Tax attorneys and accountants are about to make bank helping owners of non-primary homes navigate New York City’s pied-à-terre tax notifications, which started landing in mailboxes before the weekend.
“If you have a second home in New York City worth more than $5 (million), check your mailbox when you’re back in the five boroughs – because you’ve got mail,” Mayor Zohran Mamdani announced on social media.
Letters from the city’s Department of Finance went to owners flagged as potentially subject to the surcharge. The notices cover Phase 1 of the tax – one- to three-family homes valued at $5 million or more and condos and co-ops valued at $1 million or more — with rates running from 0.8% up to 6.5% depending on property type and value tier. Owners have 30 days to challenge or appeal their designation before formal bills follow in November.
The tax fulfills another Mamdani campaign promise to tax the rich, but it may also invite legal action, adding to a landlord lawsuit over a rent freeze filed last Thursday.
Stuart Saft, an attorney with Holland & Knight, told HousingWire TBD he expects lawsuits to emerge over the tax.
“The notices were supposed to be sent out by August 30,” Saft said. “The city is trying to get the notices out while people are away for the summer.”
He said owners won’t have time to react to new values, especially as the city’s already complicated property tax valuation process grows more complex.
Why it’s stirring backlash
The letters have amplified a political controversy that predates the mailing, after Mamdani released a video filmed outside billionaire Ken Griffin’s roughly $240 million Manhattan penthouse to promote the tax. Griffin called the video “creepy and weird” and said it put him in harm’s way. He separately threatened to pull business and jobs from the city.
Brokers say the notices are landing on top of an already jittery luxury market. From July 6 to July 12, only a single Manhattan property priced above $10 million went into contract, according to a report from Olshan Realty Inc. The report noted that this marked the lowest week for “trophy” sales since the last week in December.
Still, the report counted that sale among 29 Manhattan contracts above $4 million that week. The firm’s report for last week shows 18 contracts of $4 million or more matched the 10-year average for the third week of July. Two deals topped $20 million.
Administrative challenges
Real estate industry groups have long argued that New York City’s tax is difficult to administer fairly, warning of confusion over who qualifies.
“There’s a lot of twists and turns to it, and obviously it’s the first year,” Nick Montorio, an attorney with Eisner Advisory, said in an interview with HousingWire TBD. “Anywhere there’s ambiguity, or uncertainty, nobody knows the answer. Maybe the city might not even know the answer to how they’re going to administer it exactly at this point.”
City officials continue to defend the measure to capture roughly $500 million a year from wealthy, largely out-of-city owners who treat New York real estate as a wealth-storage vehicle rather than a home.
Regardless, the tax might spur a population boom – on paper.
Montorio said clients, who haven’t reacted positively to the tax, will balk at whether they should reestablish city residency. It comes down to a math exercise of determining if Florida, Texas, Tennessee or other tax-favorable states still offer a better deal.
“Sometimes it makes more sense to be a New York City resident and domicile in New York City at that property address, and sometimes it doesn’t,” he said.