Mamdani’s tax on high-end second homes survives legal challenge for now

By Gloria Pazmino, CNN

New York (CNN) — New York Mayor Zohran Mamdani secured a significant win Wednesday after a panel of Brooklyn appellate judges ruled his administration can resume plans to collect a new tax on high-end second homes.

The policy, also known as the “pied-à-terre tax,” is a key part of Mamdani’s affordability agenda that seeks to tax the city’s wealthiest residents.

For weeks, it was unclear whether the city would be able to continue rolling out the tax after a Staten Island judge ruled in favor of property owners who sued the city, saying it had mismanaged the implementation of the tax.

Wednesday’s ruling reverses the judge’s ruling after the panel found the property owners did not have legal standing, saying they had failed to demonstrate injury as a result of the city’s actions.

“Today, an appeals court rejected an attempt by the ultrawealthy to avoid paying their fair share and ruled in favor of the City in a lawsuit challenging the rollout of the pied-à-terre surcharge,” Mamdani said in a statement. “From day one, those with the most have attempted to use every legal avenue available to shield their wealth and avoid contributing more to our city.”

The pied-à-terre tax imposes a surcharge on New York City properties that are not used as primary residences and are valued at more than $5 million. The tax also targets co-ops valued at $1 million or more. The surcharge does not apply if the home is rented or if a relative of the owner lives in the home a majority of the time.

The tax, endorsed by Gov. Kathy Hochul, was first unveiled in Mamdani’s fiscal year 2027 budget proposal as a way to help close the city’s budget gap.

Despite Wednesday’s ruling, the tax still faces legal challenges, with two other pending lawsuits that seek to invalidate the tax itself. Both suits challenge the law on the grounds that it violates state constitutional limits on the amount of revenue the city can collect annually through real estate taxes. The suits also argue the tax is discriminatory under the US Constitution because it applies only to out-of-state property owners.

Randy Mastro, an attorney representing the property owners who brought the initial lawsuit against the city, did not dispute the legality of the tax itself but sought to challenge how the city implemented it. Mastro alleged the city had wrongly flagged the property owners’ homes as potentially subject to the surcharge even though the properties were their primary residences.

Mastro issued a statement warning the legal challenges against the tax are not over.

“What the City has done here is unconscionable — trying to ensnare thousands of people who don’t owe this surcharge into having to prove they live in their own homes or else have to pay it,” Mastro said.

“But now, this lawless and chaotic data collection scheme will go unremedied. To be clear, though, the ultimate day of reckoning for this ‘pied-a-terre’ surcharge will occur next month when its constitutionality will be decided. We remain confident we will prevail and put an end to this unconstitutional surcharge altogether.”

The city’s pied-à-terre tax is expected to yield an estimated $500 million in annual revenue.

Mamdani said he was “heartened” by the appellate division’s ruling and said his administration would continue to defend the tax law against “ongoing challenges in Suffolk County — brought by some of the same uberwealthy interests whose arguments just lost in court today.”

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