New York... New Tax

NY Governor announced an annual property tax surcharge on Secondary Homes in New York. A revenue estimate of $500 million from 13,000 “second homes” with market value of at least $5 million.  The lack of further information has spurred wide-ranging conjectures regarding which properties might be subject to the tax and how much they might pay.

Based on pied-à-terre tax proposals to estimate potential revenues and highlight areas of uncertainty. Based on the parameters chosen for the analysis, tax revenues are critically dependent on the share of targeted properties that are rented and on the behavioral responses to the tax. $500 million can be raised from over 11,200 properties.

In Addition New York Plans an additional Real Estate Tax,

Gov. Kathy Hochul and state lawmakers are poised to tax certain New York City homes that are purchased with cash.

State Assembly Speaker Carl Heastie on Thursday confirmed the tax is part of the $8 billion aid package announced earlier this week by Gov. Kathy Hochul, which New York City Mayor Zohran Mamdani relied on to balance his proposed city budget earlier this week.

The non-mortgage tax is expected to be part of a final state budget agreement, which is now more than six weeks late. It’s separate from her proposed tax on expensive second homes in New York City, which the governor finally detailed for the Legislature on Thursday.

The anticipated 1% tax on cash purchases will apply to real estate that sells for $1 million or more in the five boroughs, according to Heastie spokesperson Mike Whyland. It’s designed to be similar to the city’s existing tax on real-estate purchases with a mortgage, known as the mortgage-recording tax.

Pied-à-terre taxes are spreading globally and nationally as municipalities struggle with budget shortfalls and housing shortages.

While New York City’s major second-home tax plan has drawn the most headlines, several other areas and states are either implementing or proposing their own surcharges on luxury, non-primary residences.

Rhode Island: The state recently passed a first-of-its-kind statewide measure—colloquially dubbed the "Taylor Swift Tax"—which levies an annual surcharge on non-owner-occupied residential properties valued above $1 million.

Montana: The state implemented a differential rate structure designed to place higher property tax burdens on second homes and vacation properties.

Hawaii: Counties already utilize home-rule authority to apply significantly higher property tax rates on second homes (often with higher tiers for properties valued over $1 million or $2 million).

Oakland, California: Passed a vacant property tax that charges thousands of dollars annually on properties used less than 50 days a year.

Other New York Regions: Following the NYC proposal, state lawmakers have introduced legislation to let localities across Upstate, Long Island, and the Adirondacks implement their own second-home taxes.

British Columbia, Canada: Operates an active Speculation and Vacancy Tax designed to force empty homes into the rental market and ensure foreign owners pay a fair share.

Critics, including real estate advocacy groups and economists, argue the tax has major flaws:

• Wealthy Evasion: Buyers can shield properties via LLCs, trusts, or simply alter residency statuses to avoid the surcharge.

  
  

• Diminished Returns: Experts note that these types of wealth taxes routinely generate far less revenue than policymakers initially project.

  
  

• Market Impact: By adding massive annual costs, it can deflate real estate demand and lower property values for primary and part-time residents alike