The state of New York passed the so-called pied-a-terre tax on second homes in New York City, which will more than double property taxes owed by many wealthy luxury apartment owners.
State lawmakers on Wednesday passed the tax on nonprimary residences as a way to help close the city’s budget gap, CNBC reported. The tax will be imposed on second homes valued at $1 million or more and is expected to raise $500 million in revenue.
The tax is a joint proposal from Gov. Kathy Hochul and Mayor Zohran Mamdani to tax multimillion-dollar second homes and has been incorporated into New York’s state budget, which was passed Wednesday, two months after it was initially due, Business Insider reported. The pied-à-terre tax targets homes worth over $5 million whose owners don’t live in New York City and focuses on the ultrawealthy who own crash pads or vacation homes in the city, but may not pay city or state income taxes.
The property tax would take effect in two different phases, CNBC reported.
In the first two years – the tax years 2026-2027 and 2027-2028 – condos and co-ops valued at more than $1 million by the city’s Department of Finance will be subject to the tax, CNBC said. Properties worth between $1 million and $3 million will face a 4% annual tax; properties valued at $3 million to $5 million will face a 5.25% tax; and those above $5 million will face a 6.5% tax.
According to experts, the city’s antiquated assessment and valuation system dramatically undervalues properties, reducing the burden. CNBC said that city valuations can often be 10% or less of the true market value.
Updating Valuations
CNBC noted that the city won’t overhaul the system immediately, but will gradually update valuations and the tax, citing budget documents.
Starting in the 2028-2029 tax year, the property values will be based on comparable sales. Since valuations will skyrocket, tax rates will fall to offset the increase.
After the valuation adjustments, properties worth between $5 million and $15 million will be subject to a tax rate of 0.8%; properties between $15 million and $25 million will be taxed at 1.05%; and properties valued at over $25 million will be taxed at 1.3%, according to the city’s budget plan.
“It’s incredibly complicated,” said Robert Pollack, a New York Property Tax Attorney with Marcus and Pollack LLP.
CNBC noted that billionaire and Citadel CEO Ken Griffin became the face of the tax after New York City Mayor Zohran Mamdani posted a video in front of Griffin’s penthouse apartment announcing the tax.
Griffin then threatened to pull back business and jobs from New York in the future.
Property Tax Bill Would Rise
Griffin bought his 24,000-square-foot penthouse at 220 Central Park South in 2019 for $238 million. However, according to government records, the city values the apartment at just $15.5 million.
His property tax bill for the 2026-2027 tax year is $858,332, according to city records.
According to CNBC, in the first two years of the pied-a-terre tax, Griffin’s property tax bill would more than double to $1.87 million, Pollack said. Starting in the 2028-2029 tax year, it would increase to just under $4 million.
Griffin also bought two apartments at 740 Park Ave. for a total of $83 million, according to reports. The tax on those units would be $1.1 million starting in 2028, bringing his total Manhattan property tax bill for all his properties to more than $5 million.
While the city’s politicians say the wealthy can afford it, real estate brokers and tax attorneys say the sticker shock will be significant.
“All my clients already feel like they pay too much,” Pollack said. “These numbers are significant. I don’t care how wealthy you are.”
