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If there’s one thing the proposed tax on high-end second homes in New York City makes clear, it’s this: defining what — and who — to tax is anything but simple.
Gov. Kathy Hochul announced the so-called pied-à-terre tax on second homes worth $5 million and up weeks ago, pitching it as a way to ensure “the people who call [New York] home,” aren’t left carrying the burden alone. Hochul has said the tax could generate $500 million to help close the city’s $5.4 billion budget gap. The idea, backed by Mayor Zohran Mamdani, quickly drew pushback from the real estate industry.
A new analysis from the city’s comptroller estimates the tax could apply to more than 11,200 properties and generate roughly that amount annually.
But those figures depend on assumptions that are difficult to standardize — and that could materially affect how much revenue the tax ultimately generates. The comptroller’s analysis shows that while the tax could generate roughly $500 million under baseline assumptions, collections could fall to between $340 million and $380 million once factors such as rental exemptions and changes in owner behavior are taken into account.
One other challenge is defining the universe of eligible properties. While the tax would apply to homes valued at $5 million and above, certain property types — such as two- and three-family buildings with ground-floor retail — may not fit neatly into residential or commercial categories.
Ownership structures present an additional layer of complexity. The report notes that properties held by LLCs or trusts are not necessarily classified as primary residences, even though such entities are commonly used by buyers for a range of purposes.
That distinction could make it difficult to determine which homes qualify as second residences subject to the tax.
An analysis by The Real Deal illustrates how prevalent those ownership structures are at the top of the market: Of residential sales over $5 million recorded in the past three years, about 57 percent involved LLCs or trusts. While that does not represent all properties held through such entities, it points to the scale of the issue.
Valuation is another hurdle. The city’s Department of Finance assesses many condos and co-ops below their market value, raising the possibility that relying on those figures could undercount eligible properties. Using recent sales to estimate value could help, but many units have not traded in years.
Taken together, the findings show that while the tax’s revenue target may be within reach, getting there is far less certain.