Issue 123 – The NYC Pied-à-Terre Tax and its Implications on the Real Estate Market

Lately, we have been hearing the slogan “Tax the Rich” frequently. This is often espoused in reference to the newly implemented pied-à-terre tax in NYC.

It implies the rich aren’t paying taxes. The reality is quite different. Yes, there are some very wealthy people who pay far less in taxes than others earning the same or similar amounts. But New York City taxpayers pay the most local taxes in all of the U.S. The laws that need to be addressed are federal ones, not local. The loopholes touted are affecting just a select few, when in reality most high-net-worth folks are indeed paying a lot of taxes — especially New Yorkers, who pay $21 billion more to the state every year than the state spends on NYC.

The latest controversy stems from New York City’s enactment of a pied-à-terre tax—an annual surcharge on high-value homes that are not used as a primary residence. If you own a luxury second home in the city, you may now have a recurring tax exposure on top of other friction costs. The tax is also an annual recurring fee, not a one-time hit like the mansion or transfer tax, which makes it more pervasive.

According to a recent report by the NYC Comptroller, the legislation is expected to phase in from July 1, 2026, through June 30, 2028 (fiscal years 2026—2028), with the first phase focused on city “market value” thresholds. Early reporting indicates that the tax applies broadly to high-end second homes and provides different treatment for single-family homes versus co-ops and condos. For houses valued at roughly $5 million or more, the surcharge has been reported at 0.8%–1.3%. For co-ops and condos, the initial phase appears tied to Department of Finance values starting around $1 million, which can translate into a much higher market sale price.

I am seeing a lot of confusion about how this will be implemented. Essentially, people believe that any sales price over $5 million will be affected, when in fact Phase 1 will be based on land value, not the transactional equivalent sale price. For example, a property valued at $844,000 may not be captured by the pied-à-terre tax. It’s less than $1 million and nowhere near $5 million.

However, Phase 2 (for fiscal years 2028–2031, beginning July 1, 2028) becomes a much more speculative concern. Early indications suggest that the tax will be based on the more transactional side of things. It may even work on factoring a five-year average; we simply don’t know yet.

Some savvy buyers are trying to close before Phase 1 starts. Others are trying to keep their price below $5 million and then essentially work any credits as a side agreement to avoid the potential second-phase hit.

As Business Insider reported, “In its first two years, the tax will rely on Department of Finance ‘assessed values’ to determine which homes will face a new charge, while the city and state work out a new valuation system.”

Likewise, a recent CNBC segment details: “Billionaire and Citadel CEO Ken Griffin became the face of the tax after New York City Mayor Zohran Mamdani posted a video in front of Griffin’s penthouse apartment announcing the tax.”

I believe the pied-à-terre tax punishes people who use our services less than full-time residents. They also pay massive transfer and mansion taxes and typically don’t use our schools — a huge portion of real estate tax revenues.

My view is that this will not destroy the New York market, but it will absolutely change behavior at the margins. Buyers are already more sensitive to carrying costs, monthly common charges, assessments, the mansion tax, financing costs, and now an additional annual second-home tax. The psychological impact may be just as important as the financial one.

The highest end of the market will feel this first. For discretionary buyers, especially those comparing NYC to Palm Beach, Miami, Aspen, London, or other global luxury markets, this becomes another line item in the decision-making process. It may not stop a true New York buyer, but it may slow them down, sharpen their negotiations, or push them toward renting instead of buying.

As a result, I expect high-end rentals to benefit. A buyer who wants a New York City presence but does not want the tax complexity may choose to rent a trophy apartment instead. That could strengthen demand for luxury rentals, especially furnished, turnkey, white-glove inventory.

For co-ops, the impact may be more nuanced. Co-ops already have a smaller buyer pool because of board scrutiny, financing restrictions, and liquidity requirements. If the tax makes second-home buyers more cautious, certain high-end co-ops may feel additional pressure, especially those with significant monthly maintenance or less flexible sublet policies. That said, as I always point out, the very best buildings with scarcity, provenance, service, and location will still hold value.

I have not yet seen a wave of people selling solely because of this tax, but I have absolutely seen buyers pause, ask sharper questions, and reconsider the total cost of ownership. The conversation has shifted from “What is the purchase price?” to “What is my all-in annual exposure?”

Other markets have tried versions of second-home or vacancy-style taxes, with mixed results. In some places, they created revenue and pushed underused housing back into circulation. In others, they caused buyers to become more cautious or redirected capital elsewhere. New York is different because it remains New York — but the city cannot assume that capital is captive.

Again, citing Business Insider, “Hochul and Mamdani estimated the tax could raise $500 million.”

So, are there any benefits? Potentially. If the revenue is used responsibly, it could support city services and housing priorities. It may also create a clearer distinction between end-user demand and purely discretionary ownership. But from a market perspective, the risk is that it adds friction at a time when the luxury buyer is already highly selective.

My advice to second-home buyers is simple: do not overreact, but underwrite carefully. Understand whether the property will be classified as a primary residence or pied-à-terre. Review the building’s carrying costs, taxes, assessments, liquidity requirements, and resale profile. Buy quality, buy scarcity, and buy something you would be comfortable owning through a softer market.

It’s important to keep all in perspective: Mayors come and go, and when you start impacting the very hands that feed you in one of the most capitalistic cities that ripple through the nation, I think we stand the test of time on how we are going to navigate this.

The New York City buyer is not disappearing. But the casual, optional buyer now has one more reason to pause — and in this market, that matters.

Issue 127 – The Price Isn’t the Price

A new calculation is changing what a New York apartment is actually worth. For decades, NYC real estate has been obsessed with price per square foot. However, now we may be entering the era of cost per year.

Consider two apartments of the same size, price, amenities, light, view, and location. If one has $6,000 in carrying costs and the other $11,000, are they really worth the same amount?

Increasingly, I would argue they are not because buyers aren’t simply purchasing apartments anymore. They are purchasing the economics of the buildings they’re in, which are starting to matter enormously. Think: insurance, labor, utilities, repairs, taxes, assessments, energy compliance, staffing, capital improvements, and reserves. While monumentally important, none of these photograph well, but all determine whether an apartment is easy to own — and eventually sell.

We have always understood that certain characteristics affect value: a lower floor trades differently from a higher one, an awkward layout matters, a protected view commands a premium, and poor light equals a discount. However, I contend another discount is related to the aforementioned carrying costs.

The sexiest amenity in New York real estate may soon be a healthy balance sheet. That sounds less exciting than a lap pool, unless you are the one writing the checks. Operating costs in New York have been rising, putting pressure on building budgets and making previously deferred capital projects harder to ignore.

The 2026 New York City Price Index of Operating Costs — which tracks expenses for the city’s rent-stabilized building stock — illustrates the broader pressure. Over the five years through 2026, insurance costs in that index increased more than 80%. Maintenance increased 29%, utilities more than 26%, administrative costs more than 21%, and labor nearly 16%.

Those figures aren’t a direct proxy for every condominium or cooperative in Manhattan. But they illustrate something anyone involved in operating New York buildings already understands: buildings are getting more expensive to run.

One mistake buyers can make is falling in love with the apartment and treating the building as secondary. In New York, you aren’t just buying four walls; you’re buying into a small economy. You’re inheriting its management decisions, staffing structure, physical plant, reserve philosophy, insurance exposure, and capital planning.

A building that deferred maintenance may appear inexpensive today because it hasn’t yet charged owners for the work it needs. That doesn’t necessarily make it inexpensive. It may mean the bill hasn’t arrived yet. Conversely, a building that recently completed an expensive façade project, replaced major mechanical systems, or invested in energy efficiency may initially appear less attractive because owners have already absorbed those costs. We need to consider which building presents the greater risk over the next decade. The answer isn’t always obvious from the monthly maintenance number.

Buyers understandably love low carrying costs, and brokers value them because they make a property easy to market. But low monthly charges deserve as much scrutiny as high ones. A good broker asks: Why are they low? Is the building extraordinarily well managed? Does it have other income? Are the reserves substantial? Or has the board resisted increasing common charges while postponing expensive work?

An important distinction exists between efficient and underfunded. A well-run building with appropriately funded reserves may ultimately be far more economical than one with artificially low monthly charges followed by recurring assessments. It’s not just the number that is meaningful, but the story behind it.

Few words cause more anxiety in a New York transaction than “assessment.” Even here, context matters because not every assessment is a red flag. An assessment financing a necessary capital improvement can actually strengthen the building. A new roof, elevators, façade work, upgraded mechanical systems, or energy improvements may protect long-term value.

The more important questions a sales pro considers are: What is the assessment for? Why didn’t reserves cover the expense? Is it part of a thoughtful capital plan or the latest in a recurring series of emergencies? And, perhaps most importantly, what comes next? A $500 monthly assessment with a clear end date concerns me considerably less than a building with no assessment, minimal reserves, and several million dollars of foreseeable work.

New York’s environmental requirements add another layer of complexity. Local Law 97 places emissions limits on many large buildings and creates increasingly stringent requirements over time. The encouraging news is that the overwhelming majority of covered privately-owned buildings are currently meeting the applicable limits.

But buyers should still understand what their particular building is facing; Has the Board commissioned the appropriate studies? What capital improvements may eventually be required? Has money been allocated? Is compliance incorporated into long-term planning? The concern isn’t whether a building faces a penalty today; it’s whether the building has a credible plan for tomorrow. That, increasingly, is part of due diligence.

New development creates its own version of this problem. Buyers are understandably attracted to pristine buildings with spectacular amenities and, sometimes, surprisingly reasonable initial common charges, but what will the building actually cost to operate when it is fully functioning?

Pools, spas, private dining rooms, screening rooms, landscaped terraces, playrooms, fitness centers, and mechanical systems all require staff, maintenance, and money long after the sales office closes.

The glossy brochure tells you what you’re getting. The budget tells you what you’re buying — both matter.

This conversation also requires nuance when comparing co-ops and condos. A co-op’s maintenance can initially look dramatically higher because it often incorporates expenses that a condo owner pays separately, including the shareholder’s proportionate share of the building’s real estate taxes. A condo may show a lower common-charge number while property taxes sit alongside it.

So, comparing maintenance to common charges without understanding what each includes is meaningless. The correct question isn’t: Which monthly number is lower? It is: What is my total cost of ownership, and what am I receiving in return? I believe strong building economics will increasingly become an amenity in their own right.

Brokers spend an immense amount of time learning how to talk about marble, appliances, ceiling heights, views, and finishes. We should be equally capable of explaining the financial health of the building we’re selling, because that is a big part of valuation.

None of this means price per square foot is irrelevant. It’s still an important metric. But like any metric, it becomes dangerous when used without context.

I’ve spent my career watching New York buyers pay premiums for things that cannot easily be replicated, including light, views, ceiling height, architecture, location, outdoor space, great proportions. But I always add another thing to the list: financial soundness. That may not command the same emotional response when someone walks through the front door. But increasingly, it may command something just as valuable – confidence, which matters in uncertain markets.

For years, we’ve asked buyers how much apartment they can afford. Now we need to start asking them how much building they can afford.  Because in New York, you don’t just buy the apartment — you inherit the economics beneath it.

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