Hochul unveils new pied-à-terre tax on NYC luxury second homes
- Owners of properties worth more than $5 million would face an annual surcharge
- The governor said she expected the tax to generate at least $500 million a year
Governor Hochul's proposed surcharge, which is aimed at non-residents, would help Mayor Zohran Mamdani to close NYC’s budget gap.
Susan Watts/Office of Governor Kathy Hochul
Governor Kathy Hochul’s proposal for a new pied-à-terre tax on luxury second homes in New York City worth more than $5 million is raising concerns among real estate professionals that it could have a chilling impact on property values.
The surcharge, which is aimed at non-residents, is intended to help Mayor Zohran Mamdani to close NYC’s budget gap. Hochul said she expected it to generate at least $500 million a year in recurring revenue. The tax will be included as part of the state budget, which is past due its April 1st deadline. Details on the amount of the surcharge have not yet been released.
How many pieds-à-terre are in NYC?
During a press conference yesterday, the governor estimated that there are about 13,000 pieds-à-terre in the city.
That number may be smaller: A previous Brick Underground interview with Martha Stark, a clinical professor at the Robert F. Wagner Graduate School of Public Service at NYU and a former New York City finance commissioner who has examined the city’s data on second homes, said a 2023 tally found 10,000 Manhattan pied-à-terre properties. Most of the city’s second-home properties are in the borough.
Impact beyond owners
James Whelan, president of the Real Estate Board of New York, a trade association for the real estate industry, slammed the proposal.
“This annual tax will weaken the city’s broader economy—all without addressing its fiscal problems in the first place. Its impact will reach far beyond a small group of owners. 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,” Whelan said in a statement.
Paying their fair share
The governor framed the surcharge as a way for wealthy second-home owners to pay their fair share; only residents pay New York State income tax, which supports infrastructure and essential services.
“[T]he people who call it home should not be left carrying the burden alone,” Hochul said in a statement. “… 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.”
However, second-home owners pay property taxes. As Jonathan Miller, president and CEO of appraisal firm Miller Samuel, pointed out in his newsletter, just over 50 percent of NYC revenue comes from real estate-related activities. He pointed to the NYC Independent Budget Office, which said that real property tax is NYC’s largest source of tax revenue, comprising 44 percent of the city’s tax revenue collections in fiscal year 2023.
Miller also noted that $500 million a year, which the new tax is expected to raise, is about 10 percent of the city’s budget gap.
He said the tax would cause a reset in prices for properties just over the $5 million threshold.
“The real estate industry warns of broader harm, but the more plausible impact is a slow-burning repricing above $5 million over roughly 18 months, with the steepest value hit just over the threshold as the recurring tax is gradually baked into market values. It will be noticeable,” he wrote.
Buyers are worried
Scott Harris, a broker and founder of Magnetic Real Estate, said some buyers are already texting him with their unease about the proposed tax.
“We’ve had plenty of uncertainty over the past few years, notwithstanding a City Council that already has no shortage of value-destructive ideas,” Harris said.
He compared the pied-à-terre tax to the tiers added to the mansion tax, which hurt pricing when they were introduced.
“Just like the revised mansion tax made a big dent in property values from 2019 into 2020, this tax has the potential to reset values in a market that is uneven at best. It’s unfortunate. Just as we seem to be seeing a foundation under a soft market, this absolutely threatens its progress,” Harris said.
A change in the governor's mindset
Briggs Elwell, co-founder and CEO of RLTYco, which works with a broad number of NYC real estate agents, said the governor’s move represents a departure from her previous stance. For months, Hochul resisted Mayor Mamdani’s calls to raise taxes on the wealthy.
“This is a significant mindset shift. Agents are concerned with what could happen next,” such as adding a lower price tranche to the tax, Elwell said.
He noted that the NYC luxury market is “propped up by international and second-home buyers.”
If there is an increase in taxation and buyers need to pay more for a property they don’t live in full time, they may be inclined to buy something smaller that is not subject to the tax or they may buy outside the city, Elwell said.
Many international buyers have long considered NYC real estate as a safe place to park their cash. Hochul noted in her press conference that she is taking aim at an extremely wealthy subset that includes "Russian oligarchs buying up properties [and] driving up the property values."
Not all ‘doom and gloom’
Spencer Levine, president of RAL, a development company, said the proposal is potentially beneficial and should not be interpreted as complete “doom and gloom.”
Prioritizing full-time residency can have long-term benefits for the stability of New York.
“The proposal appears to prioritize New Yorkers looking to actually live in New York, serving as a direct response to the threat of out-of-state migration,” he said.
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