New York City Mayor Zohran Mamdani’s new pied-à-terre tax has been sold to New Yorkers under the premise of charging wealthy absentee owners an incremental property tax as a de facto penalty for owning property in the city without living there or renting it out. The stated tension is to close the city’s budget gap, and it was a feature in Mamdani’s record-setting $124.7 billion budget. As part of this budget, Mamdani estimated $500 million a year in incremental tax revenues.
Many, including the city’s comptroller, have cast doubts on whether the expected tax revenues will match what actually comes in, raising questions among analysts about the long-term implications of this tax increase. Some observers note that the incentive structure could encourage certain owners to consider relocating permanently to the city rather than paying the surcharge.
While it has not been a stated objective of the pied-à-terre tax, analysts say that if it results in more wealthy taxpayers becoming New York City residents, it could lead to a larger tax base that helps pay for many of the mayor’s proposed new social services. However, if the tax encourages divestment of New York City property, it could have the opposite effect.
How NYC Taxes Already Stack Up
Before the pied-à-terre tax existed, a high-net-worth taxpayer weighing a move to New York City already faced one of the highest tax levies in the country.
New York State’s top marginal rate is 10.9% for taxable income over $25 million. Unlike most cities, New York City also levies an income tax of 3.876% for taxpayers with income over $50,000. This combined rate exceeds 14%, which is more than any other state income tax rate in the U.S. Even beyond the income tax rate, New York City has an 8.875% sales tax rate on most purchases.
These high taxes took center stage recently New York Knicks star and NBA Finals MVP Jalen Brunson — who left the Dallas Mavericks, a state with no income tax, for a $156.5 million contract in New York — was asked what he had against the Lone Star State. His answer: “I miss the Texas taxes,” according to Yahoo Sports. This quote helps encapsulate the steep taxes New Yorkers face entering Mamdani’s mayoral term.
Enacted as part of Mamdani’s fiscal-year 2027 state budget and effective July 1, the pied-à-terre tax layers an annual surcharge onto residential property valued at $5 million or more. This tax only applies when the owner’s primary residence is somewhere other than New York City and the property is not being occupied or rented out.
Phase One of the tax applies to co-ops and condos with assessed values starting at $1 million and single-family homes at $5 million or more, taxed on a tiered schedule — 4% on the portion of value between $1 million and $3 million, 5.25% between $3 million and $5 million, and 6.5% above $5 million. If the owner makes New York City their primary residence for tax purposes or leases it to a full-time New York City resident, the surcharge disappears.
What The Pied‑À‑Terre Tax Means For High-Income Owners
Consider a taxpayer with $50 million in annual taxable income who owns a $6 million New York City condo but lives and works outside the city. This is the type of taxpayer Mamdani might be targeting: a hedge fund manager, executive or company founder whose real estate footprint in the city is large and whose taxable income is not. This taxpayer will not be subject to the very high income taxes levied against other New Yorkers. Furthermore, this taxpayer will only be subject to the high sales taxes during limited time in the city.
Following the onset of the pied-à-terre tax, this taxpayer has two options:
- Stay a non-resident.This scenario is the default, as it would be the case if nothing changes, with the taxpayer keeping the condo as a pied-à-terre. The incremental tax would run about $390,000 annually on top of the $36,000 in current property taxes — $426,000 in total tax collections.
- Become a resident.The taxpayer could avoid the pied-à-terre tax by relocating to New York City as their primary residence. The property tax collections would revert to $36,000. However, the city would now collect 3.876% of their income in taxes. The city’s total tax collections would increase to about $1,970,000.
The comparison is stark: The city collects more than four times as much from this taxpayer as a resident than it ever would from the pied-à-terre surcharge alone. For taxpayers whose income is much larger than their New York City real estate, analysts note that residency conversion could produce significantly higher tax collections than the surcharge itself. Meanwhile, the taxpayer is not necessarily increasing their tax burden. Instead, they are forgoing paying state and local taxes in their current residency to avoid paying the New York City pied-à-terre — a dynamic that could make residency more attractive for some owners.
Extrapolated across the estimated 10,000 to 11,200 properties the city estimates are genuinely subject to the pied-à-terre tax, analysts say this dynamic could help explain why precise pied-à-terre tax collections may not be the only metric to watch. Specifically, New York City may need to evaluate the levy from a broader perspective, since it could induce behavior that increases tax collections elsewhere via non-residents relocating to the city, and these increased tax collections could dwarf the estimates from the pied-à-terre tax.
The Controversies — And The Risks — Behind The Tax
Before proposing the pied-à-terre tax, Mamdani floated a 9.5% across-the-board property tax increase that drew sharp criticism for hitting ordinary homeowners as hard as billionaires and quietly shelved it. The pied-à-terre tax seemed like a compromise aimed directly at wealthy taxpayers who own New York City property but pay taxes in other jurisdictions.
However, this goodwill shifted when Mamdani filmed a video outside the Manhattan penthouse of Citadel CEO Ken Griffin — a $238 million apartment. Griffin responded by threatening to shift high-paying Citadel jobs out of the city, which could have diminished, if not significantly offset, tax collections from the pied-à-terre tax.
Controversy followed again in late July when the city’s Department of Finance published a searchable database of every property owner’s name and address potentially subject to the tax. A problem emerged: The database includes nearly a million records, far more than the 10,000 to 11,200 properties expected to be subject to the tax.
Critics, including City Council Minority Leader David Carr, whose own home appeared on the list, called the release reckless. Mamdani had previewed the move days earlier with a pointed social media warning for absentee owners to check their mailboxes once they were back in the five boroughs, a line that read to some observers as a public pressure tactic as much as a notification effort.
These controversies reinforce concerns among critics that the tax could create reputational pressure for non-residents. For instance, a tax bill mailed to a Florida address is easy to pay and forget. However, a public, searchable roll of a name next to a New York address — one that reporters, neighbors and political opponents can all search — raises the reputational cost of staying a now highly visible non-resident, according to these critics.
This dynamic also carries risks. Higher carrying costs could depress luxury property values and shrink the broader property tax base, while some owners may respond with capital flight rather than conversion — selling outright and stripping the city of future property, transfer and sales tax revenue entirely. The tax also brings steep administrative and litigation costs, as the city must verify residency and defend contested valuations in court. Finally, with Phase Two arriving in 2028 and unclear inflation indexing on the $5 million threshold, current residents face uncertainty about whether they will eventually be included in the tax.
The Verdict On The Pied‑À‑Terre Tax
Whether Mamdani’s pied-à-terre tax turns out to be a residency-conversion tool or simply a revenue line item depends on future behaviors. If many wealthy owners relocate to New York City, the pied-à-terre tax collections might be smaller than estimated. However, the total tax base will grow substantially. If many of these owners sell their property and leave the city for good, the expected tax collections might be offset by other risks and costs.