What is the pied-a-terre tax? Zohran Mamdani targets ultra-wealthy non-residents

New York Mayor Zohran Mamdani, on April 15, released a video saying that his government is planning to launch a new pied-a-terre tax, targeting the ultrawealthies. The proposal was also backed by New York Governor Kathy Hochul, who, after much deliberation, agreed to tax the ultrawealthy who primarily live outside the city. This push is targeted to cover the city's multibillion-dollar budget gap. This would specifically target the ultra-wealthy of the city who own multiple residences in the city.

What is the pied-a-terre tax?

As the name implies, it is a tax on luxury secondary residences that are valued at $5 million or more. This tax is directed to people who invest in New York real estate but live away, as New York Governor Cathy Hochul said that these luxury residences are “part of our skyline,” but the owners are not "part of our city". This will likely free up to $500 million annually to contribute to the $5.4 billion fiscal deficit of New York City.

“If you can afford a $5 million second home that sits empty most of the year, you can afford to contribute like every other New Yorker,” said Governor Cathy Hochul in a written statement. Similar legislation, which has been previously discussed in other cities, had a graded scale where properties priced between $5 million and $6 million pay 0.5 per cent of the amount over the $5 million threshold in annual taxes. This would have gradually increased, capping off at properties of more than $25 million, where the owner would pay a $370,000 annual fee plus 4 per cent of the amount over $25 million.

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What did New York Mayor Zohran Mamdani say?

"Well, today we're taxing. I'm thrilled to announce we've secured a pied-a-tierre tax, the first in New York's history. This is an annual fee on luxury properties worth more than $5 million whose owners do not live full-time in the city," said Zohran Mamdani on his Instagram video. Mamdani, in his election campaign, has voraciously argued for a tax on the wealthy. He vowed to impose a 2 per cent tax rate on the wealthiest 1 per cent of New Yorkers who earn more than $1 million. However, Ms Hochul has resisted raising taxes on large corporations or on high earners. But taxing pied-a-terre seemed more palpable to her.

“Like for this penthouse, which hedge fund CEO Ken Griffin bought for $238 million. This pied-à-terre tax is specifically designed for the richest of the rich. Those who store their wealth in New York City Real Estate, but who don't actually live here. 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,” said Mamdani.

Various studies have shown that a large part of Manhattan's skyline is owned by foreign investors, who spend almost no time in the city. According to the New York City Housing and Vacancy Survey in 2023, about 59,000 units were “held for seasonal, recreational, or occasional use.” In a tax forum on Wednesday, Mamdani said that threats of the city's wealthiest residents leaving the city over high taxes were "imagined."