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New York Officials Propose Tax on High-Value Second Homes; Business Leaders Express Opposition

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"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." – Governor Kathy Hochul

New York City & State Propose "Pied-à-Terre" Tax on Luxury Second Homes

A proposal to impose a new tax on high-value second homes in New York City has been jointly announced by New York City Mayor Zohran Mamdani and New York State Governor Kathy Hochul. The proposed "pied-à-terre tax" has drawn praise from some progressive groups and criticism from several business leaders and real estate figures.

The Proposal

The tax would apply to residential properties valued at more than $5 million that are not the owner's primary residence. According to the offices of Mayor Mamdani and Governor Hochul, the tax is projected to generate approximately $500 million annually for New York City. Governor Hochul's office estimates the tax would apply to about 13,000 properties.

The tax is part of Governor Hochul's state budget plan. The state budget was due on April 1, 2025, but negotiations are ongoing. The New York City government faces a multi-billion dollar budget deficit. Mayor Mamdani has advocated for increased taxes on high-income individuals and corporations to address this deficit.

Details of the Tax Structure

According to reports, the tax would apply to properties owned by individuals who live outside New York City, including those living in other states, abroad, or elsewhere in New York state, as well as investment properties.

  • The tax may involve a sliding scale, with higher rates for properties valued at $15 million and $25 million.
  • For the first two years, the tax would levy a maximum rate of 6.5% on the assessed value for condominiums and cooperatives. Single-family homes would be taxed at rates of 0.8%, 1.05%, and 1.3%, depending on value.
  • The city plans to create a new assessment mechanism over the next two years to capture market value more accurately. After that, all affected properties would be taxed at rates ranging from 0.8% to 1.3%.
  • The state has not yet publicly detailed how it would determine a property’s market value, whether a home is a primary residence, or the specific amount homeowners would pay.

Major Statements and Reactions

Supportive Statements

"We are one step closer to balancing our budget by taxing the ultra-wealthy and global elites with a pied-à-terre tax." – Mayor Zohran Mamdani

  • Governor Kathy Hochul stated the tax would target high-rise developments often owned by foreign investors who spend little time in the apartments and pay relatively low taxes compared to full-time residents.
  • Emily Eisner, Acting Executive Director of the Fiscal Policy Institute, stated the tax would raise revenue from wealthy property owners who do not reside in the city and called it a step toward aligning the city's tax system with its wealth.
  • Gabriel Zucman, a professor at the Paris School of Economics, stated that research does not support the argument that such taxes cause wealthy homeowners to leave an area.
  • The Working Families Party called Governor Hochul's support "an important first step in the right direction" but pressed for further action.

Critical Statements

"The phrase 'tax the rich' is hateful and comparable to racial slurs." – Steven Roth, CEO of Vornado Realty Trust

  • Ken Griffin, CEO of Citadel, criticized a video posted by Mayor Mamdani announcing the tax, calling it "creepy and weird." He stated that Mamdani has "made it very clear, New York does not welcome success." Following the video, Griffin announced that Citadel has filed permits to expand its new headquarters in Miami by "several hundred thousand square feet," adding more jobs there over the next decade.
  • Steven Roth, CEO of Vornado Realty Trust, argued that high-income earners are "large employers and philanthropists" who pay a significant portion of New York's income taxes.
  • Jim Whelan, President of the Real Estate Board of New York, stated that the tax "will weaken the city's broader economy" and "will not raise the amount of revenue expected, but will eliminate thousands of construction jobs, lower property values, and raise costs for New Yorkers."
  • Bill Ackman, hedge fund manager, wrote that non-residents who spend money on NYC apartments help drive the city's economy and that the policies could harm the constituencies they aim to help.
  • Former New York City Mayor Eric Adams called on Mayor Mamdani to apologize, stating that the video "traded thousands of real, good-paying jobs in our city for social media likes."
  • Professor Eric Chaffee of Case Western Reserve University stated that the $500 million revenue estimate is aggressive and assumes individuals will not find ways to circumvent the tax. He also stated that while some departures may occur, the tax is unlikely to cause a significant loss of ultrawealthy residents.

Background Context

  • Mayor Mamdani's announcement video, posted on April 15, 2025, was filmed outside Ken Griffin's penthouse at 220 Central Park South, which he purchased for $238 million in 2019.
  • Both chambers of the New York State Legislature had previously agreed on increasing taxes on the wealthiest New Yorkers and corporations. Governor Hochul had initially opposed most of Mayor Mamdani's proposed taxes on wealthy New Yorkers.
  • Other jurisdictions, including Massachusetts, Washington State, Rhode Island, and California, have proposed or passed similar taxes on high incomes or wealth.
  • Data from commercial real estate firm JLL indicates demand for leased office space in Manhattan has increased and vacancies have decreased since Mayor Mamdani took office, continuing a pre-existing trend.