New York City is preparing to begin enforcing its newly approved pied-à-terre tax, with thousands of owners of luxury second homes expected to receive official notices in the coming weeks informing them that their properties may be subject to the new surcharge.

Under proposed regulations released by the Mamdani administration, the city’s Department of Finance plans to notify affected property owners by Aug. 30 if their homes have been identified as qualifying for the tax.

The regulations also give the Department of Finance broad investigative authority. The agency will be able to issue subpoenas and examine records dating back six years to determine whether a property qualifies for the surcharge or should be exempt.

The tax applies to one-, two-, and three-family homes valued at $5 million or more, as well as co-ops and condominiums assessed at $1 million or higher, provided they are not used as the owner’s primary residence and remain unoccupied. The surcharge was authorized by the New York State Legislature.

To discourage attempts to avoid the tax, the proposed rules authorize the city to impose penalties equal to 50% of the tax owed on owners who submit false, inaccurate, or misleading information.

City officials specifically cited as an example “a condominium property [that] has been divided into more than three units to avoid application of the surcharge and such division was made in bad faith.”

The regulations explain the reasoning behind the penalty, stating, “This provision would promote compliance with the surcharge by increasing the potential cost of evasion by property owners while ensuring that such property owners are afforded an opportunity to challenge the imposition of such penalties.”

Owners who receive surcharge notices will have 30 days to dispute the assessment. Appeals may be filed with the city’s Tax Commission or, in certain cases, directly with the Department of Finance.

The tax is a centerpiece of Mayor Zohran Mamdani’s effort to increase taxes on wealthy property owners who maintain luxury residences in New York City without living in them full time.

City officials estimate the measure will generate between $340 million and $500 million annually from roughly 10,000 high-end second homes across the five boroughs.

For qualifying one- to three-family homes, the surcharge will range from 0.8% to 1.3%, depending on the property’s value. Co-ops and condominiums will face higher rates beginning at 4% and rising to 6.5% for units valued above $5 million.

Real estate professionals say the higher rates on co-ops and condos reflect the city’s belief that its current property assessment system undervalues those properties, allowing the new tax to generate greater revenue.

The Department of Finance is expected to reassess the value of co-ops and condominiums in approximately two years as part of the tax’s planned second phase. Unless renewed by the state Legislature, the program is scheduled to expire in 2031.

The real estate industry has long opposed the tax, arguing that determining which properties qualify will be complicated and that implementation will almost certainly trigger legal challenges.

Industry representatives have also warned that cooperative apartment boards could face additional administrative burdens because they will be responsible for helping collect the surcharge from shareholders who own affected apartments.

“The Department of Finance’s proposed rules highlight the serious challenges of implementing the second-home tax fairly,” said Zachary Steinberg, executive vice president of external relations and advocacy at the Real Estate Board of New York.

He added, “As the City rushes to roll out this new tax, many New Yorkers—particularly cooperative apartment owners who were never intended to be affected—may be hit with unexpected tax bills and little time to appeal.”

The proposed regulations will take effect after the public comment period concludes on July 9.

Most of the public comments submitted so far have supported the new tax, although critics have also voiced strong objections.

One anonymous commenter wrote, “Communism at its finest. This law will ensure that anyone with a second home here will be driven out of NYC if they have not already left. You are chasing your tax bases away.”

Others disagreed. Licensed real estate agent Mohamed Fathelbab argued, “I’m telling you all, this tax will not chase a single multimillionaire or billionaire away from the city. And the revenue that’ll come in will be of great benefit.”

Among those expected to be affected is billionaire Citadel founder Ken Griffin, whose annual New York City property tax bill is reportedly projected to increase by approximately $1.3 million to $1.4 million under the new surcharge. The tax was approved by Gov. Kathy Hochul and the state Legislature at the request of Mayor Mamdani as part of an effort to boost city revenues.

Mamdani drew national attention earlier this year after releasing a viral video outside Griffin’s penthouse, pointing to the luxury residence as an example of the type of property the new pied-à-terre tax is designed to target.