Long Island business groups push for update to state mansion tax on million-dollar home sales

Several Long Island organizations are pushing lawmakers to rethink the mansion tax, saying the state law is an "increasingly outdated barrier to homeownership" for Long Islanders.

The groups collectively sent the letter Thursday morning to Long Island state legislators with proposals that include increasing the tax threshold.

The letter was signed by heads of the Long Island Builders Institute, Association for a Better Long Island, Long Island Association, Long Island Contractors Association and HIA-LI.

The New York State law affects buyers paying $1 million or more for their home — they are responsible for a tax of 1% on the sale price at closing. That means someone buying a home for $1 million is responsible for paying an additional tax of $10,000, on top of closing costs.

The mansion tax was introduced in 1989 by then-Gov. Mario M. Cuomo. At the time, the goal was to raise money to balance the state budget by having homeowners pay a tax if the closing price met a certain threshold.

A bill that would increase the threshold for the mansion tax was reintroduced in Albany this year, but stalled in committees in both the State Senate and Assembly. Introduced by Assemb. Nader Sayegh (D-Yonkers), co-sponsors of the Assembly version include Assemb. Steve Stern (D-Dix Hills). Stern could not be immediately reached for comment.

Local real estate experts have said the million-dollar threshold should be increased to account for inflation. Mike Florio, CEO of the Long Island Builders Institute in Melville, said he hopes the threshold can be increased to reflect current housing values, perhaps to $2 million.

Newsday reported that in February 1989 the median sale price for a single-family home was $188,000 in Nassau County and $152,000 in Suffolk County. Last month, the median price was $880,000 in Nassau and $750,000 in Suffolk — an all-time high for the latter county — according to data from OneKey MLS.

Florio said post-pandemic inflation has created the need for the change.

"For a million dollars, you're not getting a mansion," Florio said during a phone interview. "The way this was done back in 1989, it focused on ultra-luxury homes, which was a million-dollar home at the time. Right now, a million dollars is going to get you a nice, solid middle-class home here, depending what community you're in, on Long Island."

About

1 in 4 homes

that sold on LI so far this year closed for 

$1 million or more

Out of more than 10,000 Long Island home sales reported by OneKey MLS this year through the end of July, nearly 2,500 closed for $1 million or more. That means about 1 in 4 home sales on Long Island have been subject to the mansion tax.

The communities with the most home sales totaling $1 million or more this year in Suffolk were Dix Hills and Huntington, according to OneKey MLS data. For Nassau, those areas were Great Neck (which includes villages and unincorporated sections on the Great Neck peninsula) and Garden City.

More than 650 homes on Long Island closed for $2 million or more in the first half of the year, sales data shows.

In addition to increasing the threshold, another solution offered in the letter is for lawmakers to take a "regional approach" to altering the tax, Florio said, considering each area's cost of living. Indexing the threshold to inflation would also ensure that "New Yorkers do not find themselves in this same situation again as home values increase over time," the letter states.

Kyle Strober, executive director of Association for a Better Long Island, provided a statement to Newsday that reads in part: "It's long past time to modernize the law and protect families already struggling to stay on Long Island."

Overall, the goal of the letter is to raise awareness of the mansion tax, as Florio feels many Long Islanders are still unfamiliar with it.

"We're not saying get rid of the tax," he said. "The tax has been around and has served a purpose, but it's dated at this point. It's never been indexed to inflation; home prices have soared in the post-pandemic era, and this is just another impediment to achieving the American dream of owning your home."