New York City’s new tax on expensive second homes has run into a legal roadblock just months after it became law. A Staten Island judge ordered the administration of Mayor Zohran Mamdani to cancel tax notices sent to thousands of homeowners and remove a citywide property list that had triggered complaints over privacy and the way the tax was being implemented.
Justice Wayne M. Ozzi did not rule on whether the tax itself is constitutional. His ruling focused on how the city identified and notified homeowners who could potentially be liable for the surcharge. The decision has left the tax in place, but has forced the city to defend its rollout in court while separate lawsuits challenge the tax itself.
What did the judge rule?
The Department of Finance had sent letters to about 17,000 homeowners who could potentially be subject to the surcharge. It also published a list containing about 900,000 properties, along with homeowner names and property values.
Homeowners challenged the rollout, explaining that the list created confusion and exposed personal information. Some people whose names appeared on the list said their properties were actually their primary residences.
Ozzi ruled that the city should remove the previously published list. The Department of Finance may instead publish a list containing properties that are actually subject to the tax.
The judge also ordered the cancellation of notices sent to homeowners who were only potentially affected. The city has been directed to notify properties that are actually liable for the surcharge.
“No crime is involved here, but homeowners are being substantially harmed and penalized needlessly by DOF’s method of implementing the Tax Law,” Ozzi wrote in the judgement note.
He also criticised the city’s decision to make homeowners prove their primary-residence status when the Department of Finance had access to tax information that could have helped identify properties subject to the surcharge.
What is the pied-a-terre tax?
A pied-a-terre is a residence that someone owns but does not use as their primary home. New York’s surcharge applies to expensive non-primary residences in New York City. Under the law, the surcharge starts at 0.8% and rises to 1.3% for properties valued at $25 million or more.
The rules are more complicated for different types of properties. During the first two years, certain condominiums and cooperative apartments valued at $1 million or more are covered, and the threshold for other properties is $5 million.
The law took effect on July 1, 2026, and is currently scheduled to remain in place until June 30, 2031, unless extended. The city expects the measure to raise at least $500 million a year. This is part of Mamdani’s affordability agenda.
How did Mamdani bring the tax into focus?
The idea of taxing expensive second homes in New York is not new. A 2014 Fiscal Policy Institute report called for Albany to approve a tax on second homes worth more than $5 million. A similar proposal gained momentum in 2019 after a record $238 million Manhattan penthouse purchase, but the proposal was ultimately left out of the state budget. Mamdani revived the idea as part of his campaign for additional revenue from wealthy property owners.
In February, he gave Governor Kathy Hochul an ultimatum that is raise taxes on wealthy New Yorkers or city homeowners could face a 9.5% property tax increase. Hochul had previously expressed concern that higher taxes could push wealthy residents out of New York.
Hochul later proposed the pied-à-terre surcharge in her budget. Her administration estimated that it could raise at least $500 million a year.
The state legislature approved the measure on May 27. Hochul signed it into law on May 28.
Mamdani then made the tax a prominent part of his messaging. His administration focused on the potential contribution from owners of some of the city’s most expensive homes.
Citadel CEO Ken Griffin became a prominent example. Mamdani filmed the announcement of the tax outside Griffin’s Manhattan penthouse. Griffin had threatened to move jobs and business away from New York in response to the measure.
Who could end up paying?
The tax is aimed at people who own expensive New York City properties but do not use them as their primary residences. As per Business Insider, Griffin could face an annual bill of about $1.3 million to $1.4 million on his Central Park South apartment.
Other wealthy property owners and celebrities, including Donald Trump, Jeff Bezos, Jay-Z and Beyonce, were also identified as potential taxpayers.
The law gives some ways for homeowners to avoid the surcharge. A homeowner may establish that the property is their primary residence or challenge the city’s valuation of the property. The city had also created a process for homeowners to seek an exemption.
Where did the rollout go wrong?
The administration began mailing notices on July 23. About 17,000 owners received letters telling them they could be affected.
At the same time, the city published information covering more than 900,000 properties. The problem was that the list was much broader than the group of properties that would ultimately owe the tax. This distinction led to confusion. Some homeowners found their names on the list even though they said the property was their primary residence.
The city extended the deadline for seeking an exemption by four weeks to September 18. Homeowners who missed that deadline could still appeal to the Tax Commission by March 2027.
By early August, about 4,800 owners had started exemption applications. Three homeowners subsequently sued the city. Their lawsuit did not initially challenge the legality of the tax itself. Instead, they challenged the publication of the property list and the way the notices were sent.
A judge temporarily blocked further implementation on August 10. An appellate judge later allowed the rollout to continue.
What did Mamdani’s administration say?
The administration has defended the tax and its implementation. Matt Rauschenbach, a spokesperson for the mayor, said homeowners with substantial wealth were resisting the surcharge.
“Today’s decision is wrong, and we will invoke a stay of the injunction,” Rauschenbach told media back then. “With a stay, we will continue implementing the surcharge fairly, efficiently and in full compliance with the law, as we have since day one.”
The administration has also hired about two dozen additional staffers to handle appeals and questions from residents.
What happens now?
The immediate issue is the city’s appeal of Ozzi’s ruling. The administration has invoked New York’s “auto stay”, which can put a lower court ruling on hold while an appeal proceeds. The practical effect of that move will depend on the appeals process.
There is also a separate and potentially bigger legal fight over whether the tax itself is constitutional. Former US Commerce Secretary Wilbur Ross Jr., his wife Hilary Ross, and businessman Stephen Wynn are among the property owners who have sued New York over the tax. Their lawsuit argues that the surcharge is unconstitutional under both state and federal law.
Wynn’s case says he was billed $183,094.69 under the tax. Another group of homeowners has filed a similar constitutional challenge. The city has said it will intervene to defend the tax.
What is at stake?
The tax is an important part of its revenue plans for Mamdani’s administration,. The city expects at least $500 million a year from the surcharge.
For homeowners, the immediate dispute is about how the city identifies taxable properties and communicates with them. The broader lawsuits could determine whether the tax itself survives constitutional challenges. The next major developments to watch are the city’s appeal of Ozzi’s ruling and the constitutional cases filed in Suffolk County.
Those cases could determine whether New York’s experiment with taxing expensive second homes becomes a lasting source of revenue or faces further changes in court.