The dream of many millionaires around the world is to own a property in New York . But the famous pied-à-terre in the Big Apple can turn into a tax nightmare for those who believed they had secured a place in the sun in Manhattan.
At least that's what Mayor Zohran Mamdani intends. The city has just implemented the Pied-à-Terre Tax , a tax levied on high-end properties used as second homes.
One of Mamdani's main campaign promises, the tax aims to increase taxation on luxury properties that remain vacant most of the time or are only used occasionally by people who live elsewhere.
The city estimates that there are at least 11,000 properties that fall into this category. And it estimates that the tax could generate around US$500 million in extra revenue for public coffers.
However, the measure has been the target of a series of questions and criticisms. Many companies and entrepreneurs have been directing their investments to other states, arguing that the city is becoming less and less business-friendly .
Lawyers and tax analysts interviewed by Barron's website have questions about who the tax applies to, as well as its calculation basis. These questions are being raised during a public consultation period that ends on July 9th.
The implementation of the Pied-à-Terre Tax was divided into two stages. In the first stage, which runs until 2028, the measure will be applied to single-family homes or homes intended for up to three families valued at US$5 million or more, and to condominiums and housing cooperatives with a market value of at least US$1 million.
Secondly, starting in 2028, the government intends to adopt a valuation system that more closely reflects real market prices for all types of properties, based on the sale prices of comparable properties.
One of the main problems identified is that the operational definition of the criteria for classifying owners has not yet been clarified.
Among the concerns is the possibility of double taxation for people who maintain their primary residence outside of New York City but are considered "statutory residents" because they remain in the city for at least 183 days a year. According to municipal regulations, statutory residents pay New York City residency taxes.
The assessment is that, as the law is currently drafted, statutory residents would be subject to the tax, since the property they own in New York City is not their primary residence.
Another issue under discussion is how the authorities will assess market values over this two-year period. In a statement to clients, the Holland & Knight law firm stated that the city has been unable, for 30 years, to define a methodology for valuing apartments based on sales of comparable properties.
These issues are in addition to others, such as the fact that the law treats owners of similar properties differently and represents discrimination against owners in other American states.
Mamdani x Griffin
More than the criticism of how the tax was implemented, the Pied-à-Terre Tax has become a symbol, for many, of a city that has become a difficult and hostile environment for businesses and high-income individuals.
Mamdani's campaign slogan was " Tax the Rich, " with the Pied-à-Terre Tax being the main measure. With his election, many investors are already looking to other states, and those who were considering buying property in New York have begun to rethink their investment.
One of the main critics of Mamdani and the Pied-à-Terre Tax is Ken Griffin . The founder and CEO of the hedge fund Citadel was, against his will, used as a "poster boy" by Mamdani to promote the tax. The mayor recorded a video announcing the tax in front of Griffin's penthouse in New York, which he bought in 2019 for approximately US$238 million.
The executive retorted. Griffin stated, at an event held in May, that the video made by the mayor "was making something really clear: that New York does not accept success."
The CEO of Citadel described the video as "frightening and bizarre" and said it put him in danger, recalling the 2024 murder of Brian Thompson, CEO of UnitedHealthcare, in New York.
And he went further. Griffin stated that he intends to redirect Citadel's expansion to Miami and that he is reconsidering one of Manhattan's largest corporate real estate projects: a $6 billion investment in an office tower.
