Plan to Tax Ultra-Luxury Second Homes Gains Momentum in New York
New York State officials are rallying behind a proposal from Gov. Kathy Hochul to impose a new tax on high-value second homes in New York City, reviving a long-debated idea aimed at both raising revenue and addressing inequality.
The measure, expected to be part of the upcoming state budget, would apply to residential properties worth $5 million or more that are not used as primary residences. Often referred to as a pied-à-terre tax, the proposal targets wealthy individuals who own property in the city but live elsewhere.
Support for the plan has grown amid shifting political priorities. Mayor Zohran Mamdani, elected on a platform centered on affordability, has pushed for stronger measures to ease financial pressure on everyday New Yorkers. Although Gov. Hochul has rejected his call for higher income taxes on millionaires, she has signaled willingness to pursue alternative approaches to help close a projected $5.4 billion budget shortfall.
The concept itself is not new. A similar effort surfaced in 2019 after hedge fund billionaire Kenneth C. Griffin purchased a $238 million apartment overlooking Central Park. That proposal ultimately failed after intense lobbying from the real estate industry. This time, however, officials suggest the environment may be more favorable for passage.
Details of the current proposal remain limited, but the basic framework is taking shape. The tax would function as an annual surcharge layered on top of existing property taxes. It would apply broadly, not only to out-of-state owners but also to New York residents who maintain second homes in the city and to investors holding vacant units. Properties rented out full-time would be exempt.
One unresolved question is whether city residents who own multiple apartments locally would be subject to the tax. Additionally, determining which properties meet the $5 million threshold may be complicated by the city’s uneven assessment system. Single-family homes are valued based on market price, while condos and co-ops rely on income-based formulas tied to the building, a distinction that could significantly influence who is taxed.
The Hochul administration estimates the tax could generate at least $500 million annually, though past projections suggest a more modest outcome. A 2020 review of the earlier proposal by the Independent Budget Office estimated revenue closer to $232 million. Abir Mandal, a senior policy analyst with the Tax Foundation, a nonpartisan tax policy organization, is skeptical of the plan’s claims.
“Will this bring in revenue? Yes. But will it bring in as much as the governor thinks it will? Probably not. There are plenty of ways for wealthy people to avoid taxes.”
Indeed, enforcement may pose challenges. Many high-end properties are owned through limited liability companies or trusts, structures that can obscure ownership and complicate classification. The state is expected to rely on existing residency declarations, which determine where individuals pay income taxes, to distinguish primary residences from second homes.
If implemented, the surcharge would likely follow a sliding scale, increasing with property value. A luxury penthouse worth $100 million would face a substantially higher charge than a $5 million apartment.
The scope of the tax remains uncertain. Officials estimate that roughly 13,000 properties would qualify, but the number of second homes in the city has been declining. According to the New York City Housing and Vacancy Survey, units used only occasionally dropped from 75,000 in 2017 to about 59,000 in 2023. Broader trends, including high interest rates, rising home prices, stricter short-term rental rules, and fewer foreign buyers, have contributed to the decline.
Politically, the proposal offers a middle ground. It allows Gov. Hochul, who faces reelection and has resisted broader tax hikes, to generate revenue without raising income taxes. At the same time, it taps into widespread frustration over empty luxury apartments that many view as symbols of inequality.
At a recent news conference, Hochul underscored that sentiment, pointing to the skyline filled with largely unoccupied units.
“They’re part of our skyline, but those people are not part of our city.”
Mayor Mamdani echoed that framing in a post on X, writing, “We will be taxing the ultra-wealthy and global elites.”
The proposal has also received backing from City Council Speaker Julie Menin, who called it “a smart, sensible proposal,” as well as cautious support from leaders in the State Senate and Assembly, whose approval will be required for the measure to move forward.
Still, opposition from the real estate industry has been swift and forceful. The Real Estate Board of New York (REBNY) has launched a campaign urging lawmakers to reject the tax, warning of broader economic consequences. Critics argue that wealthy buyers could simply shift their investments to lower-tax states like Florida, reducing demand in New York and discouraging new construction at a time when housing supply is already constrained.
“This annual tax will weaken the city’s broader economy — all without addressing its fiscal problems in the first place,” the REBNY president, James Whelan, said in a statement. “Albany should focus on policies that encourage investment and housing production to create a more affordable city, not ones that stifle its growth.”
With a July 1 deadline looming for the city’s budget agreement, negotiations between state and city leaders will determine whether the pied-à-terre tax finally becomes a reality or joins earlier versions that failed to cross the finish line.
Moumita Basuroychowdhury is a Contributing Reporter at The National Digest. After earning an economics degree at Cornell University, she moved to NYC to pursue her MFA in creative writing. She enjoys reporting on science, business and culture news. You can reach her at moumita.b@thenationaldigest.com.
