New York City is getting its pied-à-terre tax. State lawmakers on Wednesday approved the $268.5 billion 2027 state budget, which included a new annual surcharge on second homes in the city valued at $5 million or more. First announced last month by Gov. Kathy Hochul, the new tax will take effect July 1 and could potentially generate $500 million in revenue for the city each year. According to the governor, the tax ensures those who own luxury properties as their second homes are still “fairly contributing towards the funding of essential services,” like police and fire departments, sanitations, parks, and more.
Determining the value of non-primary residential properties in the city will take effect in two phases. For the first two years, starting July 1, co-ops and condos valued at $1 million or above by the city’s Department of Finance will face the tax.
Because of a peculiar tax system, city co-ops and condos are not taxed at the true market value, but instead are assessed by looking at comparable rental buildings. The governor’s office has claimed $1 million market value is the equivalent to a sales value of $5 million.
As 6sqft previously reported, the difference can be even more significant. For example, Ken Griffin’s $238 million apartment at 220 Central Park South was assessed at $9.4 million, 3.9 percent of the purchase price, in 2019. The city valued the home at $15.5 million for the 2026-2027 tax year.
Under the new tax, as first reported by the New York Times, properties worth between $1 million and $3 million will see a 4 percent annual tax. Properties between $3 million and $5 million will face a 5.25 percent tax. Apartments worth above $5 million will face a 6.5 percent tax.
Starting in 2028, the city will evaluate properties by looking at comparable sales and then update the tax. After the adjustment, properties will be taxed as follows:
- between $5 million and $15 million, 0.8 percent
- between $15 million and $25 million, 1.05 percent
- over $25 million, 1.3 percent
As CNBC reported, Griffin’s property tax bill would double to $1.87 million during the first two years of the new tax. During the next two years, his bill would rise to just under $4 million.
“Our new pied-à-terre tax will have the ultra-wealthy elite — those who own $5 million apartments in New York City but don’t actually live here — pay their fair share,” Mayor Zohran Mamdani said in a post on X supporting the tax.
While Hochul says the new tax will generate $500 million in annual revenue, there are multiple factors at play that could reduce the total earnings. A report from NYC Comptroller Mark Levine released this month found the real revenue could be somewhere between $340 and $380 million after considering exclusions for rented units and behavioral responses to the tax.
The Real Estate Board of New York (REBNY) argues the new tax will hurt New York’s economy and discourage investment.
“The tax on second homes will dampen market activity, reduce property values, hurt new development, and weaken the City’s economy,” James Whelan, president of REBNY, said in a statement on Thursday.
“State spending increased nearly six percent this year, and now stands over $268 billion – with tougher fiscal decisions awaiting State leaders down the road. New York cannot continue down its path of rising spending and higher taxes if it wants to remain an attractive place to live, work, invest, and build a business.”
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