Gov. Kathy Hochul’s eleventh-hour state budget pitch for a new tax on second homes owned by out of towners is winning her support in the legislature — and skepticism from the real estate industry. 

The move is also encouraging some lawmakers to hold their ground on the larger tax asks. 

What You Need To Know

Gov. Kathy Hochul’s eleventh-hour state budget pitch for a new tax on second homes owned by out of towners is winning her support in the legislature — and skepticism from the real estate industry

Sources told NY1 she called Mayor Zohran Mamdani on Monday, April 13, telling him she was ready to back a tax on the wealthy

If passed, the measure would apply to non-primary residents’ second homes in New York City valued over $5 million

But before her public endorsement, legislators in both the state Senate and Assembly were discussing this tax — among others — as a Plan B should Hochul hold the line on the current personal income and corporate tax rates

Sources told NY1 she called Mayor Zohran Mamdani on Monday, April 13, telling him she was ready to back a tax on the wealthy.

Hochul has been putting out feelers for weeks, quietly securing support and researching the tax known as pied-à-terre, according to multiple sources familiar with the governor’s movements. If passed, the measure would apply to non-primary residents’ second homes in New York City valued over $5 million.

“This proposal that we’ve worked on with the governor is one that speaks exactly to that need and does so while funding the essential city services that New Yorkers can’t go without,” said the mayor on Friday during a news conference.

But before her public endorsement, legislators in both the state Senate and Assembly were discussing this tax — among others — as a Plan B should Hochul hold the line on the current personal income and corporate tax rates.

“I’m happy to see that the governor understands that the city of New York needs the revenue, and so hopefully we’ll close this down,” Heastie told NY1 exclusively on Friday.

Real estate cautions against the move — and is seeking answers on the exact tax rate, whether the law will have to be renewed in the future, and if it will even raise the $500 million promised.

“I worry that there’ll be a cutback of projects, and that this will hurt jobs and wages and make the city less affordable for working-class New Yorkers,” said Jason Haber, a real estate agent at Compass.

He told NY1 that it could also compromise tax dollars that flow to city programs.

“I think once you introduce a pied-à-terre tax, you introduce doubt, you introduce uncertainty, and you’re risking buyers going elsewhere and hurting overall transaction value,” he said.

“We want people buying and selling in the city of New York, if for no other reason, to collect the taxes on those transactions. They are critically important to the functioning of this city, is to have the transfer tax and the mansion tax collected. And if you drop transactions, you will see those numbers spiral down. And that is not good for public education,” added Haber.

The bill’s former sponsor, Manhattan Borough President Brad Hoylman, who formerly represented parts of Greenwich Village and Upper West Side in the state’s Senate, defended the measure.

“For example, Ken Griffin’s trophy apartment. He’s not a New Yorker. It was sold for $238 million. He pays a lower effective tax rate than a single-family homeowner on Staten Island,” he said, referring to the CEO of Citadel LLC.

“Miami is sinking, quite literally, in the luxury condo market; New York is staying strong now. There’s no question that whenever you impose a new tax, you have to see what its impact is,” he added. “It’s not going to dissuade them from protecting their money.”

Meanwhile, Manhattan Assemblywoman Grace Lee has a proposal called the Teardown Tax Act for a new $10,000 surcharge on multi-million dollar apartment alterations or demolitions.

“We’re not only losing housing, but we’re losing the neighbors who lived in these homes,” she said, standing outside a former multi-family unit on Bank Street recently sold and on track to be converted into a single-family home.

“It is about revenue, but it’s also about slowing gentrification and making sure that we are preserving housing, not losing housing. You know, we have ultra-wealthy people who are coming in, converting multi-family housing into single-family homes,” she added.

Lee said she’s also not backing down from other taxes to plug the city’s $5.4 billion budget hole.

“I think the assembly spoke when we issued our one-house proposal that included revenue raisers and taxes on the ultra-wealthy. We would love to see that happen in the final budget,” said Lee.

Hochul also favors other taxes, including one on nicotine products, like Zyn.

But the company says Hochul’s fight is misguided and instead attacks an alternative for smoking addicts.

“Seven billion dollars a year in New York’s Medicaid funds go toward taking care of people who smoke and got sick. So nicotine pouches, on the other hand, still are delivering nicotine, but with much lower risk,” said Brian Erkkila, of Philip Morris International on behalf of Zyn.

It’s also opposed by business groups, including the Business Council of New York.

The state budget is now 17 days past its April 1 deadline. Legislators are due back in Albany to pass another budget extender providing temporary funding for state workers on Monday, April 20.