City and state officials in New York are supporting a plan to tax luxury second homes valued at $5 million or more.
Gov. Kathy Hochul proposed a so-called pied-à-terre tax to help New York City address its $5.4 billion budget deficit, offering an alternative to Mayor Zohran Mamdani’s call for a higher income tax rate on millionaires and corporations to help close the gap.
In 2019, New York officials considered a tax on luxury second homes, but industry groups, including the Real Estate Board of New York (REBNY), lobbied against it, and the measure was dropped. The board said it would hurt the luxury real estate market, and the ripple effects would lead to cuts in construction jobs and a drop in home values.
The new planned tax rate is not yet available, but the proposal is expected to be included in the New York state budget, which was due on April 1 but has been delayed. Here’s what we know for now.
How Does the Pied-à-Terre Tax Work?
The tax aims to collect additional revenue from those who own New York apartments, townhouses, condos, or co-ops as an investment or part-time residence.
It would apply to people who reside outside the city, whether in upstate New York, another state, or abroad. The tax would be added to the city’s annual property taxes. It’s unclear if city residents who own a second property in the city as an investment would also be included.
Hochul has estimated that 13,000 properties would be subject to the tax, which she expects to raise $500 million.
The 2019 proposal was for a sliding scale based on market value. Properties worth $5 million or more would be subject to a 0.5 percent tax, rising to 4 percent on homes worth $25 million or more.
For co-ops and condos, the assessed value is often much lower than the market value, as state law requires the value to be assessed as if they were rental apartment buildings. So the assessment is based on the income of similar apartment buildings, rather than the market value.
Only properties with no permanent residents would be subject to the tax. Properties occupied by the owner’s family, or rented out to a tenant who makes it their primary residence, would be exempted.
The measure faces little opposition in the the state Legislature, which is controlled by Democrats.
Nassau County Executive Bruce Blakeman, a Republican candidate in New York’s upcoming November gubernatorial election, called the tax “a war on homeownership and the American Dream.”
On April 15, Mayor Mamdani explained the pied-a-terre tax in a video, “Happy Tax Day, New York. We’re taxing the rich,” which has been viewed more than 51 million times on X alone. In the video he stands on Central Park South, outside a luxury penthouse owned by Citadel CEO Ken Griffin, who purchased it for $238 million.
Responding to Mamdani’s video, billionaire investor Bill Ackman said residents like Griffin benefit the city in multiple ways.
“Importantly, non-resident owners of NYC apartments who leave their apartments vacant for much of the year are not a burden to NYC schools, services, or other resources while they drive growth in retail sales, restaurants, theater, and other important drivers of our economy. They also often support NYC non-profits with donations,” he said.
President Donald Trump, who officially left New York for Mar-a-Lago in 2019, may himself be subject to the tax, depending on how property value is assessed.
A day after the announcement, he reacted on Truth Social.
“Sadly, Mayor Mamdani is DESTROYING New York! It has no chance! The United States of America should not contribute to its failure,” he wrote.
“It will only get WORSE. The TAX, TAX, TAX Policies are SO WRONG. People are fleeing. They must change their ways, AND FAST. History has proven, THIS ‘STUFF’ JUST DOESN’T WORK.”
Impact on Luxury Real Estate
Reactions from think tanks and industry groups are mixed; some say the tax will harm the real estate market, while others suggest it may ease the housing market by discouraging vacancy. REBNY responded that such a tax would hurt property values, as properties valued at more than $5 million would become less desirable.
The board also said the tax would hurt the construction industry.
“It will not raise the amount of revenue expected, but will eliminate thousands of construction jobs, lower property values, and raise costs for New Yorkers,” REBNY President James Whelan posted on X.
An Independent Budget Office review of the 2019 proposal estimated that it could generate $232 million, compared with other estimates of $450 million to $650 million.
The Partnership for New York City nonprofit suggested the tax could undermine the revenue the city already collects from buyers of properties worth $1 million or more. Buyers of such properties must pay a mansion tax of 1 percent to 3.9 percent of the market value.
Moses Gates, vice president for housing and neighborhood planning at the Regional Plan Association, said in a statement that the tax could help the city raise money and would also discourage absentee ownership, easing the housing shortage. Even so, he cautioned that New York needs comprehensive property tax reform and that adding on this new tax is not a substitute.
Overall, the real estate market likely won’t see a significant shift, according to an analysis by the Fiscal Policy Institute.
The tax can be expected to lower the price of top-end real estate, encourage more efficient use of housing resources, and tilt the market slightly more toward full-time rather than part-time residents, according to the institute’s analysis.
Enforcement could also be a challenge. Verifying whether the owner’s residency is primary or secondary requires documentation (such as days occupied and voting registration) and is tricky to enforce, especially when the legal owner is an LLC, which is the case for more than a third of Manhattan properties.
