Super-rich complain but experts welcome Mamdani’s pied-à-terre tax

New York City’s introduction of a pied-à-terre tax has provided fodder for Zohran Mamdani’s critics, who accuse the democratic socialist mayor of attacking the rich – even as others welcome it as a much-needed effort to tax the wealthy in a city known for its yawning inequality and cost-of-living crisis.The tax, aimed at closing the city’s budget gap, covers people who own but do not live full-time in a house worth more than $5m or a condominium or cooperative unit worth at least $1m.The city recently sent letters to 17,000 addresses suspected to be second homes and published a tax roll of about 960,000 owners who could be subject to the surcharge. The list, which the city stated was intended to help people find out if they could be liable, also contained the properties’ addresses and market values.Some New Yorkers were upset that they received notice of their potential tax liability even though the particular property is their primary residence. Others saw the list as an invasion of privacy and as Mamdani again trying to shame the ultra-rich.But some public policy experts see the tax as an effective, equitable way for the local government to generate additional revenue and perhaps create more affordable housing. Nor do they expect the initial response to have lasting negative consequences for the city, as some of its – often wealthy – critics claim.“It places a tax on high earners, people with a lot of resources who can contribute more to the economy,” said Emily Eisner, executive director and chief economist at the Fiscal Policy Institute, a left-leaning thinktank.Eisner added: “I don’t think a lot of the typical concerns about migration are concerns when it comes to the pied-à-terre tax. I’m not concerned about dampening real estate markets … The largest concern is a matter of implementation and making sure that the city is able to appropriately assess many of these properties.”While middle- and lower-income Americans have had an increasingly difficult time in recent years purchasing homes and affording groceries, it’s become particularly hard in New York.More than a quarter of the city’s residents lived in poverty in 2024, which was twice the national average, according to a report from Columbia University and Robin Hood, an anti-poverty group. And only 33% of residents own a home or apartment, the lowest rate among US cities with 500,000 people or more, and half the national average, according to the Regional Planning Association, an urban planning group.Cities such as Paris, Singapore and Vancouver already have pied-à-terre taxes. In theory, that makes it easier for people who want to live in the city to buy property.In April, Mamdani and the state governor, Kathy Hochul, announced the tax and said it would generate $500m in annual revenue. Mamdani also filmed a video outside a $238m penthouse owned by the billionaire hedge fund manager Ken Griffin.The tax is “specifically designed for the richest of the rich, those who store their wealth in New York City real estate but don’t actually live here”, he said in the clip, which received 53m views on X. “But even so they are able to reap the huge financial rewards of owning property in, dare I say, the greatest city in the world.”Griffin responded that Mamdani was “making it really clear: New York doesn’t welcome success”. He threatened to expand his business in Miami.But for the less wealthy, it can be difficult to succeed in New York because there is a shortage of affordable housing. Mamdani has focused on the issue during his campaign and first year in office.“In the context of the city doing everything it can to get housing construction happening, the idea that we would be having empty units is hard to justify,” said James DeFilippis, a professor of planning and public policy at Rutgers University. “If you have something that is creating a negative externality that is imposing costs on others, the most efficient way to deal with that, just in narrow economic terms, is to impose a tax.”And whereas a flat property tax can create “ill-effects like forcing people from their family homes because [their value] appreciated underneath them”, second homes “represent concentrated and largely immobile wealth”, said Andrew Leahey, an assistant professor at Drexel University School of Law. “A tax on a second home is, in most cases, a tax on a luxury.”Opponents of the surcharge say it will cause people to not only sell their properties but also move their businesses from the city, thus reducing the city’s tax revenue.Eisner said that was unlikely because research shows people in the top income tax brackets are not “that sensitive to incremental tax increases at the city and state levels”.And indeed, despite Griffin’s earlier threats, this week, the developer of a planned 62-story building in Manhattan announced Griffin would remain a partner in the $4.5bn project.The market for high-end real estate also appears to still be strong despite the new tax. Sales of Manhattan properties in the $10m to $20m range increased 38.6% in the second quarter as compared with the same period last year, according to the real estate broker Compass.Still, Mamdani may have suffered a political setback because of how the city informed the public about their potential tax liability. The New York Post, a conservative daily tabloid that frequently and vociferously attacks the mayor, recently ran a front cover featuring the mayor with the headline, “PIED-A-TERROR: Mamdani puts people in danger by posting a ‘rich to be taxed’ list publicly.”The Staten Island borough president, Vito Fossella, a Republican, reacted to the list by saying: “This is more like Havana than New York City.”The city did not actually violate anyone’s privacy because the information in the database was already publicly available, DeFilippis said. The local government regularly releases it as part of its property tax assessment role.But the document bothered people such as Gale Brewer, a Democratic city council member who represents a district that includes the Upper West Side. She said she had heard from constituents who are upset too.Brewer has lived in her brownstone for 30 years and said it probably meets the $5m threshold, but it’s her primary residence – which means she should not be subject to the tax.“I’m a public official. I don’t mind my home address being out there, but I’m probably the only person of the [960,000] who doesn’t mind,” she said.Karen Young, one of Brewer’s constituents, said she received a letter stating that her home might be subject to the surcharge but that she could apply for an exemption if it was her primary residence, which it is.“Instead of the American way, you’re innocent until proven guilty, I very much felt that the way this was positioned was, you are guilty until you prove yourself innocent,” said Young, who works in cosmetics and voted for Mamdani.As of Wednesday, more than 9,600 people had started applications for the exemption, according to acity figures. Young applied for one and received it the same day.The city has extended the deadline for people to apply for the exemption to 18 September and hired 24 additional staff to respond to complaints.The city council will also hold a hearing on 18 August about the tax rollout.“I hope for answers. I have great respect for the department of finance and for the mayor, and I appreciate that they have been working with the constituents that have been calling me,” Brewer said.Leahey said he was unsure whether the city will ultimately be able to collect $500m in revenue. The city comptroller released a report in April stating that while that number is feasible, it could also be between $340m and $380m, “based on assumptions on exclusions for rented units and behavioral changes following the imposition of the tax”.“Any hundreds of millions return would be meaningful,” Leahey said. “But the city should be better about publishing its assumptions and distinguishing plausible estimates from accounting certainties.”