, but also Asbury’s poor people have no cars, so they lose access to goods and services.

5.     Cultural Erasure: Historic neighborhood identities, localized traditions, family-owned small businesses and community networks disappear as affluent newcomers take over.

6.     Increased Financial and Health Stress: Families who manage to stay face extreme cost-of-living pressures, which contributes to chronic anxiety, depression, and physical health deterioration.

7.     Widening Inequality:  Listed without need for further explanation.

A Pied-a-Terre tax in Asbury Park would be constitutional because it is rationally related to depressurizing all the above problems. 

Most importantly, all this revenue from wealthy out of towners can pay down the school levy.  That means everyone’s taxes go down, everyone’s rents go down, gentrification stalls, stress is relieved and old Asbury is saved.

Developers like Asbury Partners, iStar (and Madison Marquette because they are partners) will still be able to sell their condos. No one is stopping them.

They will however complain that this tax reduces their pool of potential buyers, because people who only want to summer here will lose interest.  Less demand means iStar may have to sell condos at lower prices.  They will complain bitterly!

Please give me a moment to gather myself together due to the grief I feel right now thinking that these poor billionaires may have to work harder to sell condos for less money.  Good grief.  These people were given endless perks from Asbury for the past quarter century to make tens of millions of dollars, and they still let Convention Hall and Casino rot.  No sympathy.  They owe us.

It’s time for Asbury’s government to put the people’s interest, the school children’s interest, ahead of billionaire developers.  It’s an emergency.  Just make sure a Mayor and Council is elected that isn’t too chicken to fight for the people.  Ask every candidate where he or she stands on this.

I’m aware the State would have to authorize a Pied-a-Terre tax (just as NY State did).  Hey Senator Gopal and Assemblywomen Donlon and Peterpaul – I triple dog dare you to give a reason why you shouldn’t do this. No local person or business will be harmed. Just helped. The people are more important than iStar.  Asbury Park votes for you three at 85%.   Don’t be a leader on this one – be a public servant and get this done.

Some may ask why a good capitalist like me is advocating for a new tax.  Isn’t hindering demand just meddling in the free market? 

Those are legitimate questions.  Here is my legitimate reply:

Asbury Park took itself out of the market economy in 2002 when they signed a hybrid public/private contract giving ONE company (Asbury Partners) the exclusive right to all the real estate in the massive Waterfront Redevelopment Area for 30 years. 

All that SUPPLY was REMOVED from market competition, including ownership and the right of eminent domain.  PILOTs further disrupted competition.

The political philosophers out there (I include myself in that group) may be wondering this: If Asbury’s waterfront is outside market capitalism, with which economic system does it align? 

The answer is Asbury is a microcosm of either crony capitalism (see Columbia, Venezuela) or oligarchy (see Russia, China, Iran). Those systems are birthed differently, but each ends up with power concentrated in the hands of a few without competition (just like iStar in Asbury).

Because Asbury removed market forces from its local real estate economy by contract, usual capitalistic fixes like expanding ownership and competition are not available. System generated Oligarchs can only be crushed with taxes until they fall (isn’t that how all planned economies eventually fall? Let’s get started).  

Lastly, are you readers as sick as me of Asbury Park Mayors, Council members and candidates saying, “There is nothing we can do because of contracts signed by past city councils.”

Applesauce. Don’t ever say that again.  Justice Lee Solomon told us how to take the Casino back and make a profit, and the City refused to do it.   Here is a chance for the City to do something that truly helps people on affordability, the hottest political issue in America.  Will they refuse again?  Why? To do what plan instead?

Make every candidate, incumbent or challenger, answer this. Also ask those seated but not running this year.