Hochul proposes new tax on second homes worth more than $5 million in New York City

NEW YORK (WABC) -- Gov. Kathy Hochul now supports a yearly tax surcharge on second homes in New York City worth $5 million or more -- an about face that would help Mayor Zohran Mamdani close the city's $5.4 billion budget deficit.

West 57th Street may have more billionaire residents per square foot than anywhere else in the world. But many of their luxury, multi-million dollar apartments are second homes and real estate experts say many of them don't even live there.

Hochul says they can afford higher real estate taxes.

"We're talking about people who are ultra-wealthy. I mean, there are literally Russian oligarchs buying up properties, driving up the property values, and that has an effect now," Hochul said. "They're all welcome to stay. They're here because this is a great city and it has so much to offer. But those come at a cost and I think it's fair to ask them to contribute."

The governor's luxury tax proposal is an annual tax surcharge on second homes in New York City valued at $5 million and up. It's estimated to raise at least $500 million in revenue every year.

It is expected to apply to roughly 13,000 residences-in places like 220 Central Park South, where a luxury penthouse is valued at more than $200 million.

On Wednesday, Mayor Mamdani applauded the governor's plan.

"This is this is a tax on properties worth more than $5 million that are owned by people who do not reside in New York City, the super wealthy who can purchase properties and use them to store their wealth to benefit from New York City's real estate market, but not have to pay back into that same city that generates so much of that wealth in the way that they should," Mamdani said.

It won instant approval from City Council Speaker Julie Menin.

"This is a smart, sensible proposal," she said in a statement, "that will generate significant new revenue to help fund the vital services New Yorkers rely on. This is the comprehensive approach we need."

But critics in the real estate industry insist the surcharge will be complicated to apply and will hurt the city's construction industry.

"You're going to have lost construction jobs, you're going to have lower property values for full time residents, and you're going to have higher costs as investment dries up across the city," said James Whelan with Real Estate Board of New York.

The state budget was due back on April 1, but has yet to pass as negotiations continue in Albany, increasing pressure on lawmakers to reach an accord.

New York City's budget deficit is a serious point of contention.

Both chambers of the New York State Legislature agreed on increasing taxes on the wealthiest New Yorkers and corporations, which Gov. Kathy Hochul initially said she would not support.

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