New York Enacts Pied-à-Terre Tax Targeting Luxury Second Homes

New York State lawmakers passed the so-called pied-à-terre tax on May 28, 2026, introducing a new annual levy on high-value residential properties that are not a primary residence. The legislation, championed by New York City Mayor Zohran Mamdani, establishes a progressive tax rate structure starting at 0.5% for homes valued between $5 million and $6 million, rising to a top rate of 4% for properties valued at over $25 million. Citadel CEO Ken Griffin became a focal point of the debate after Mayor Mamdani posted a video in front of Griffin's $238 million penthouse on Central Park South. The tax applies to a property's entire market value, not just the portion above the threshold, creating a significant annual liability for owners of ultra-luxury second homes in New York City.

Context — [why this matters now]

The concept of a pied-à-terre tax has circulated in New York politics for over a decade, gaining traction during periods of budget shortfalls and increasing focus on wealth inequality. A similar proposal was seriously considered by the state legislature in 2019 but ultimately failed to advance amid fierce opposition from the real estate industry. The current political climate, marked by a stronger progressive bloc in city and state government, provided the necessary catalyst for its passage.

The policy emerges against a backdrop of a cooling national housing market. The S&P CoreLogic Case-Shiller U.S. National Home Price Index recorded a modest year-over-year increase of 3.4% in its most recent reading, a significant slowdown from the double-digit growth seen in prior years. This cooling may have reduced the perceived risk of the tax triggering a broad-based market downturn, making it more politically palatable. The primary catalyst was the alignment of the mayor's office with a supportive coalition in the state legislature, overcoming longstanding industry lobbying efforts.

Data — [what the numbers show]

The tax structure is explicitly progressive, with rates escalating sharply with property value. The initial tier applies a 0.5% annual tax on the entire value of properties between $5 million and $6 million. The rate climbs to 1% for values between $6 million and $10 million, 1.5% for $10 million to $25 million, and peaks at 4% for properties valued above $25 million. For a $30 million apartment, the annual tax would be $1.2 million.

Property Value	Tax Rate	Annual Tax on Full Value
$5.5 million	0.5%	$27,500
$8 million	1.0%	$80,000
$20 million	1.5%	$300,000
$30 million	4.0%	$1,200,000

Analysts at the city's Independent Budget Office estimate the tax will apply to approximately 1,500 properties and generate between $200 million and $300 million in annual revenue. This revenue is earmarked for the city's Affordable Housing Preservation Trust Fund. The effective date for the first tax bills is January 1, 2027, giving owners a six-month window to assess their holdings. The tax applies specifically to condominiums and cooperatives that are not the owner's primary residence, as defined by state tax filings.

Analysis — [what it means for markets / sectors / tickers]

The most direct impact will be on the ultra-luxury segment of the New York City residential real estate market. Properties valued above $10 million, which face the steepest rates, may see downward pressure on prices as the new annual carrying cost is priced in by potential buyers. This could negatively affect developers specializing in super-prime condominiums, such as those behind projects like 220 Central Park South, where Griffin's apartment is located. Revenue volatility for brokerage services in this niche market, as seen with AMD stock trading at $505.10 with a daily range of $493.52 to $507.98, could increase as transaction volumes potentially decline.

A counter-argument is that the tax base is small enough that it will not materially impact the broader New York City real estate market or the municipal bond market. The revenue projection of $300 million is a fraction of the city's $100 billion-plus annual budget. The primary risk is not the revenue loss but the potential for wealthy individuals to restructure ownership or shift their primary residency declarations, thereby eroding the tax base over time. Early market positioning suggests some investors are shorting real estate investment trusts (REITs) with significant exposure to high-end New York residential assets, while flows into REITs focused on affordable housing and primary residences have increased modestly.

Outlook — [what to watch next]

The immediate focus shifts to potential legal challenges. Property owners and industry groups are expected to file lawsuits arguing the tax is unconstitutional or constitutes double taxation. The first court filings are anticipated before the end of Q3 2026. The outcome of these challenges will determine the tax's ultimate implementation.

Market participants should monitor quarterly earnings calls from New York-focused developers and REITs, such as SL Green Realty and Related Companies, for commentary on the tax's impact on buyer demand and portfolio valuations. Key levels to watch are transaction volumes for properties above $5 million; a sustained drop of more than 20% year-over-year would signal a significant market reaction. The first concrete data on revenue collection will not be available until after mid-2027, making anecdotal evidence from brokers and preliminary Q1 2027 earnings reports the earliest indicators of the policy's real-world effect.

Frequently Asked Questions

How does the New York pied-à-terre tax compare to similar taxes in other cities?

Vancouver, Canada, implemented a similar Empty Homes Tax in 2017, initially set at 1% of a property's assessed value and later raised to 3%. London has also debated a pied-à-terre levy but has not enacted one. A key difference is that New York's tax is explicitly progressive, with rates scaling up to 4%, making it one of the most aggressive such taxes globally. The Vancouver tax applies to homes left vacant for more than six months, while New York's applies to any non-primary residence, regardless of how often it is occupied.