New York City’s push to collect more money from luxury second-home owners has hit a legal setback, putting a major source of expected revenue into question.
A judge ordered the city to restart its rollout of a surcharge projected to raise $500 million, the New York Daily News reported on Tuesday, September 29. The ruling targeted how Mayor Zohran Mamdani‘s administration implemented the tax, rather than overturning the tax law itself.
Staten Island Supreme Court Justice Wayne Ozzi found that the notices the city mailed to property owners were unlawful, meaning they must be canceled and reissued. The city was also told to take down an online supplemental property tax roll, per the report.
“No crime is involved here, but homeowners are being substantially harmed and penalized needlessly,” Ozzi wrote in his 22-page decision.
The surcharge, known as a pied-à-terre tax, is an annual charge on certain valuable properties that aren’t used as a primary residence. For the first two tax years, it covers one- to three-family homes valued by the city at more than $5 million and co-ops and condos valued at $1 million or more, according to the New York City Department of Finance.
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Officials initially expected about 10,000 properties to be affected. Instead, roughly 17,000 owners received notices in July warning that they might owe, the New York Daily News noted. More than 2,000 people have since challenged their status.
Mamdani, 34, is counting on the money to help pay for his affordability agenda, per the outlet. His spokesman, Matt Rauschenbach, called the ruling “wrong” and said the administration would immediately seek a court-ordered pause.
“The ultra-wealthy are fighting in court to avoid paying their fair share,” Rauschenbach said in a statement, the outlet reported. “They have filed lawsuit after lawsuit to protect their privilege, and we will not back down.”
Randy Mastro, the attorney representing the homeowners, argued that the city “failed to follow state law when it burdened New York City homeowners with proving they live in their own homes or be on the hook for paying a new surcharge.”
Meanwhile, two new lawsuits filed against the state in Suffolk County are challenging the tax itself, per the outlet.
In May, Mamdani, 34, unveiled a $124.7 billion budget that called for bringing in more money from wealthy property owners and high earners.
As First for Money previously reported, Morgan Stanley plans to establish a Dallas hub expected to create more than 3,800 jobs and generate over $1.3 billion in direct and indirect investment, which the New York Post suggested was a reaction to Mamdani’s planned tax policies on the wealthy.
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