NYC’s First Pied-à-Terre Tax Collection Tangles Primary Homeowners

New York City’s public rollout of a new, controversial tax on pieds-à-terre got off to a rocky start.

Last week, the Department of Finance sent notices to homeowners across the five boroughs whose properties could be subject to the surcharge — an apparently wide-net approach that notified primary residences and second homes alike.

“I was surprised the city didn’t make an effort to determine who owes the tax and who doesn’t,” said Jody Kriss, founder of real estate investor and developer Kriss Capital. “I’m not saying the city could have gotten it perfect, but they could have eliminated a lot of these people.”

Kriss posted on LinkedIn about receiving a letter from the city. In a comment responding to the post, Habitat Magazine owner Carol Ott wrote that she, too, had received a notice, despite living in her home since 1997.

“I checked the city list and found that 27 of my neighbors got a tax bill too,” Ott wrote. “I guess we’re all guilty until proven innocent.”

A spokesperson for the Department of Finance said the agency has so far sent 17,000 notices to property owners. City officials initially estimated the new fee would apply to roughly 10,000 properties.

To dispute the surcharge, owners of one- to three-family and condos will need to prove to the city that their properties are their primary homes by Aug. 21, while co-op owners have until Aug. 24, according to the finance department’s website. Property owners can apply for an exemption online, which includes uploading documents such as state or federal tax returns or others showing the home is their primary residence.

Kriss said he anticipates that the city will have to extend that deadline, given the number of exemptions likely to be filed. He added that he also expects litigation to follow.

The levy, which took effect earlier this month, will increase property tax bills for some second homes in New York City, including townhouses worth $5 million or more and co-ops and condos valued at $1 million or more.

Since state lawmakers approved the tax earlier this year, it has sparked questions for property owners, attorneys and other industry players, particularly about the city’s plans for determining which homes would be hit with the fee as the legislation offered few specifics about the tax’s implementation.

“They set their position in motion without the tactics of how they were going to actually do it,” said Marketproof co-founder Kael Goodman. “That’s part of what has caused the confusion and angst.”

That confusion intensified over the weekend, when the city released a list of properties and their valuations, which some reports said included over 30,000 homes that could be targeted for the tax. But that number is likely significantly overblown, as the data doesn’t distinguish between primary residences and second homes.

At a press conference on Wednesday, Mayor Zohran Mamdani said that only property owners who receive notices are the only ones potentially subject to the tax hike. Those owners are just a “small fraction” of those in the list of properties released this week, which he said includes most of the city’s residential properties.

“What we did is follow through with the law as it stands,” Mamdani said.

The statute requires the city to finalize its determination of which homes qualify as pieds-à-terre by the end of August. Also at the press conference, Department of Finance commissioner Richard Lee acknowledged that some owners who don’t meet the criteria for the tax may have received letters due to out-of-date information or because they purchased their properties with a trust.

“There’s a lot of different reasons why we have these edge cases,” Lee said.

City and state lawmakers expect the tax to generate around $500 million in annual tax revenue, though that figure could be higher, according to Marketproof’s analysis of data published by the finance department.

The platform estimates roughly 24,000 homes meet the value requirements for the tax, with nearly 8,000 of those being second homes, based on whether the property’s address matched the mailing address listed on the tax bill.

If those numbers are correct, the levy could yield closer to $600 million in revenue in its first collection year, though the report warns that their process for determining pied-à-terre status was “a sensible stand-in rather than a certainty” and cautioned those reviewing the report to “treat the revenue figures as careful estimates.”

Goodman added that the number of second homes in the report could end up being even lower, as owners who purchased their homes with LLCs may have their tax bills addressed to the attorneys or other representatives who manage their shell companies.