Gov. Kathy Hochul’s plan for a yearly surcharge on second homes in New York City worth $5 million or more could be an elegant political move — one that taxes the rich who don’t live in the city full-time.
If approved, the so-called pied-à-terre tax will be a populist win that avoids levying new taxes on constituents of Ms. Hochul and Mayor Zohran Mamdani of New York.
But real estate agents and economists say the tax could be catastrophic for the city’s housing market, hurting not the superrich investors who park their money here, but the very middle- and lower-income citizens it’s designed to benefit.
For proof, they say, just look at London.
A slew of punishing new taxes has transformed London’s luxury housing market over the last decade. The taxes have pushed housing values down and driven international buyers, who have historically made up nearly half of the homeowners in prime London neighborhoods, to consider other markets.
The once-sizzling housing market in central London is now chilled. Sales prices of properties in London have dropped more than 20 percent since 2015. As taxes mounted and prices dipped, smaller landlords threw in the towel, taking tens of thousands of apartments off the market and constricting supply. Average monthly rents, as a result, are now at record highs.
A similar blowback could be the consequence of Ms. Hochul’s proposal that Mr. Mamdani has gleefully promoted, the economists and real estate agents warn.
Katya Nadirova, a New York-based real estate agent with Douglas Elliman, works frequently to help foreign buyers relocating to and from New York.
“There is a big exodus of wealthy individuals from London, they’re trying to sell and they are thinking then maybe I will put this money into the stock market and I will do much better,” she said. “London is no longer a beacon for this kind of buyer. We don’t want this to happen here.”
The details of New York’s tax proposal remain fuzzy. One proposal being discussed would apply one tax rate to pieds-à-terre with assessed values between $5 million and $15 million. Those with second homes worth between $15 million and $25 million would pay a higher rate; with an even higher one applied to homes assessed for more than $25 million.
The actual value of each of those tax rates remains to be seen, but the governor hopes the new tax will bring in $500 million a year, funds New York City could desperately use at it struggles to pay its estimated $5.4 billion deficit. In 2023, about 59,000 units in the city were “held for seasonal, recreational, or occasional use,” according to The New York City Housing and Vacancy Survey.
Detractors say that the proposal fails to take into account the significant amount of property tax dollars those second homes already bring to New York City. For example, Ken Griffin, the billionaire founder of the hedge fund Citadel, paid more than $840,000 in property taxes last year on his penthouse that overlooks Central Park. In 2019, his purchase of the penthouse for $238 million was the most expensive residential sale in U.S. history at the time.
The record remains a symbol of income inequality in a city now headed by Mr. Mamdani, a democratic socialist, who announced the second-home tax proposal in a social media post where he appeared in front of Mr. Griffin’s building.
Mr. Griffin, whose primary residence is in Palm Beach, Fla., did not respond to a request for comment about his thoughts on the proposal.
British media reports have chronicled the exit of several well-known billionaires. John Fredriksen, the Norwegian-born shipping magnate, told newspapers “Britain has gone to hell” before selling his $338 million mansion and relocating to Dubai. Nassef Sawiris, the owner of the Aston Villa soccer team who is known as the richest man in Egypt, also exited and blamed the government on his way out.
“This was all in the making for 10 years of incompetence by the most left-leaning Conservative Party in history,” Mr. Sawiris told the Financial Times in April of last year.
The share of foreign buyers buying investment properties worth more than 5 million pounds in Central London has dropped four percent over the past decade, according to the Savills Index, which tracks residential property data across the United Kingdom.
Taxes on second-home owners in England have been piling up since 2016, when a Stamp Duty tax required any home buyers who already owned at least one property to pay an additional surcharge of around 3 percent. In April 2025, the government gave local councils in England the power to ramp up property taxes on second homes by as much as 100 percent. That same month, the United Kingdom government abolished the special tax status of nonresidents, instituting new rules that tax them on their global income.
The flurry of new taxes, said Lucian Cook, a London-based housing economist who leads research for Savills, have created a narrative that London is no longer as friendly to real estate investment. The number of foreign buyers in the United Kingdom registering with a real estate agent — the first step before purchasing property — is now at its lowest level since 2008. At the same time, the real estate markets in cities like Barcelona and Dubai, where tax rules are much friendlier to second-home buyers, are seeing a fresh influx of foreign money.
“One city’s tax is another city’s gain,” said Ryan Serhant, the founder and chief executive of the New York brokerage SERHANT.
Brad Lander, the former city comptroller and mayoral candidate who is now running for Congress, said in an interview that the proposed tax would be a windfall for New York City, and that concerns about a looming exit of wealthy businesspeople were being exaggerated.
“People will pay this relatively modest tax and we’ll have additional resources,” he said. “I think people know broadly that it’s a good idea at this moment to tax the wealthiest in order to fund the basic services that everybody needs. It is an intuitive concept: nobody really needs more than one home. If you can afford two, three, four, or five, you should pay a little extra so that other people can survive.”
But in London, Mr. Cook said, so many international buyers have turned elsewhere, taking their spending and charitable giving with them, that the market has deflated.
“All of this has played into the narrative that London isn’t as welcoming to international wealth as it was previously,” Mr. Cook said. “It sends a message.”
In an email to Citadel staff on Thursday, Gerald Beeson, the chief operating officer, noted that Mr. Griffin has personally made donations worth $650 million to social-good causes in the city, including museums, hospitals and educational groups.
“The mayor has once again manifested the ignorance and disdain of the elite political class towards those who have been consistently committed to building one of the greatest cities in the world,” Mr. Beeson said in the email, which was reviewed by The New York Times and first reported by The Wall Street Journal.
Citadel employees also have collectively paid $2.3 billion in city and state taxes over the last five years, Mr. Beeson said in the email. The hedge fund is currently preparing to start construction on a super-tall tower on Park Avenue, a project that the company estimates will create 15,000 new jobs in the city. The project was approved last September.
The email sent a chill through the real estate industry, with worries that both commercial and residential real estate exits could be on the horizon. Some business leaders are rallying to convince Ms. Hochul to change course.
In 2019, when a similar second-home tax was proposed for New York, the city’s powerful real estate lobby mobilized to help torpedo it.
Jim Whelan, the president of the Real Estate Board of New York, said his organization was opposed to the idea of the tax and was holding conversations with Gov. Hochul’s team to share its perspective.
“Tax policy impacts behavior,” Mr. Whelan said. “The impact it has on behavior is that people decide to do other things. They decide to purchase elsewhere.”
Debra Kamin is an investigative reporter for The Times who covers wealth and power in New York.
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