A controversial proposal to tax luxury second homes in New York City may end up affecting far more homeowners than initially expected, after Gov. Kathy Hochul’s office unveiled a plan that lowers the threshold for some properties from $5 million to just $1 million in assessed value.

New details released Thursday by Hochul’s office outlined a complicated two-part framework for the proposed pied-à-terre tax, developed alongside Mayor Zohran Mamdani. The proposal could eventually reshape major aspects of New York City’s long-criticized property tax structure.

Under the proposal, the tax would apply to second homes in condos and co-ops assessed above $1 million, while one-, two-, and three-family homes would only qualify if assessed at more than $5 million.

The proposal, first reported by the New York Times, also caught lawmakers by surprise even as Albany continues prolonged budget negotiations requiring legislative approval for the measure.

“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.”

The latest proposal represents another concession by Hochul to Mamdani and progressive allies who have pushed aggressively for higher taxes on wealthy New Yorkers.

The pied-à-terre concept gained traction after Mamdani’s broader proposal to tax millionaires lost momentum, largely due to opposition from Hochul.

Instead, the governor agreed to support a targeted tax on luxury second residences, originally describing it as a levy aimed at homes valued at $5 million or more — approximately 13,000 properties citywide, according to her office.

Hochul and Mamdani estimated the tax would generate roughly $500 million annually, though city Comptroller Mark Levine disputed those projections, estimating revenue would likely fall between $340 million and $380 million.

Real estate experts warned that implementing the tax would be extraordinarily complicated because of New York City’s notoriously confusing property tax system and the challenge of determining which residences qualify as second homes.

The framework released Thursday appeared to be an attempt to address those concerns.

Under the proposal, second homes classified as one-, two-, or three-family residences would still only be taxed if their assessed value exceeds $5 million.

Homes assessed between $5 million and $15 million would face a surcharge of 0.8%.

The surcharge would rise to 1.05% for properties valued between $15 million and $25 million, while homes at the highest tier would face a 1.3% rate.

Officials estimated that a part-time city resident with a single-family home assessed at $11.5 million would owe approximately $92,000 annually under the tax.

The proposal takes a far more aggressive approach toward condos and co-ops, aligning with Mamdani’s campaign promise to target “richer and whiter neighborhoods.”

According to the plan, condos and co-ops with a Department of Finance “market value” of at least $1 million would immediately be subject to the surcharge during the first two years.

Hochul’s office argued that because of the city’s unusual assessment formulas, a property carrying a $1 million assessed value may actually sell for around $5 million in the real market.

During the initial phase, properties with assessed market values between $1 million and $3 million would pay a 4% surcharge.

Units assessed at $5 million or higher would face a 6.5% surcharge, according to the proposal.

“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 the first two years, officials hope to replace the temporary structure with an entirely redesigned valuation system for condos and co-ops that would align their taxation more closely with single-family homes.

Under that revised model, officials said the same $18.5 million condo would eventually owe $194,250 annually.

Hochul’s office estimated that the updated tax plan would impact between 8,000 and 10,000 properties.

The release of the proposal came only hours after legislative leaders acknowledged that negotiations over the tax were still unresolved.

“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.

At the time, Heastie noted that lawmakers were still debating whether the surcharge should be based on assessed value or the more difficult-to-determine market value.

Real estate attorneys predicted the proposal would trigger a surge of legal challenges from property owners disputing their tax bills, according to Erik Zaratin, a partner at 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, sharply criticized the plan, warning it would place additional financial burdens on residents already facing some of the nation’s heaviest tax loads.

“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 separately reported Thursday that Hochul and state lawmakers had also agreed to another previously undisclosed tax measure — a surcharge targeting cash purchases of homes valued above $1 million.

{Matzav.com}