Late Monday afternoon, a judge dealt a blow to New York City Mayor Zohran Mamdani’s plan to charge a so-called pied-à-terre tax on vacant second homes owned by wealthy non-residents.
Wayne Ozzi, a Staten Island judge, issued an emergency pause on implementing the tax. Ozzi sided with homeowners who sued the city Friday. They did not challenge the tax itself but a rollout they said cast too wide a net, forcing New York City homeowners to prove residency.
In the temporary restraining order, Ozzi ruled the city cannot take further enforcement action on tax notices sent to roughly 17,000 homeowners. The next hearing is set for Aug. 31.
However the tax shakes out, it has already reshaped the city’s ultra-luxury rental market. Mamdani’s administration has sought to expand affordable housing, but the tax plan is boosting supply of high-end rentals commanding five- and six-figure monthly rents.
“The rental market is becoming part of the conversation for owners who might otherwise have been considering a sale,” Michelle Griffith, a broker with Douglas Elliman, told HousingWire TBD. “For some owners, renting can provide a way to generate income from a property while maintaining ownership and giving themselves more time to evaluate their longer-term options.”
Owners started shifting when Mamdani proposed the tax. Griffith said a downtown client switched from selling to renting, listing the unit at $40,000 a month. The owner got the asking rent.
Rental market shifts
Since then, rents have kept rising even as supply rises, with eye-popping listings appearing on local marketplace StreetEasy.
“There are multiple listings asking over $100,000, and they’re renting,” Ian Slater, CEO and co-founder of Trove Partners, told HousingWire TBD. “It used to be a headline to hit $100,000 a month. Now it’s commonplace.”
A Midtown condo has sat on the market for about six days at $170,000 a month; it last rented for $59,000.
To avoid the pied-à-terre tax, owners must rent to someone who makes New York City their primary residence, Slater noted. State law requires a bona fide, arm’s-length lease of at least one year. The tax still applies if a unit sits vacant, gets rented short-term or serves as a tenant’s second home rather than primary residence.
Residential brokers say the pause is not expected to change owners’ calculus on renting versus selling. It may, however, dissuade developers from building more luxury condos.
“The city makes a fortune from these developments between the taxes and operating a full-service building and keeping union people employed in the building,” Stuart Saft, an attorney with Holland & Knight, in an interview with HousingWire TBD. “And now the wealthy are having a second thought about wanting to come to New York.”
For now, Griffith said she is not seeing owners rush to sell or leave New York.
“I’m seeing them become much more strategic about how they use and structure their real estate,” she said. “If an apartment is going to be subject to an additional carrying cost, owners are naturally going to ask whether it makes more sense to leave it vacant, sell it, or put it to work as an income-producing asset. The strength of the Manhattan rental market makes that a particularly compelling option right now.”
