New York City Mayor Zohran Mamdani appears to have won his first significant concession from Gov. Kathy Hochul in the escalating fight over how to close the city's budget gap. Hochul has decided to back a new annual surcharge on New York City second homes worth $5 million or more when they are owned by people whose primary residence is outside the city, according to details reported Tuesday.
The governor hopes the measure will raise about $500 million a year to help address the city's fiscal shortfall, reports The New York Times.
Hochul had spent months resisting Mamdani's broader push to raise taxes on the wealthy and on corporations. In February, Reuters reported that Mamdani was calling for a 2% tax increase on New Yorkers earning more than $1 million a year, plus a higher corporate tax rate, as part of his plan to close what he then described as a multibillion-dollar budget gap.
Hochul, by contrast, had publicly insisted she could invest in New York without raising taxes.
which makes this new second-home tax such a notable shift.
However, Hochul is not embracing Mamdani's full tax platform and has instead narrowed the target to ultrawealthy nonresidents who own luxury apartments or homes in the city but do not primarily live there and therefore generally do not pay city income taxes. The measure would be structured as an annual pied-à-terre surcharge, likely on a sliding scale that increases with the property's value.
For Mamdani, the breakthrough gives him a badly needed fiscal and political victory. His administration has been grappling with a large budget problem while trying to preserve promises on affordability, child care, and transit. The city comptroller's office has said the mayor's financial plan still depends, in part, on "state budget proposals" and on projected higher tax collections in later years if those proposals are enacted. The City Council, meanwhile, has argued there are alternative ways to identify roughly $6 billion in resources without raising property taxes on ordinary New Yorkers.
The tax also fits neatly with Mamdani's message that the burden of balancing the budget should fall on those most able to pay. In the February Reuters interview, Mamdani said wealthy individuals and highly profitable corporations should "contribute a little more." Real estate industry publication The Real Deal later reported that his administration had also floated several housing-related tax ideas in Albany, including a 1% property-tax surcharge on certain Class 1 and Class 2 properties valued at $5 million or more.
The idea itself is not new. Variations of a pied-à-terre tax have circulated in Albany for years, especially after reports highlighted the number of luxury New York properties owned by people who spend relatively little time in them. A 2023 New York City housing survey found that about 59,000 units were held for seasonal, recreational, or occasional use, down from about 75,000 in 2017, according to reporting on Hochul's proposal. Previous versions of the tax stalled after heavy lobbying from developers and concerns over administration and revenue estimates.
There are still important caveats. The surcharge is not law yet. Hochul intends to include it in the still-unfinished state budget, which remains under negotiation with legislative leaders. The final rate structure also has not been nailed down, meaning the exact impact on owners and the precise revenue yield could still change before a budget deal is complete.
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