They’re flooding the market.
The trigger point for a controversial new tax on luxury second homes in New York City could be lowered from $5 million to $1 million of a property’s assessed value — potentially squeezing even more homeowners.
Gov. Kathy Hochul’s office finally spilled details on her and Mayor Zohran Mamdani’s envisioned pied-à-terre tax Thursday, revealing a convoluted two-phase plan that could ultimately lead to drastic changes to the city’s unloved property tax system.
The so-called “pied-à-terre” tax would apply to second homes in condos and co-ops with assessed values exceeding $1 million and one-to-three family homes assessed at over $5 million.
New York Gov. Kathy Hochul is doing a big u-turn from her January promise of no new taxes. James Keivom for NY Post
The proposal – first reported by the New York Times – also blindsided state lawmakers with whom Hochul has been engaged with never-ending budget negotiations and whose approval is necessary for the tax plan.
“This budget process is broken. It needs to be fixed,” an exasperated state Sen. Leroy Comrie (D-Queens) said, griping that lawmakers learned the proposal from the media instead of the governor.
“We should know these things. It shows a level of disrespect.”
Hochul’s proposal is the latest concession to Democratic socialist mayor and his lefty followers engaged on a tax-hike crusade targeting the rich.
The pied-à-terre tax emerged as Mamdani’s envisioned levy on the city’s millionaires fizzled, in no small part because of Hochul’s opposition.
The governor instead agreed to pursue the tax on luxury second homes, initially pitching it with Mamdani as targeting properties worth $5 million or more – roughly 13,000 across the city, according to her office.
The tax would bring in $500 million a year, Hochul and Mamdani argued – although that estimate was quickly disputed by city Comptroller Mark Levine, who found it’d bring in closer to $340 to $380 million.
Experts warned that putting the levy in place would be enormously complex, in large part because of New York City’s byzantine property tax system and problems with even identifying what homes should be taxed.
The proposal circulated by Hochul’s office represented a stab at a solution.
Pied-à-terre properties based in one-, two- or three-family homes would still only have to pay the tax if the assessed market value of the property was over $5 million.
Those valued between $5 million and $15 million would pay an 0.8% surcharge, under the proposal.
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The rate would increase to 1.05% for properties between $15 and $25 million, and 1.3% for those at the highest level.
A part-time New York City resident’s single-family home with a $11.5 million assessed value would pay a $92,000 surcharge, according to the proposal.
But Hochul’s newest proposal clamps down hard on condos and co-ops, fulfilling Mamdani’s campaign pledge to go after “richer and whiter neighborhoods.”
The scheme would initially hit those units with a “market value” – an arcane figure determined by the city’s Department of Finance – of $1 million with the tax for the next two years, according to the proposal.
Hochul’s office is justifying lowering the threshold by suggesting that due to New York City’s byzantine property tax assessment system, the assessed market value of a $1 million equates to a roughly $5 million sale price.
Under the scheme pitched by Hochul, those properties with a market value between $1 and $3 million would pay a 4% surcharge.
Properties at $5 million or more would be subject to a 6.5% surcharge, according to the governor’s office.
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“For example, a condo selling for $18.5 million may have a (Department of Finance) assessed market value of only $1.1 million,” the proposal states. “In the first two years, it would pay a surcharge of $45,115, or 4% of its current assessed market value.”
After two years, the proposal optimistically envisions this method will be replaced by an entirely new system of valuing condos and co-ops properties that will lead to the surcharges being the same as family homes.
The $18.5 million condo would ultimately pay $194,250 a year under the new assessment system, officials said.
Hochul’s office says the revised tax will impact 8,000 to 10,000 properties.
The proposal came just hours after top legislators said a deal was still yet to be finalized on the pied-a-terre.
“I don’t have any final details. I have an idea of it, but I don’t have the exact details,” Assembly Speaker Carl Heastie (D-Bronx) told reporters Thursday.
He said at the time that there was still even debate over whether the tax should be based on a property’s assessed value or a trickier-to-determine market value.
The tax likely will keep real estate lawyers busy contesting bills for clients hit by it, said Erik Zaratin, a partner Goldberg Weprin Finkel Goldstein LLP.
“There will be more property owners filing grievances,” he said.
James Whelan, president of the Real Estate Board of New York, blasted the proposal as adding more taxes on the most heavily taxed residents in the nation.
“On the back of $500 million in a new second-home tax, putting even more costs on home buyers and sellers will further discourage transactions and threaten existing revenue collected by the State, City, and MTA,” he said.
Bloomberg also was first to report Thursday that Hochul and legislators had agreed to another previously unrevealed tax – a surcharge on cash purchases of homes over $1 million.