New York state lawmakers have approved a tax on multimillion-dollar second homes in New York City. The measure, backed by Gov. Kathy Hochul and Mayor Zohran Mamdani, targets properties worth more than $5 million owned by people who do not live there full time. It passed as part of the delayed state budget on May 28. And it marks a rare point of alignment between the progressive mayor and the more moderate governor.
The so-called pied-à-terre tax is projected to generate $500 million a year. Officials say the money will help close a $5.4 billion city budget gap without a broad property-tax increase on regular homeowners. But independent analyses suggest the actual haul could fall short. Critics warn it may trigger an exodus of wealthy owners and reduce other city revenues. The debate reveals deep tensions over how New York funds its services and whether it can afford to alienate high-net-worth residents.
Hochul and Mamdani announced the plan in mid-April. “If you can afford a $5 million second home that sits empty most of the year, you can afford to contribute like every other New Yorker,” Hochul said in the joint release. (NYC Mayor’s Office) Mamdani, who campaigned on taxing the rich, framed it as fairness. “This is a tax on properties worth more than $5 million that are owned by people who do not reside in New York City, the super wealthy who can purchase properties and use them to store their wealth to benefit from New York City’s real estate market, but not have to pay back into that same city,” he told reporters. (ABC7NY)
The tax applies a surcharge scaled to value. For single-family homes it starts at 0.8% between $5 million and $15 million, rises to 1.05% up to $25 million, and reaches 1.3% above that. Condominiums and co-ops face higher initial rates on assessed value before adjustments. Owners must prove primary residency or face the fee. Notification comes by late August. The levy runs through 2031 before renewal. Roughly 10,000 properties could qualify, though early estimates cited 13,000. (Business Insider)
Examples make the target clear. Citadel CEO Ken Griffin’s $238 million Central Park South penthouse stands out. Mamdani even filmed a campaign-style video outside the building. Griffin responded sharply. “Mamdani has made it very clear, New York does not welcome success,” he said, signaling plans to shift more activity to Miami. (Business Insider) Russian auto dealer Alexander Varshavsky’s $20.5 million cash purchase also drew notice in the announcement. Other billionaires including Jeff Bezos and Michael Dell could face exposure depending on ownership structure.
Real-estate interests and business voices pushed back immediately. Bill Ackman and Jason Calacanis derided the idea on social media. They argued it would chill luxury sales and encourage owners to sell or relocate. The revenue math remains unsettled. A New York City comptroller study released in early May projected collections between $340 million and $380 million at best. Behavioral shifts could cut that further. Conversions to rentals might drain another $88 million to $133 million in related revenue. An exodus of wealthy residents could cost the city $38 million to $42 million annually in lost taxes and spending. Comptroller Brad Lander’s team cited Vancouver’s empty-homes tax, which reduced vacant units by more than 60 percent. “Behavioral responses to the tax — conversions to rental, primary-residence claims by relatives, sales, and possible legal challenges — introduce further variability that will only become observable after implementation,” the report noted. (Realtor.com)
Even the count of affected homes has shifted. Hochul’s office first referenced 13,000 units drawn from a 2023 comptroller report. Aides later called that an early figure needing refinement. Data firm Marketproof found just three residential properties citywide with assessed values of $5 million or more under current rules. The gap stems from how New York assesses luxury condos. It relies on rental comparables rather than recent sales, a method locked in by 1980s state law. That keeps assessments artificially low relative to market prices. (The New York Times)
The proposal sidestepped Mamdani’s earlier threat of a 9.5 percent property-tax hike on millions of regular homes, co-ops, and commercial buildings. That idea surfaced in February as a last resort if Albany blocked taxes on high earners. By April the mayor had dropped it in favor of this narrower levy. The budget deal also included state aid to the city. Yet the final package still leaves questions about long-term fiscal health. (The New York Times)
Supporters view the tax as pragmatic. It hits empty luxury units that contribute little to neighborhood life or the tax base beyond basic property levies. Proponents point to foreign oligarchs and global elites who park wealth in Manhattan towers that stay dark for most of the year. They argue New York’s public services, schools, transit, and policing benefit everyone. The rich should pay more when they use the city as a safe-deposit box. Recent coverage notes the tax survived negotiations despite opposition from real-estate lobbies. (CNBC)
Opponents counter that the policy misunderstands mobility. Ultrawealthy individuals already split time among New York, Florida, London, and other hubs. Additional costs could accelerate that trend. Griffin’s public pivot to Miami offers one data point. Others may follow quietly. Sales data through mid-May showed luxury transactions holding up, but analysts expect softer demand later this year as the tax takes effect. Broader economic effects could ripple through construction, brokerage, and related industries that rely on high-end activity. (Business Insider)
Implementation details will matter. The city must verify occupancy. Owners get a chance to document primary residency. Disputes seem likely. Legal challenges could test the tax’s definition of “second home” or its reliance on assessed rather than market value. Renewal in 2031 will reopen the debate. By then, revenue outcomes and behavioral data should clarify whether the measure succeeded or simply accelerated departures already underway since the pandemic.
Hochul’s shift carries political weight. She had resisted Mamdani’s calls for steeper income taxes on top earners and corporations. The pied-à-terre approach let her deliver revenue without endorsing a wider “tax the rich” agenda. For Mamdani it delivers a signature win on his core promise. He celebrated the budget passage. Yet the lower revenue forecasts and potential side effects mean the city’s structural deficit may persist. Future mayors and governors will inherit both the new tax and its consequences.
The episode exposes limits of targeting only the ultrawealthy through property. New York already imposes some of the highest combined tax burdens in the country. Wealthy residents generate significant income, sales, and estate tax revenue even if their pieds-à-terre sit vacant. Shrink that population and the losses compound. Vancouver’s experience shows vacancy can fall sharply. But reduced economic activity followed in some Canadian markets. New York’s scale and global status differ. Outcomes may vary. Still, the comptroller’s warnings deserve attention.
So the tax is law. Collection begins soon. Whether it produces the promised $500 million or something closer to $300 million will shape the next round of budget talks. In the meantime, luxury-building managers report owners asking about residency rules. Some are converting units to rentals. Others are simply staying away longer. The city will watch its high-end real-estate market closely. The rest of New York will watch whether public services improve or whether this becomes another example of symbolic policy that fails to solve deeper fiscal problems.
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