Hochul wants tax on NYC second homes worth $5M+

New York Governor Kathy Hochul is proposing a new tax on second homes in New York City worth at least $5 million as a way to raise cash for the city's struggling budget.

"If you can afford a multimillion-dollar second home in New York City, you can afford to join its residents in supporting the greatest city in the world," Hochul said in a social media post Tuesday that provided few details of how the tax would be implemented. 

The plan represents a compromise between the governor and New York City Mayor Zohran Mamdani, a democratic socialist who, for months, has pushed Hochul to raise taxes on the wealthy and large corporations. The governor has repeatedly resisted such measures and didn't include material hikes in her initial budget. 

The second-home plan is expected to be part of ongoing state budget negotiations and would levy a yearly surcharge on the pied-à-terres. Details are being ironed out, but the tax may be levied on a progressive scale, meaning higher-valued properties would be subject to a bigger rate, according to the New York Times, which first reported on the proposal. The tax would aim to raise $500 million a year, the newspaper said.

Mamdani praised Hochul's plan, saying it would help bridge the divide between the ultra-rich and working-class residents.  

New York City had almost 60,000 units classified as held for "seasonal, recreational or occasional use," according to a 2023 housing survey. It has long been a destination for the global ultra-rich who have snapped up residences in high-rise buildings in Manhattan, including the so-called Billionaires' Row just south of Central Park. 

"We are one step closer to balancing our budget by taxing the ultra-wealthy and global elites with a pied-à-terre tax — the first of its kind in our state," Mamdani said in an emailed statement. "Alongside the governor, our administration is fighting every day to make sure we address this fiscal deficit fairly, where the wealthy contribute what they owe and our budget reflects our commitment to the working New Yorkers being priced out of our city."

The proposal also received the support of New York City Council Speaker Julie Menin, who's also clashed with the Mayor over spending and levies, including Mamdani's threat to raise property taxes this year.

"This is a smart, sensible proposal that will generate significant new revenue to help fund the vital services New Yorkers rely on," said Menin.

The Real Estate Board of New York slammed the proposal, arguing it would "weaken the city's" broader economy.

"It will not raise the amount of revenue expected, but will eliminate thousands of construction jobs, lower property values, and raise costs for New Yorkers," REBNY President James Whelan said in a statement. 

Taxing second homes in New York City has been proposed before, without success. A similar plan was put forward by state lawmakers in 2019, which was considered by then-Governor Andrew Cuomo, as a way to raise money for the subway system. The push followed a $238 million purchase of a Central Park South penthouse by hedge fund billionaire Ken Griffin. 

That legislation stalled after opposition from the real estate industry, who said at the time such a measure would be a drag on the luxury home market.  

While Hochul's proposal would raise money for the budget, it isn't enough to stem the current shortfall or finance Mamdani's full affordability agenda, said Emily Eisner, acting executive director and chief economist at the Fiscal Policy Institute, a left-leaning think tank. The budget deficit is currently estimated at more than $5 billion through the next fiscal year. 

"New York lawmakers will need to look toward broad-based solutions such as the personal income tax and corporate tax," she said.