Mayor Zohran Mamdani and Gov. Kathy Hochul’s controversial proposal for a pied-à-terre tax in New York City could bring a wave of legal battles from wealthy New Yorkers avoid new levies, according to experts.
The Dems last week announced a new tax on luxury second homes worth more than $5 million.
But as experts noted, there is a huge difference between NYC’s property assessment values and market values, and the pols have yet to clarify which figure will be used for the new levies.
If the democratic socialist and his Albany ally choose to factor in market values, which are typically far higher than the assessment values churned out by NYC’s outdated system, wealthy New Yorkers may respond in court, hiring their own appraisers.
“Anyone with a value between $5 million and $6 million is going to be going down to the courthouse to fight this,” Nathan Goldman, a member of the American Accounting Association and a professor at North Carolina State University, told The Post.
“There are gonna be a whole lot extra layers of legal battles that ensue as a result of this because this isn’t like the stock market,” he said. “This is a subjective number.”
The new tax will raise $500 million per year for the city’s budget, say Mamdani and Hochul — who initially opposed the mayor’s tax-the-rich platform but pivoted during this year’s state budget fight.
But they have released few details on how the fee, which still needs approval from the state legislature, will actually work.
“Mamdani was desperate. I think he was very interested in getting a win” by his 100th day in office, Goldman said. “But this is far away from anything officially being ironed out.”
The pied-à-terre policy is already facing harsh criticism from business leaders concerned it could fuel an exodus of wealth from the city.
Citadel founder Ken Griffin – whose $238 million Manhattan penthouse was attacked in Mamdani’s viral video announcing the tax – signaled Thursday that he’s so appalled, he is considering scrapping a major Midtown project.
Fellow billionaire Bill Ackman also lashed out at the policy, arguing that non-resident owners of Big Apple properties drive economic growth without acting as a drain on local resources – and warning that Mamdani’s tax could push more business to Florida.
In one of the most expensive real estate markets in the world, the new tax policy could have a huge impact.
About 70% of properties sold for $5 million or more are second homes, Jonathan Miller, CEO of appraisal company Miller Samuel, told CNBC.
Over the past five years, 4,146 Manhattan apartments sold for at least $5 million, he said – and the new tax policy could hit their owners in vastly different ways depending on how the city implements the proposed tax.
Griffin bought his 24,000-square-foot penthouse at 220 Central Park South in 2019, with the nine-figure price tag making it the highest home sale ever in the US.
Under the city’s arcane rules, officials currently give it a market value of $15.5 million and an assessment value of just $6.99 million, Robert Pollack, senior partner at Marcus & Pollack LLP, told The Post.
In New York City, co-ops and condos are not valued based on how much they sell for, but on what they would rent for if they were apartments — which is why the assessments in the case of Griffin’s property and many others are so low, Pollack explained.
The city estimated Griffin’s condo would rent for $239,255 per month for tax year 2025-26, giving it a market value of $15.5 million, according to a notice of property value.
It uses a complex formula based on a range of variables, including rental buildings with similar characteristics and rental trends in similar neighborhoods – but it’s widely criticized for being outdated and inaccurate.
To reach an NYC assessment value, the city ignores the $238 million transaction value altogether, and simply calculates 45% of the market value – which is about $6.99 million.
It’s not year clear how much extra tax Griffin could face under Mamdani and Hochul’s pied-à-terre plan.
Another unresolved issue in the pied-à-terre tax proposal is whether it will have a graduated rate — as was the case with a 2019 proposal that suggested a 0.5% tax on properties worth over $5 million, a 1.5% rate on properties over $10 million and 4% for those over $25 million.
If that’s the case, New Yorkers could soon notice a swath of apartments valued at $4.98 million to avoid the tax, or at $24.9 million to escape the highest rate, according to experts.
Yet another unclear detail concerns whether the proposed tax will apply to a home’s entire property value or only to its value over $5 million. Rhode Island took the latter approach with its pied-à-terre tax — also known as the “Taylor Swift Tax” since it targeted the singer’s $17 million Rhode Island vacation home.
New York City will also need to clarify who counts as a non-resident owner, since many will likely seek to skirt the tax by making their penthouses their primary residences, Goldman said.
“If Ken Griffin’s only at his condo for three months of the year, is he gonna be subject to this tax? We don’t know,” he told The Post.
“People game these systems all the time. They don’t report certain additions, they do their own appraisals and use beneficial comps that will help them depress their property values,” Goldman added.
“Now their financial advisers are going to be telling them to claim this as their primary residence.”
Wealthy property owners will likely try to argue that their property values are decreasing, not increasing, since the tax will make buyers less likely to scoop up properties worth $5 million or more, Goldman said.
