The long-awaited tax on billionaires’ second homes in New York City is now official.
A joint proposal from Gov. Kathy Hochul and Mayor Zohran Mamdani to tax multimillion-dollar second homes has been incorporated into New York’s state budget, which was passed Wednesday, two months after it was initially due. That pied-à-terre tax targets homes worth over $5 million whose owners don’t live in New York City — focusing on the ultrawealthy who own crash pads or vacation homes in the city, but may not pay city or state income taxes.
It’s one avenue lawmakers are taking to plug budget shortfalls, and a victory for Mamdani’s tax-the-rich agenda; while Hochul has squashed increasing income or corporate taxes on higher earners, the new levy will target those wealthy enough to maintain a multimillion-dollar second residence in one of the most expensive cities in the world. Hochul and Mamdani estimated the tax could raise $500 million, although the total revenue could end up coming in lower.
The tax, currently set to apply through 2031 when it will be up again for legislative renewal, will increase depending on how much a property costs. Single-family homes worth between $5 million and $15 million will be subject to a 0.8% surcharge, and those between $15 million and $25 million will be subject to 1.05%. Properties worth $25 million or more will face a 1.3% levy. In its first two years, the tax will rely on Department of Finance “assessed values” to determine which homes will face a new charge, while the city and state work out a new valuation system.
“The assessed value for a $5 million property is hardly ever five million,” said Jonathan Miller, a renowned real estate appraiser. “You significantly reduce the pool, so you’ve got to lower the threshold to some arbitrary number like a million dollars.”
The tax will fall on co-ops and condos that are currently valued at $1 million or more by the DOF. The state said the lower cutoff is a result of assessed values typically being far below what they would actually sell for. The initial rates for those will be 4%, 5.25%, and 6%, depending on the condo’s market value, during those first two years of implementation. After that initial onramp period, the city will develop a new assessment system, and surcharges will be applied at those 1.3% or lower rates.
To determine who’s subject to the tax and what counts as a second home, the Department of Finance will consider if the home was occupied for the majority of a calendar year by a covered owner. Homeowners will be notified by August 30 that they’ll be expected to pay, and they will have a chance to submit proof that the unit is actually a primary residence.
The tax is estimated to fall on around 10,000 properties, one of which Mamdani targeted when he unveiled the tax last month. In the video announcement, Mamdani stood in front of a limestone tower on Central Park South, where Citadel CEO Ken Griffin bought a penthouse for $238 million in 2019.
The directness of the move ruffled Griffin, who also owns multiple apartments in a Park Avenue coop.
“Mamdani has made it very clear, New York does not welcome success,” the Citadel chief said earlier this month at the Milken conference in Los Angeles. He floated abandoning a planned New York office for Citadel, adding that he would “double down” on Miami.
Prominent business people, including investors Bill Ackman and Jason Calacanis, have derided the tax, which would likely affect dozens of billionaires, from Jeff Bezos to Michael Dell.
