After promising to deliver millions of dollars to help balance Mayor Zohran Mamdani’s city budget, Gov. Kathy Hochul on Thursday released details of her new second-home tax that could apply to 10,000 properties in New York City, quickly drawing the ire of the real estate industry.

The plan also assumes that the city and state governments will amend the city’s property tax system.

What You Need To Know

  • The second home tax, or pied-à-terre tax, would cover homes worth over $5 million and be taxed at their assessed market value

  • The plan also assumes that the city and state governments will amend the city’s property tax system

  • The plan still needs approval from both chambers of the state legislature and Hochul’s signature in the final budget package

It’s a big part of both the governor’s and mayor’s still unfinished budgets.

According to details of the proposal obtained by NY1, the new tax structure applies to one to three family homes, condos and co-ops owned by people who don’t call New York City home full time.

The second home tax, or pied-à-terre tax, would cover homes worth over $5 million and taxed at their assessed market value.

The tax rate would then increase depending on assessment: properties assessed at $5 million to $15 million would face a 0.8% surcharge, those assessed at $15 million to $25 million — a 1.05% surcharge and those over $25 million at 1.3%.

The plan still needs approval from both chambers of the state legislature and Hochul’s signature in the final budget package. Representatives for both state Sen. Majority Leader Andrea Stewart-Cousins and Assembly Speaker Carl Heastie told NY1 they are still reviewing the proposal.

In a statement, Hochul’s office called the move a “common-sense approach to support New York City and protect the services millions of families rely on.”

“We’re asking some of the wealthiest people in the world to contribute a bit more to generate targeted revenue while avoiding unintended consequences for New York’s tax base,” said Hochul spokeswoman Jennifer Goodman.

Hochul’s office offered one example for a single-family home assessed at over $11,500,000 would pay over $92,000 annually under the new structure.

Previously, Hochul said the tax would apply to 13,000 homes across the city, but on Thursday her office revised that estimate to between eight and 10,000 properties. The real estate industry slammed the blueprint and argued it could freeze buying habits.

“When you buy a second home, you pay property taxes; when you come to the city, you go out to restaurants, you go out to theaters, you pay for goods that generate sales tax. This all comes back to the benefit of the city [and] state,” said Real Estate Board of New York President James Whelan in an interview.

But the plan also expects state lawmakers to tackle a new issue: changing the city’s antiquated property tax system dating back to the 1980s.

Depending on the neighborhood — and its recent popularity — market value and property value might not be in sync.

Compass real estate broker Jason Haber explained that Hochul’s tax will come in phases.

“The tax will go into effect in step one in a certain narrow defined way, and then in step two, after the city’s figured out a way to assess the market value of a home,” he said in an interview with NY1.

“Then step two, condos and co-op buildings,” he continued. “There’s no individual tax lots. There’s one tax lot for the entire co-ops. That presents a huge challenge for the governor’s office,” he added.

“Frankly, it is so confusing to understand it. I mean, it was easier for me to explain to my daughter how we sent people around the moon and back than it was to explain this,” said Haber.

Hochul’s proposal appears to give a two-year window that assumes an updated property tax code, specifically to account for how condos and co-ops are assessed. Right now, the city calculates value based on rental units.

“You could be looking at a situation of substantial property tax increases for New Yorkers,” said Whelan.

“The signal this sends and the impact it’s going to have it’s going to result in less construction, fewer jobs, less tax revenue for the city, state and MTA,” he added.

If passed, it would apply to next year’s tax rolls.

“The governor and the mayor have committed that this will raise $500 million. We’re very confident that that will happen,” said First Deputy Mayor Dean Fuleihan in an interview with NY1 before the tax details were made public.

But the city comptroller has argued it won’t generate the promised $500 million annually.

If passed, the tax would expire in five years and need to be passed again by the state legislature.

Meanwhile, there may be another new real estate transfer tax included in Hochul’s final budget — after she promised to hold the line on increases.

“The message that got sent is: we’re not interested in having folks invest in New York City,” said Whelan.

Details aren’t final, but the new tax could apply to cash purchases of homes valued at a certain level.

So far, sources say it could help plug the city’s budget hole as it is factored into the state’s multi-billion dollar budget bailout for City Hall.