A Pied-à-Terre Tax Must Be Designed to Actually Raise Revenue for New York

New York City is constantly searching for new, sustainable ways to fund essential services—from schools and housing to transit and public safety—without placing additional burdens on the average resident.  That is the stated goal behind the proposal to impose a pied-à-terre tax on second homes valued above $5 million in New York City.

However, good intentions are not enough. If this tax is not designed carefully and realistically, it risks raising far less revenue than promised and could weaken key funding streams the city and state depend on.

The proposed pied-à-terre tax targets a narrow group of high-value second-home owners. But these owners, who are often global buyers with many options, are among the most sensitive to changes in annual carrying costs. Unlike full-time residents, they are not tied to New York by employment or necessity. If ownership costs rise sharply or unpredictably, they can sell, defer purchases, or take their investment elsewhere, leading to a chilling effect on our economy that will extend far beyond just the wealthiest New Yorkers and real estate industry.

New York City’s fiscal health is inextricably tied to real estate. Property-related taxes generate roughly half of the city’s locally controlled revenue, making stability in the real estate market necessary for stable budgets.

At the state level, the Metropolitan Transportation Authority (MTA) relies heavily on real estate transfer and mortgage recording taxes to fund its capital program and operating budget.  In calendar year 2024, the MTA received well over $1 billion in revenue from real estate transfer taxes.  Any policy that reduces transaction activity directly affects not just City Hall, but the transit system millions of New Yorkers rely on every day.

It also means the potential for an unintended loss of good paying union and middle-class jobs that depend on transportation and housing construction. This could especially hit communities of color, as our most recent Workforce Snapshot report shows the New York City construction labor force is 66% non-White.

Real estate markets respond quickly to policy signals. Taxes that materially increase annual costs are reflected in lower sale prices, fewer transactions, and slower development. Lower transaction volume means fewer transfer taxes, which the MTA depends on to fund subway signals, station upgrades, buses, and major capital projects. In recent years, when transaction activity slowed, the impact on MTA finances was immediate and significant.

A pied-à-terre tax that discourages buying could therefore undercut one of the most reliable funding sources for mass transit at a time when the MTA cannot afford it.  Additionally, New Yorkers who reside in cooperative apartments will be hit particularly hard. A large share of high-end residences are co-ops, which are taxed at the building level. Without careful rules, a pied-à-terre tax could end up spreading costs across all shareholders—including full-time residents, seniors, and long-term owners who are not the intended targets. That outcome would likely trigger legal challenges and political pressure to carve out exemptions, further reducing net revenue.

Supporters often cite large projected revenue numbers. But those projections assume little to no behavioral change. Indeed, a deeper dive into the proposal by New York City Comptroller Levine holds that projections could fall short depending on design, implementation and enforcement. This demonstrates the established precedent that revenue raisers appearing lucrative on paper often shrink once real-world responses take effect:  fewer transactions, lower valuations, more ownership restructuring, and capital flowing elsewhere.

None of this is an argument against taxing second homes outright. It is an argument for realism, and a call to not rush through something just to say we did something. If a pied-à-terre tax is to succeed, it must be narrowly tailored, clearly defined, and structured to avoid dampening transactions and long-term value. It must also not further threaten a construction industry workforce already swimming against the tides of federal policy uncertainty.

New York does not need policies that promise easy money and deliver unintended consequences. It needs tax policy grounded in economic reality—policy that strengthens, rather than strains, the city’s broader fiscal ecosystem.

Carlo A. Scissura, Esq. is President & CEO  of the New York Building Congress