Hochul, Mamdani float tax on NYC Pied-à-Terres over $5 million

The Governor of New York. Kathy Hochul said Tuesday she plans to propose a new tax on New York City second homes worth $5 million or more, reviving a long-discussed idea as pressure mounts to boost the incomes of the city’s wealthiest residents.

“As governor, I understand the importance of stabilizing the city’s finances without sacrificing the essential services New Yorkers rely on,” Governor Hochul shared via a statement. “If you can afford a $5 million second home that sits empty most of the year, you can afford to contribute like any other New Yorker.” Her intention was first reported by the New York Times.

It’s a remarkable shift for Hochul. Just weeks after resisting calls to raise taxes on top earners and corporations, she now appears to be joining New York’s mayor Zohran Mamdani on a narrower idea: targeting ultra-luxury pied-à-terres owned by wealthy part-time residents.

The move comes after Mamdani proposed a broad 9.5% property tax increase to help close the city’s inherited $5.4 billion budget gap through next budget year if the governor does not approve new taxes on the city’s wealthiest residents and businesses — a core campaign promise that required Albany’s support.

“[It targets] the super-rich, who can buy properties and use them to store their wealth, to take advantage of the New York City real estate market, but not have to pay back to that same city that generates so much of that wealth the way it should,” the mayor said at an event Wednesday morning.

The emerging deal finds itself at the center of the national discussion about how to tax second homes more aggressively, and the lingering fear that higher taxes will drive wealthy residents — and their incomes — out of New York.

What do the two represent?

A statement from the mayor’s office says the proposal would impose an annual surcharge on one- to three-family homes, condos and co-ops valued at more than $5 million when the owner’s primary residence is outside New York City.

That would represent a highly targeted portion of the second-home market and is expected to generate $500 million in annual revenue, the mayor’s office said.

On Wednesday, Mamdani pointed it out directly Ken Giffin‘s $238 million Central Park South penthouse as a prime example of who this tax would target.

“The super-rich, who can buy properties and use them to store their wealth, to take advantage of the New York City real estate market, but not have to pay back to that same city that generates so much of that wealth the way it should,” Mamdani said, arguing that the tax would require them to contribute more to the city.

The mayor’s office says 93% of New Yorkers support a pied-à-terre tax. But similar attempts have failed before. The most recent push came in 2019, largely in response to Griffin’s purchase of the Park Avenue penthouse, which at the time was the most expensive home ever sold in the United States.

That proposal died in Albany after an intense lobbying campaign. Another attempt, in 2014, also failed.

But this time, the idea enters a broader national conversation about whether second-home owners should shoulder a larger share of property taxes.

Last year, Montana overhauled its property tax system to lower tax rates on primary homes and offset some of the lost revenue by raising taxes on second homes. Californians alone owned more than 5% of Montana’s taxable real estate market, but paid only 3.54% of property tax revenue.

Last month the governor of Florida said. Ron DeSantis also suggested that second-home owners could help offset the tax credit for homesteads in his state.

“A rich man from Brazil buys a mansion in Miami, it could still be taxed,” DeSantis said. Hang out with Sean Hannity.

New York’s pied-à-terre market

Part of what makes these types of proposals politically attractive is the severity of the housing shortage. The US currently has a housing shortage of 4.03 million, according to the latest analysis of Realtor.com®. In New York City alone, the Regional Plan Association By 2024, it is estimated that approximately 540,000 additional units will be needed.

That background helps explain why occasionally used houses attract so much attention. The most recent New York City Housing and Vacancy Survey found that about 59,000 homes were “occupied for seasonal, recreational or occasional use” in 2023, up from about 75,000 in 2017. Still, that total amounts to nearly 11% of the homes the city would need to help close the housing shortage.

The share of homes worth $5 million or more represented between 3.3% and 4.8% of New York City home sales as of 2019, of that segment, 63.8% to 74.1% represented non-primary residential properties, according to an analysis by Realtor.com.

But that figure is broader than the ultra-luxury pied-à-terre market that Hochul and Mamdani are targeting. This could include rental properties and other occasionally used homes, not just vacant apartments owned by wealthy part-time residents.

How taxing the rich affects housing

“Any change in tax policy here would have no noticeable impact on the city’s overall market, but it could drive down prices at the top end of the Manhattan real estate market,” says Jake Krimmel senior economist at Realtor.com.

But that impact is only part of the debate. The bigger concern might be whether higher taxes on wealthy homeowners risk pushing more high earners out of New York.

From 2019 to 2023, New York lost nearly $10 billion in annual adjusted gross income from tax filers moving out of state. That trajectory predates Mamdani’s government and covers only the beginning of Hochul’s term, after she came to power in late 2021.

It’s something the governor has already expressed concerns about.

“What I want to make sure we’re smart about is that we have a system that doesn’t just tax for the sake of taxing,” Hochul said this at a forum in January. “I need people with high net worth to support the generous social programs we want in our state.”

Mamdani, on Wednesday, on the other hand, framed the issue around a different kind of exodus.

“We have to take into account the very real exodus we are seeing in the city – an exodus of working class people, an exodus of those who cannot afford to live here,” he said.