New York City’s budget gap continues to raise questions as different government leaders suggest potential solutions. And just yesterday, with budget negotiations stalled, Governor Hochul threw out a new idea: the imposition of a pied-à-terre tax in NYC. This isn’t the first time such an idea has been bounced around in Albany. So, what does this mean, and what are the likely consequences?
Back in February, our colleagues wrote about Mayor Mamdani’s threat of a property tax hike. Since then, Mr. Mamdani has backed away from this solution – which was aimed at pressuring Albany to agree to increase taxes on large companies and wealthy individuals living in New York City. But Governor Hochul has been opposed to Mr. Mamdani’s tax proposals, with good reason, not wanting to see a large exodus of the companies and individuals who financially support the City.
That being said, the Governor seems not to be afraid of taxing the wealthy individuals who own second homes – pied-à-terre – in the City. For context, “pied-à-terre” is French for “foot on the ground.” It has come to mean a small, secondary residence. Typically, a pied-à-terre is an apartment or studio used for short-term stays, and is usually associated with an apartment in a large city and used for business purposes.
From what we know so far, and it’s not much, but the Governor’s proposal would be an annual tax on pieds-à-terre worth more than $5 million, although the surcharge amount and methodology have not yet been announced. Back in 2019, this same idea was raised, and we covered it then, too. At the time, the proposal provided a sliding scale, with properties between $5 and $6 million subject to a 0.5% surcharge, all the way up to a 4% surcharge for homes valued at more than $25 million. That proposal didn’t pass, in part due to legitimate concerns that the wealthy pied-à-terre owners would prefer to sell their properties rather than pay the tax, therefore not spending their time and money in New York City.
We’ll have to wait to see exactly what Governor Hochul’s proposal looks like; it is expected that she will include this pied-à-terre surcharge tax in New York’s budget, which was due April 1st, but is still being negotiated. The logistics and administration of the 2019 proposal were particular sticking points; we’ll see if the Governor heeded those concerns when making her new proposal. Until then, à la prochaine (look it up).
