New York City’s new pied-à-terre tax is a simple concept: if you don’t use your home as a primary residence and it is particularly valuable (over $5 million for a house or over $1 million for a condo or co-op unit), you will pay the tax. If you live in your home (or you have a tenant), you will not.
Yet the rollout of this new tax has been pilloried as “doxxing,” “confusing” and as a “freakout” – all on behalf of some of the wealthiest property owners (or prospective property owners) in the city. The city, in response to a broken website and the coverage of the rollout, delayed the deadline to file for exemptions until September.
The news coverage of the second home tax has been disconnected from the real living conditions for the millions of New Yorkers who don’t own a second (or third, or fourth) home. The 2024 American Community Survey shows:
- 5 million New Yorkers live in an estimated 3.7 million housing units; 1.1 million of those units are owner-occupied.
- The majority of New Yorkers – 5.3 million people, representing 62 percent of the city’s households — are renters who will never pay this tax.
- Of the remaining 3.2 million New Yorkers who live in owner-occupied homes, most don’t own a home that would be eligible for the tax, even without the residency requirement. The median owner-occupied unit is valued at $778,000, with fewer than 31 percent of all owner-occupied units valued at more than $1 million.
Despite these figures, major media outlets are writing breathless stories about over…17,000 properties that may have to pay the tax? Perhaps closer to 12,000 if all the exemption applications are completed – that is, one out of every 300 housing units? The real estate market in New York City is large enough and strong enough to withstand the effects on a few thousand properties owned by the wealthiest residents.
What became obvious over the weekend was that the frenzy over this was in part due to taxpayers who admitted to avoiding the city’s local income tax. Commentators online were quick to note the irony. The entire point of owning a pied-à-terre is that you are not a full-time resident who is otherwise liable for the city personal income tax. Owners avoiding the personal income tax by claiming residency in the suburbs or another state are not contributing to city services that they use most of the time. Gov. Kathy Hochul’s office announced the state will be monitoring the exemptions filed for cases of residency fraud since those taxpayers may also be avoiding state income tax.
Part of the privacy concern from taxpayers was around a city data release that identified high-value properties that may be eligible for the tax. This property and owner data is already public information, as even Fox News admitted. Estate planning lawyers, to their credit, used the release of already public data to fearmonger new clientele to establish LLCs and trusts. Though there are legitimate reasons to put properties into LLCs or trusts, most of those reasons are to protect properties from things like deed theft or mortgage scams. LLCs and trusts are also liable for the pied-à-terre tax – using these tools will not result in a lower tax bill.
Second-home taxes make complete sense in a city like New York. With one of the highest costs of living in the country, valuable real estate, and more wealthy people than any other city in the world, the tax is a valuable tool to access part of the source of that extreme wealth. If wealthy New Yorkers would like to avoid the pied-a-terre tax, I have some free advice: don’t lie to the tax authorities about where you really live.
