Dive Brief:
- The rollout of a new tax on high-end second homes in New York City hit a snag Monday when a Staten Island judge ordered a pause on the effort after a handful of homeowners sued. The city appealed the decision soon after, staying the order until it moves through a higher court, CNN reported.
- The judge sided with plaintiffs, saying the city failed to provide appropriate notice to homeowners who will be impacted by the tax and unlawfully placed burden on homeowners to prove whether or not they are subject to it. The next hearing is scheduled for Aug. 31.
- Other states are also moving forward with taxes on high-end, non-primary residences. On July 1, Rhode Island enacted a non-owner-occupied property tax on homes valued at $1 million or more that are not the primary residences of their owners. Montana imposed a flat 1.9% tax on second homes earlier this year.
Dive Insight:
New York City is in the midst of an historic housing crunch, with the vacancy rate dropping to just 1.4% last year.
New York Gov. Kathy Hochul introduced the luxury secondary home tax proposal for New York City in April. It is expected to generate $500 million for the city in fiscal year 2027, according to the city comptroller.
The proposed “pied-à-terre” tax is a surcharge on secondary homes, including one-, two- and three-family homes valued at $5 million or more and condos and co-ops valued at $1 million or more. The New York City comptroller estimates there are more than 13,000 such homes in the city. The city began notifying homeowners they may be subject to the tax July 23 through the mail and controversially published a searchable database of all such homes.
Earlier this month, city officials announced they were extending the deadline to file for an exception to Sept. 18, FOX5 reported.
Mayor Zohran Mamdani has billed the surcharge as a measure to “tax the rich.” The mayor said at a press conference Monday he anticipates more lawsuits in the future but is confident the tax is legal.
New York State Sen. Patricia Fahy has proposed implementing a version of New York City’s second-home tax statewide.
