New York has introduced an annual levy on luxury second homes – the pied-à-terre tax will take effect on July 1, 2026. Find out which properties are subject to the new surcharge, what rates are set for apartments and houses, who is exempt from paying, and how this norm fits into the nationwide American trend of taxing empty luxury homes

New York has officially become the first city in the United States to introduce a progressive annual levy on luxury secondary housing – the so-called pied-à-terre surcharge. Governor Katie Hochul signed the relevant budget in late May 2026, and from July 1, owners of luxury apartments and houses for whom New York is only a second address will feel it on their accounts.

Pied-à-terre – what is this tax?

The French phrase pied-à-terre – literally “foot on the ground” – has long become a New York euphemism for penthouses and apartments worth hundreds of millions of dollars, which their owners use for several weeks a year. Now it is no longer just an expensive whim, but the subject of a separate tax.

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Why did New York introduce a tax on luxury real estate and why now?

The tax was adopted as part of the state budget and comes into force on July 1, 2026. According to Governor Hochul, approximately 10,000 real estate properties will be subject to the new levy.

The $268 billion budget deal included the pied-à-terre tax in a statewide package, along with $1.5 billion in additional state aid to the city.

The impetus for the passage was an urgent fiscal need. New York City Mayor Zoran Mamdani, a democratic socialist, was looking for new sources of revenue to plug the city’s $5.4 billion budget deficit and fund an affordable housing program. Hochul, who had previously publicly opposed raising taxes on the wealthy, ended up supporting the compromise.

Symbolically, the mayor personally pointed to Ken Griffin’s $238 million penthouse overlooking Central Park as a prime example of who would be affected by the new rule.

The symbolism here is not accidental. Griffin is one of the most vocal critics of the new tax, but he moved to Miami long ago, in part to avoid New York City taxes, while keeping his $238 million penthouse above Central Park. The mayor simply pointed a finger at him: here is a man who shouts “this is not fair” – and is the perfect target of the new norm. Moving out of the city, but keeping the most expensive real estate in it – this is exactly the scheme the law is trying to shut down.

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Who will pay real estate taxes in New York and how much?

The tax structure is two-stage and depends on the type of property and its market value.

In the first two years – 2026-2027 and 2027-2028 – the following rates are set for condominiums and cooperative apartments worth more than $1 million:

- From $1 to $3 million – 4%.

- From 3 to 5 million - 5.25%.

- Over 5 million - 6.5%.

For single-family homes, a lower scale applies:

- From 5 to 15 million dollars - 0.8%.

- From 15 to 25 million - 1.05%.

- Over 25 million - 1.3%.

Starting in fiscal year 2028, apartment rates will be reduced to the level of house rates.

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How will these rates affect owners?

It is important to understand the real financial impact on owners. The owner of a $ 10 million apartment in Manhattan already pays from $ 80 to $ 120 thousand per year in property taxes, plus maintenance costs from $ 80 to $ 150 thousand. The additional pied-à-terre fee will be another $60,000–$80,000 per year.

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Who is exempt from paying the New York City luxury real estate tax?

The law clearly defines the line between primary and secondary residences. Real estate is considered a primary residence and is not subject to the surcharge if it is occupied by the owner or his or her immediate family: spouse, parents, children, siblings, grandparents, and grandchildren. Properties that are rented out on a regular basis are also exempt - they are also not subject to the levy.

The new levy applies to condominiums, cooperatives, and single- to three-family homes with a market value of more than $5 million if the owner's primary residence is outside the five boroughs of New York.

New York is not alone: ​​a pan-American trend

Pied-à-terre in New York is not an isolated idea, but part of a broader movement in American tax policy. In 2025, Rhode Island passed a similar law – the so-called “Taylor Swift Tax” – an annual levy on properties worth more than $1 million that are not the owner’s primary residence, effective July 2026. Montana also introduced a higher tax rate on secondary and vacation homes, starting in 2026.

The logic is the same everywhere: luxury properties that sit empty for most of the year bear an unfairly small burden, while cities struggle with budget deficits and an affordable housing crisis.

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Market reaction and forecasts

Despite criticism from billionaires – including Ken Griffin, Bill Ackman and Kevin O’Leary – analysts give a restrained but mixed assessment of the consequences. Some analysts predict that the actual revenue could be closer to $350 million per year, rather than the reported $500 million.

Some buyers are already reorienting their search. The Staten Island and Brooklyn Heights real estate markets are seeing a surge in interest in properties in price ranges not yet subject to the new surcharge. Some are considering purchasing properties through LLCs or trusts – although lawyers warn that the law does not explicitly exempt corporate ownership from the new levy, and these schemes are under close scrutiny by regulators.

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For international investors and wealthy non-residents who have come to regard a Manhattan penthouse as an indisputable asset, 2026 marks a game-changer. And the New York City Budget Commission has already been mandated to review and adjust the valuation of all real estate in the city - because current assessments for tax purposes are significantly underestimated relative to real market prices.

The new pied-à-terre tax in New York is a vivid reminder of how quickly the rules of the game can change for property owners abroad. What seemed like a profitable investment can unexpectedly turn into significant additional costs if you do not have competent legal support nearby.

Visit World real estate lawyers specialize in precisely such situations: they analyze the current legislation of the country, check the legal purity of the object, assess all the risks of the transaction and protect you from possible fraud. Regardless of whether you are buying an apartment in New York, Dubai or Lisbon - a professional legal check is a mandatory step. Do not sign any documents without the support of a lawyer. Order legal support for a real estate transaction.

Recall! The Turkish CBI program allows you to obtain citizenship through real estate investments from $ 400,000, and most applicants choose Istanbul. Rental yields in different areas of the city differ significantly - from 3.8% to almost 15%, which significantly affects the return on investment. We have already talked about the most profitable areas of Istanbul for investments under the CBI program in 2026.

Photo - generated by Gemini

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