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• New York State has approved a new surcharge on high-value second homes in New York City as part of the 2026 state budget signed by Governor Kathy Hochul.
• The “pied-à-terre” tax is expected to generate nearly USD 500 million annually for New York City.
• The surcharge will apply to luxury secondary residences and apartments that are not occupied as primary homes by owners or immediate family members.
• The proposal received support from New York City Mayor Zohran Mamdani but faced opposition from several high-profile investors and billionaires.
• Authorities stated that the measure is aimed at strengthening city finances and addressing budgetary pressures.
Kathy Hochul has signed New York State’s latest budget legislation, introducing a progressive surcharge on luxury second homes in New York City in a move expected to generate approximately USD 500 million annually for the city administration. Advertisement
The measure, commonly referred to as a “pied-à-terre” tax, targets high-value secondary residences owned by individuals who do not use the properties as their primary homes. The term “pied-à-terre”, derived from French, generally refers to a secondary residence maintained for temporary or occasional use.
The proposal received backing from Zohran Mamdani, who has advocated higher taxation on luxury assets as part of broader efforts to address New York City’s budgetary requirements and expand revenue generation.
According to the approved budget framework, the surcharge structure will vary based on assessed market values of residential properties. Authorities stated that existing property assessments in New York City often reflect only a portion of actual market sale values, prompting a directive for the city’s tax commission to reassess real property valuations.
Under the new framework applicable during fiscal years 2026 to 2028, houses with market values between USD 5 million and USD 15 million will attract a surcharge of 0.8%, while homes valued between USD 15 million and USD 25 million will face a 1.05% levy. Properties exceeding USD 25 million in value will be subject to a 1.3% surcharge.
Separate surcharge rates will apply to apartments. Units valued between USD 1 million and USD 3 million will attract a 4% surcharge, while apartments valued between USD 3 million and USD 5 million will face a 5.25% levy. Apartments with market values exceeding USD 5 million will be taxed at 6.5% during the initial implementation phase.
The budget document stated that apartment surcharge rates are expected to align with house tax rates from fiscal year 2028 onwards.
Properties occupied by owners, immediate family members or tenants will continue to qualify as primary residences and therefore remain exempt from the surcharge. The exemption framework covers spouses, parents, children, siblings, grandparents and grandchildren residing in the property.
The proposal drew criticism from several high-profile investors including Ken Griffin, Bill Ackman and Kevin O'Leary, who opposed the additional taxation on luxury residential assets.
Mamdani had earlier publicly referred to Griffin’s Manhattan penthouse overlooking Central Park as an example of the type of ultra-luxury secondary property that could fall within the scope of the new surcharge structure.
The measure represents a significant policy shift for the state administration, as Hochul had previously resisted broader tax increases linked to wealth taxation proposals advanced by city leadership.
Urban policy observers note that the introduction of targeted taxation on luxury second homes reflects growing efforts by global cities to expand municipal revenues through premium residential real estate, particularly amid rising fiscal pressures and widening housing affordability concerns.
Source - Reuters
5th Jun, 2025
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