New York Passes Pied-a-Terre Tax on Luxury Second Homes Worth $1 Million or More

New York State lawmakers passed a new tax on second homes on Wednesday, targeting nonprimary residences valued at $1 million or more in what officials say is an effort to close the city's budget gap. The so-called pied-a-terre tax is expected to generate $500 million in revenue and will more than double property taxes owed by many wealthy luxury apartment owners, according to tax experts.

The tax will be implemented in two phases, with initial rates applied from tax years 2026-2027 through 2027-2028. Properties valued between $1 million and $3 million will face a 4% annual tax; those between $3 million and $5 million will be taxed at 5.25%; and properties exceeding $5 million will face a 6.5% tax. However, experts note that the city's antiquated assessment system significantly undervalues properties—often by 90% or more—which reduces the initial tax burden. Starting in the 2028-2029 tax year, the city will shift to market-based valuations, at which point tax rates will fall to compensate: 0.8% for properties worth $5 million to $15 million, 1.05% for $15 million to $25 million, and 1.3% for properties exceeding $25 million.

Billionaire Citadel CEO Ken Griffin has become the public face of the tax after New York City Mayor Zohran Mamdani posted a video announcing the measure outside Griffin's penthouse at 220 Central Park South. Griffin, a Florida tax resident who purchased the 24,000-square-foot apartment for $238 million in 2019, responded by threatening to reduce business operations and jobs in New York. Under the new tax regime, Griffin's property tax bill for his Central Park South penthouse alone would more than triple from $858,332 to nearly $4 million by 2028-2029, based on CNBC calculations. He also owns two apartments at 740 Park Avenue purchased for $83 million combined, which would incur an additional $1.1 million in annual taxes under the second phase of implementation.

Property tax attorneys and real estate brokers have warned that the magnitude of the tax increases will be significant. "These numbers are significant. I don't care how wealthy you are," said Robert Pollack, a New York property tax attorney, noting that clients already feel overburdened by existing taxes. City officials argue that wealthy property owners can afford the additional burden, while the increased revenue is needed to address New York City's fiscal challenges.