They are using space that could otherwise be occupied by others. Doing so would reduce pressure in the housing market and increase the productive density of the city. Part of the point of property taxes is to encourage productive use of space - if the value you're getting isn't enough to cover the property taxes, you're incentivized to sell to someone who will use the space more productively.
Also note that of course the owners are deriving a great deal of benefit from city services, both directly in that they are counting on the NYPD and FDNY to keep their property safe, and indirectly insofar as the whole reason these apartments are valuable in the first place is that NYC is a world-class city where many people desire to live.
> They are using space that could otherwise be occupied by others.
I'm building a tower. The sweet tax situation means I can sell some extra units as tax shelters, so I slap on a couple more floors. Is that then space that would've been occupied by others?
This misses the mark completely on what the NYC building market is like.
For better or worse, building rights are extremely limited. Developers do everything they can to get more building rights. I can't think of any recent building that went up and was limited by demand for space and not by what the building code would allow them to build.
You can assume that given a different set of incentives, the buildings going up would have a different mix of units.
Well here's the thing: if not for those extra tax shelter floors, he would not have built them at all, because no one else was willing to pay for a use of that space. Therefore, had he not built the extra floors on his theoretical tower, the space would have gone completely unused (and likely could not be used in the future).
Meanwhile, since there are people willing to pay to simply own portions of that floor, he builds it. In the future, if there is a high enough demand for that particular space, the owners of those portions of the floors could sell the floors. For those owners, they have effectively used the space on the extra floors as a property investment. However, the floors are still available in use when the time is necessary.
Comparatively, if those floors weren't built, no one would have made use of that space. If the building wasn't designed to accommodate future expansion vertically (is that even possible at that scale), then that space would have gone unused even when a demand for that space finally exists.
Thus, no one is being deprived of space because those extra floors were built. If at all, that space will be more likely to be utilized in the future, since it will have been built and ready for sale.
There is no such thing as "no one else was willing to pay for a use of that space". Maybe no one else would pay the exorbitant price they are sold for and, most likely, no one would pay that price if they had to pay reasonable property taxes on that unit. They are doing no favors to the city. Since property taxes are so low, it often pays just to withdraw units from the market to inflate prices further by creating an artificial scarcity.
Seems equally fair for a city to require the standard tax rate regardless of whether the owner lives there. What interest does a city have in allowing residential housing to be bought up by absentee owners paying lower taxes vs. locals who (a) need housing in order to contribute to the community and (b) will pay the standard tax rate?
Infrastructure like water, roads, and subway systems is only loosly tied to useage. If NY needs to build an extra 500 feet of subway because of an empty building in the middle of the city that's a direct cost.
Not all spending is directly related to infrastructure costs. AKA school teacher salaries. Also, land is varying pricy in cities with a small empty lot could easily be worth 100 million. Or as they say, location, location, location.
Taxing property values much like sales taxes is already regressive as % of income spent on housing decreases as income increases. EX: A firefighter might spend 45% of their income on housing costs where many billionaires spend less than 1% of their income on housing costs.
PS: Though this does bring up the question of what bill Gates’s hypothetical 60 billion dollar house might look like. 15 one world trade centers lined up in a row? How about 1/2 of the ISS?
They're using the land/housing that could otherwise be used by someone who actually does live there. Just because you're choosing not to spend your time there shouldn't matter.
If that's true, then why should they pay higher taxes? If they're not actually living in the community, they're not using services. Seems fair.