A new tax surcharge on the second homes of wealthy part-time residents of New York City would initially target properties that have a “market value” of at least $1 million, according to a plan that Gov. Kathy Hochul proposed to state legislative leaders on Thursday.
For the next two years, second homes with a “market value” of $1 million or more will face a tax surcharge between 4 percent and 6.5 percent — in addition to their existing property tax obligations.
The so-called market value, however, is a government metric that bears little relationship to a property’s actual sales value, especially at the highest end of the market. One Midtown Manhattan penthouse, for example, has a current market value of about $4.2 million, but sold in 2024 for more than $135 million.
It is not clear how many homes would be affected by the tax. The governor’s office claims that a $1 million “market value” is the equivalent to a sales value of about $5 million.
According to the governor’s office, a second-home condominium with a sales value of $18.5 million might have a “market value” of $1.1 million. The owner would pay a surcharge of $45,115, or 4 percent of that value.
The details of the new tax, which Ms. Hochul hopes will raise $500 million annually for New York City, have been challenging to finalize and will remain contentious.
After the initial two years, the city and state would begin using a different method to determine which properties would be subject to the tax surcharge. That metric would be partly based on the estimated sales value of condos and co-ops — which would require adding a new valuation system to New York City’s already byzantine machinery.
For those homes, Ms. Hochul is proposing a tax rate of 0.8 percent for units with a sales value of $5 million to $15 million; a rate of 1.05 percent for units valued between $15 million and $25 million; and a top rate of 1.3 percent for apartments worth $25 million and above.
The new tax on so-called pieds-à-terre has been the talk of the New York political world since Ms. Hochul announced it in April. The idea was a last-minute addition to the state budget, which is now more than a month late, and the amount it is expected to raise falls well short of what the tax-the-rich contingent had been clamoring for.
Even so, Mayor Zohran Mamdani cast the proposed tax as an example of how he was delivering on his promise to tax the rich, appearing in a video outside the home of one billionaire and telling him to pay up.
Ms. Hochul took a more measured approach. She framed the proposal as a middle-of-the-road idea that would not cause rich individuals and businesses to flee the state, but would still create a sustained revenue stream from extremely wealthy part-time residents that would help the city close its budget deficit.
The proposal contains an exemption for individuals buying second apartments in the city for family members to occupy, according to the governor’s office.
The notoriously expensive penthouse bought in 2019 by the billionaire financier Kenneth Griffin for $238 million — at the time, the most expensive home sale on record in the United States — had as a “market value” of about $15.5 million, according to city records.
The reason for the discrepancy is that, under a state law passed in the 1980s, the city is required to compare co-ops and condos to rentals of similar size and age, assessed on the potential income those rentals might bring in. But the highest-end condos and co-ops do not have clear rental equivalents, which drags down their calculated market values; in some cases, these high-priced condo buildings are even compared to rental buildings with rent-regulated units.
The specifics of the governor’s proposal were still being furiously worked out in the days after Ms. Hochul announced last week that she had reached a “general agreement” on the state’s budget with legislative leaders.
Andrea Stewart-Cousins, the State Senate majority leader, told reporters as recently as Tuesday that neither Ms. Hochul nor her aides had shared more details about the new tax with Albany lawmakers, who must sign off on the plan’s inclusion in the budget.
The State Assembly speaker, Carl Heastie, said on Thursday, “I have an idea of it, but I don’t know the exact details.”
Real estate leaders have argued that they need predictability to be able to move ahead with developments, and that changing the taxation system after two years does not provide the necessary stability.
A report about the tax released last month by the New York City comptroller, Mark Levine, warned that the amount of money the city can collect through the tax may be reduced if people choose not to have second homes in the city. It could also drop if the second homes are actually being rented to city residents, which is not always captured in government projections.
Benjamin Oreskes is a reporter covering New York State politics and government for The Times.
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