New York Governor Hochu proposed a new tax plan targeting high-end properties on the 15th, planning to impose an annual pied-à-terre tax on owners of “second homes” worth over $5 million in New York City. The target is the ultra-high-income group, aiming to raise an additional $500 million in annual revenue for the city, which has sparked strong backlash from the real estate industry.
According to the state government, this tax will primarily focus on non-primary residences, meaning apartments or mansions owned by wealthy individuals in New York but not used as their primary residence. Hochu stated, “If you can afford to purchase a second home worth millions of dollars in New York City, you should be able to contribute alongside local residents to support this great city.” It is believed that the proposal is expected to affect around 13,000 properties, with a tiered tax rate design. Properties valued at over $5 million will be subject to taxation, with possible further rate increases for those valued at $15 million and $25 million or more.
Hochu emphasized in a post on X platform that this measure is not targeting “primary residences.” If the homeowner lives there long-term themselves or rents to long-term tenants, they would not need to pay the additional tax.
This concept draws inspiration from similar systems in Rhode Island and elsewhere, but the specific tax rates and potential financial revenue it may generate have not been finalized. It is noteworthy that similar “luxury home vacancy taxes” have been proposed in the New York State Assembly several times in the past but have failed to pass due to opposition from the real estate industry and some lawmakers.
The Real Estate Board of New York (REBNY), which represents developers and property owners, swiftly expressed opposition. The Chairman of the board, James Whelan, indicated that this annual tax would weaken the overall economy and lead to a decline in property prices.
The industry generally believes that the taxes could reduce demand for high-end properties, impacting foreign investment and investors entering the New York market, ultimately affecting employment in the construction and related industries. The Real Estate Board warned that such policies “not only fail to achieve expected revenue but could also raise costs and hinder investment.”
At the same time as this proposal is being put forward, New York City Mayor Mamdani is urging the state government to approve larger-scale tax and financial support plans. Mamdani, in a video posted on social media on the 15th, echoed the Governor’s new tax proposal, stating, “This second home tax is specifically tailored for the ‘wealthiest of the wealthy,’ those who hoard vast wealth in New York City real estate but do not actually reside there.”
The city currently faces a significant budget shortfall, with Mamdani requesting around $5.4 billion in relief funds from the state government. At the same time, he advocates for taxing households with annual incomes above $1 million and increasing corporate taxes to expand public services and social welfare spending. Analysts point out that Hochu’s “second home tax” aligns to a certain extent with the city’s direction of taxing high-income groups but with greater specificity.
The state government’s introduction of this new tax concept is related to potential financial pressures. The recent possible cuts in Medicaid funding by the federal government could lead to a larger budget gap for New York State. In this context, seeking new sources of revenue has become an important option for the state government.
English-language media have noted that the luxury property market in New York City has shown signs of cooling in recent years due to a decreased demand from foreign buyers. If further taxed, it could potentially further suppress transaction volumes.
This proposal is currently in the conceptual stage and will need to be reviewed and approved by the state legislature. Given past obstacles faced by similar policies and the strong lobbying power of the real estate industry, its ultimate implementation remains uncertain.