New York Governor Kathy Hochul has proposed a new tax on second homes in New York City valued at $5 million* or more, in a move aimed at closing the city’s widening budget gap.
The tax would target pieds-à-terre – vacation homes and part-time residences owned by wealthy individuals who primarily live outside the city, according to The Wall Street Journal.
“New York City is the greatest city in the world, and the people who call it home should not be left carrying the burden alone,” Ms Hochul said in a statement, as reported by the Journal.
“If you can afford a $5 million second home that sits empty most of the year, you can afford to contribute like every other New Yorker.”
The proposal is expected to raise $500 million annually and will be formally introduced as part of Ms Hochul’s spring budget.
Mayor Zohran Mamdani, who campaigned on taxing the wealthy to improve affordability, has thrown his support behind the measure.
“Thanks to the support of Governor Hochul, 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,” Mr Mamdani said.
City Hall’s press release named specific property owners who could be affected, including Ken Griffin, founder and CEO of Miami-based hedge fund Citadel, Reuters reported. Mr Griffin paid $238 million for a penthouse overlooking Central Park in 2019 – a record for a US home sale at the time.
The scale of the issue
According to New York City’s 2021 Housing and Vacancy Survey, an estimated 102,900 units in the city aren’t for rent or sale but sit vacant because they are used for “seasonal, recreational, or occasional use,” the Journal reported.
City Hall described these properties as being used “as a vehicle for wealth storage rather than as homes.”
New York City faces a projected budget gap of up to $12 billion over the next two years. Mr Mamdani had previously proposed a broader tax on wealthy residents and corporations, but that gained little traction.
A later proposal for a 9.5% property tax increase sparked outrage among homeowners.
Industry pushback
The real estate industry has responded with alarm.
Jim Whelan, president of the Real Estate Board of New York, told WSJ the tax would harm rather than help the city.
“This annual tax will weaken the city’s broader economy,” Mr Whelan said.
“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.”
New York would not be the first to target non-primary residences, with countries including France, the UK, and Canada already applying various taxes or surcharges on second homes and vacant properties.
*All prices in USD