New York City Mayor Zohran Mamdani stood outside a luxury skyscraper in Manhattan for a video on Tax Day to deliver on his trademark plan: “We’re taxing the rich.”
The skyscraper, located on ritzy Central Park South and built at a cost of $1.5 billion, seemed a fitting symbol for Mamdani’s video announcing that New York City at long last would institute a so-called pied-à-terre tax on second homes of the city’s wealthiest, News.Az reports, citing CNN.
Mamdani singled out billionaire financier Ken Griffin’s $238 million penthouse as a prime example of the “fundamentally unfair system” that allows the city’s richest to store their wealth in homes that sit empty most of the time.
Griffin and opponents of Mamdani were enraged. Griffin said Tuesday that the video was “creepy and weird” and New York “doesn’t welcome success” under Mamdani. He said his investing firm Citadel plans to expand in Miami over New York City in response.
Left unsaid by both sides: Griffin’s 23,000-square-foot penthouse, the most expensive home ever sold in the United States, is valued at just $9.4 million by the city for tax purposes.
The kerfuffle masks the larger problem with New York City’s broken property tax system, which undervalues high-end condos and overtaxes renters. Little of the city’s most expensive real estate is actually taxed at its market value. This creates a powerful incentive for the world’s richest people to park their money in New York City real estate and contributes to the housing crisis pricing out everyday residents.
A pied-à-terre tax “can play well politically, but it doesn’t get at the core problem,” said Jared Walczak, a Senior Fellow at the right-leaning Tax Foundation. “In a better designed New York property tax regime, these homes would be taxed higher.”
New York City’s tax system requires luxury condos and co-ops like Griffin’s to be assessed based off the hypothetical income they would generate if they were rental properties, far underestimating their actual sales value.
Large apartment buildings also face higher effective tax rates than single-family homes under the city’s laws. And people living in predominantly Black neighborhoods pay higher property tax rates than wealthier, whiter neighborhoods.
Property taxes are the largest revenue source of New York City’s budget, and the city’s complex laws are widely considered flawed. But progressive New York City mayors have unsuccessfully sought reforms for decades.
A pied-a-terre tax will help raise funds for the city and encourage primary residency in New York City, said Moses Gates, vice president for housing and neighborhood planning at the Regional Plan Association. But it’s “not a substitute for comprehensive property tax reform.”
Who’s leaving cities?
New York lawmakers have floated various tax proposals on pied-à-terre homes for more than a decade. They’ve all met fierce opposition from real estate interests and raised alarms about wealthy residents fleeing the state.
The New York City comptroller said a pied-à-terre tax could generate approximately $500 million annually from an estimated 11,200 second homes with market values above $5 million.
“There is sometimes a theatrical component of this, where the wealthy are treated as engines of economic prosperity,” said Vanessa Williamson, a senior fellow at Brookings and author of “The Price of Democracy” on America’s taxation history. “The presumption with leaving is they will take economic growth with them.”
New York City’s wealthy are critical to its tax base, but it’s families with young children that are the economic engines of cities, she said. They are many cities’ highest earners, biggest spenders and future workers – as well as the people leaving high-cost metros in droves.
In New York City, households with young children are twice as likely to leave as those without young children, according to the non-profit Fiscal Policy Institute.
“New York’s pattern of out-migration is primarily a result of an affordability crisis in the state, particularly for families,” the organization said in a 2024 report.
New York City has also been losing wealthy residents, but few people move solely because of taxes.
New York’s share of the nation’s millionaires dropped 31% between 2010 and 2022, according to an analysis by the non-profit Citizens Budget Commission. Florida, California and Texas gained millionaires at a faster pace than New York.
Millionaires have low migration rates, said Cristobal Young, a sociologist at Cornell University who researches whether high earners actually move when their taxes go up. Tax flight is not a myth, but only about 15% of millionaires who move wind up with a lower tax bill, he said.
The social connections that wealthy people build from living in a single place and enable their success are hard to give up, Young said. Younger people and those with lower incomes, looking for economic advancement, are less rooted to place and likelier to move.
A pied-à-terre tax is a small step in Mamdani’s goal to tax the rich, but it falls well short of his campaign pledge to raise income taxes on the wealthiest residents and large companies to support his agenda. New York Governor Kathy Hochul has rejected these tax hikes.
“If this is all there is to the grand Mamdani tax vision, New York’s rich can be pretty happy,” said David Schleicher, a professor of property and urban law at Yale University.
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