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New York Governor and NYC Mayor Propose Tax on High-Value Non-Primary Residences

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Proposed "Pied-à-Terre Tax" Targets High-Value NYC Second Homes

New York Governor Kathy Hochul and New York City Mayor Zohran Mamdani have jointly proposed a new annual tax on high-value properties in the city that are not primary residences. The proposal, often called a "pied-à-terre tax," is estimated to affect approximately 13,000 properties valued over $5 million and could generate up to $500 million in annual revenue for the city. The plan is part of ongoing state budget negotiations and has drawn a range of reactions from policy experts, business leaders, and real estate representatives.

Proposal Details

The proposed tax would apply an annual surcharge to residential properties in New York City valued at more than $5 million that are not the owner's primary residence. This includes homes owned by individuals living abroad, in other states, or elsewhere in New York, as well as investment properties.

  • Scope: The tax is estimated to apply to roughly 13,000 properties.
  • Structure: The proposal could involve a sliding scale, with higher tax rates for homes valued at $15 million and $25 million.
  • Revenue: The offices of Governor Hochul and Mayor Mamdani estimate the tax would generate approximately $500 million per year for New York City.
  • Status: The tax has been proposed as part of Governor Hochul's state budget plan. The state budget was due on April 1 but has not yet been passed as negotiations continue.

Context and Background

The proposal emerges as New York City faces a multi-billion dollar budget deficit. Mayor Mamdani has advocated for increased taxes on wealthy individuals and corporations to address the shortfall. Both chambers of the New York State Legislature had previously signaled agreement on raising taxes on high-income residents and corporations.

Governor Hochul had initially opposed most of Mayor Mamdani's proposed tax increases on wealthy New Yorkers. Her announcement of support for the pied-à-terre tax represents a shift in her position.

Statements from Officials

Governor Kathy Hochul stated, "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." She added that city residents "should not be left carrying the burden alone." Her office noted the tax would target properties, including high-rise developments, often owned by foreign investors who spend little time in them and currently pay relatively low taxes compared to full-time residents.

Mayor Zohran Mamdani thanked Governor Hochul for her support, stating the move brings the city "one step closer to balancing our budget by taxing the ultra-wealthy and global elites." In a video announcement, the mayor cited specific properties, including a $238 million penthouse purchased in 2019 by Citadel CEO Ken Griffin and a $20.5 million apartment purchased by Russian auto dealer Alexander Varshavsky, as examples of the types of holdings the tax would affect.

Reactions and Analysis

The proposal has elicited a range of perspectives from policy analysts, business figures, and industry representatives.

Supportive Views

  • Emily Eisner, Acting Executive Director of the nonpartisan 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 at a forum 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" while pressing for more action.

Critical Views

  • Jim Whelan, President of the Real Estate Board of New York, stated 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."
  • Nicole Gelinas, a Senior Fellow at the Manhattan Institute, described the proposal as a "gimmicky" idea and not a full tax reform, suggesting broader property tax reform would be preferable.
  • Bess Freedman, CEO of Brown Harris Stevens, stated in a memo that the tax's impact could extend beyond ultra-wealthy homeowners and affect the broader property market.
  • CNBC anchor Sara Eisen responded to Mayor Mamdani's video on social media, writing that policies seen as targeting business leaders could be "risky" for the city, noting that individuals like Ken Griffin "employ thousands of people in NYC" and invest billions.
  • Several business figures have criticized the proposal on social media. Hedge fund manager Bill Ackman stated such policies could harm the constituencies they aim to help. Others, including entrepreneur Jason Calacanis and former President Donald Trump, have made critical comments about the plan's potential economic impact.

Additional Analysis

  • Eric Chaffee, a professor of tax and business law at Case Western Reserve University, told Business Insider 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 the ultra-wealthy to leave the city in significant numbers.
  • The state has not publicly detailed how it would determine a property's value, whether a home is a primary residence, or the specific amount homeowners would pay. Some property owners may be difficult to identify as they purchased homes through trusts or limited liability companies.