New York state lawmakers pass Mamdani, Hochul-backed plan to tax second homes in NYC

New York state lawmakers passed a revenue package for the state that will include a new tax on expensive second homes, known as a pied-à-terre tax that will take effect on July 1 this year. 

The so-called pied-à-terre tax, as well as the other portions of the budget, were signed weeks late by New York state lawmakers in Albany. The tax was crafted in an effort to generate around $500 million in tax revenue to help close a budget gap in New York City and fund Mamdani's vast network of social programs. The plan was backed and proposed at Mamdani's direction by New York Governor Kathy Hochul. 

Hochul's office has said that the tax will impact about 10,000 single-family homes as well as condos in the Big Apple. The passage comes as socialist New York City Mayor Zohran Mamdani has pressured Hochul into bailing out the city with more state-collected tax funds to close the budget gap nearly $10 billion budget gap going into fiscal year 2027.

In May, Hochul said, "To help out New York City, we're finalizing the details of a pied-à-terre tax to help close the city's budget cap without eroding its tax base or burdening hard-working New Yorkers. And I'll have more to say on that soon, but I want to be very clear, my commitment to New York City has been and always will be ironclad. This budget already includes $28 billion in total aid for the city."

The enacted state budget does not, however, include any of the personal income tax or corporate tax increases that Mamdani campaigned on and promised to bring about, per the New York Focus. Hochul has declined to endorse increases of that nature due to her concerns that corporations and high-net worth individuals could leave New York and bring their tax dollars to another state.

The new second-home tax will target non-primary residences that have a sale value of $5 million or more. Those homes that are between $5 million and $15 million will be taxed a 0.8 surcharge. That rate will increase to 1.3 percent for homes that are above $25 million.

The valuation of homes that are also subject to the tax will take place in two phases, according to Masion Global. Comparable sales values of homes will be the standard long-term, but there is no such system right now in place. Because of this, until July 1, 2028, New York will use the state's current "market value" system from the New York Department of Finance which is used for property tax evaluations. 

In addition to the tax and funding from New York state to the Big Apple, Albany has given permission for the Big Apple to delay making pension fund payments to employees over the next five years. The delay will “save” the city around $900 million next year, but cost more in the long run.