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New York has done something it has talked about for over a decade — it has finally passed a pied-à-terre tax. On May 28, 2026, Governor Kathy Hochul signed the 2026–2027 New York State Budget into law, and tucked inside it was a measure already reshaping conversations across the city’s luxury real estate market: an annual surcharge on high-value residential properties that are not used as a primary residence.
If you own a second home in New York City — or you are thinking of buying one — here is what the law actually says, who it affects, and what it means for the city going forward.
AUTHOR YURIY MOSHES, ESQ
Founding Member of Moshes Law, P.C.
During his years of practice, Yuriy has concentrated in litigation
and real estate transactions as his areas of expertise
If you own a second home or luxury property in NYC, a New York real estate attorney can help you understand your obligations and protect your interests under the new law.
A pied-à-terre (French for “foot on the ground”) is a secondary or part-time residence — typically a city apartment or townhouse — that is not the owner’s primary home. In New York City, the term describes properties owned by wealthy non-residents, business travelers, or part-time residents who maintain their main home in another state or country but keep a place in the city for occasional use.
New York’s pied-à-terre tax is an annual surcharge on NYC residential property that is not the owner’s primary residence. Signed into law on May 28, 2026, as part of the state’s 2026–2027 budget, it takes effect July 1, 2026, and is scheduled to expire June 30, 2031. It is the first tax of its kind in New York State history.
Governor Hochul proposed the measure on April 15, 2026, framing it as a fairness issue. “If you can afford a $5 million second home that sits empty most of the year, you can afford to contribute like every other New Yorker,” she said. The State estimates the tax will generate at least $500 million per year in new revenue for New York City — money intended to help close a significant municipal budget gap without cutting services or raising taxes on full-time residents.
The NYC Comptroller’s independent April 2026 analysis offered a more cautious estimate: $340 million to $380 million annually, noting that some owners would likely rent out their properties, restructure ownership, or sell in response to the surcharge — all of which would reduce the taxable pool.
The law is administered by the New York City Department of Finance (DOF), which is responsible for identifying covered properties, notifying owners, and collecting the surcharge.
The tax applies to three categories of NYC residential property not used as a primary residence:
Rental apartment buildings, commercial properties, hotels, vacant land, new construction without a certificate of occupancy, and unsold sponsor units are all excluded.
Two distinctions worth understanding:
Rental buildings are fully outside the scope. A standard NYC rental building — regardless of its value — is not subject to the surcharge.
This is not the Mansion Tax. The existing mansion tax is a one-time transfer tax paid at closing. The pied-à-terre tax is an annual recurring charge. Buyers of high-value pied-à-terres could owe both: the mansion tax once when they purchase, and the pied-à-terre surcharge every year thereafter.
The tax applies to any “covered owner” of a qualifying property that is not used as a primary residence. This includes individual homeowners, condo unit owners, co-op tenant-stockholders, sole beneficial owners of trusts, and majority partners, shareholders, or members of LLCs, partnerships, or corporations that hold covered property.
The tax is not limited to out-of-state residents. Several groups may be affected that are not immediately obvious:
New York State residents outside NYC. Someone whose primary home is in Westchester, Long Island, or upstate New York — but who also owns a Manhattan apartment they use occasionally — may be subject to the surcharge if they do not pay NYC income taxes.
LLC and corporate owners. If a property is held through an LLC where no single individual holds a majority interest, no primary residence exclusion applies. The property is subject to the surcharge unless it is rented to a qualifying tenant under an arm’s-length lease of at least one year.
Trust owners. For properties held in trust, the beneficial owner is treated as the covered owner — but only if that person is the sole beneficiary. Properties held in trusts with multiple beneficiaries sit in a legal grey zone the statute does not clearly address.
NYC residents who already pay full New York City and State income taxes are generally not affected, even if they own additional properties — though they can only designate one property as their primary residence.
The pied-à-terre tax is structured in two phases with different rates and valuation methods.
| Property Type | Value Threshold | Annual Surcharge Rate |
|---|---|---|
| 1–3 Family Homes | $5M – $15M | 0.8% |
| 1–3 Family Homes | $15M – $25M | 1.05% |
| 1–3 Family Homes | Over $25M | 1.3% |
| Condos & Co-ops | $1M – $3M | 4.0% |
| Condos & Co-ops | $3M – $5M | 5.25% |
| Condos & Co-ops | Over $5M | 6.5% |
Phase 1: July 1, 2026 – June 30, 2028
The rate gap between single-family homes and condos/co-ops is intentional. NYC currently assesses condos and co-ops using a rental income model rather than actual sales prices — meaning a condo worth $10 million on the open market might carry an assessed value of only $500,000 to $1.5 million. The lower threshold and higher rates for condos and co-ops are designed to produce a roughly equivalent real tax burden despite these assessment gaps.
Phase 2: July 1, 2028 – June 30, 2031
Starting July 1, 2028, all property types share the same $5 million threshold and the same rates: 0.8% ($5M–$15M), 1.05% ($15M–$25M), and 1.3% (over $25M). The DOF is required to develop a comparable-sales valuation model for condos and co-ops to make this possible. As of the time of writing, that methodology has not been released — and notably, New York City has not successfully implemented such a system in over 30 years since similar reform was first attempted.
| Date | What Happens |
|---|---|
| May 28, 2026 | Law signed by Governor Hochul |
| July 1, 2026 | Surcharge takes effect (retroactive to January 1, 2026) |
| August 30, 2026 | DOF must issue primary residence determinations |
| January 1, 2027 | First surcharge payment due |
| July 1, 2028 | Phase 2 begins — new valuation model for condos/co-ops |
| June 30, 2031 | Scheduled sunset date |
Several significant legal and administrative questions are unresolved.
Legal challenges. Multiple law firms have flagged potential state and federal litigation — on constitutional grounds (whether New York can tax out-of-state residents solely based on property ownership) and on procedural grounds (the law was enacted without public hearings). Owners’ ability to contest DOF determinations is limited: challenges are restricted to the NYC Tax Commission and Article 7 proceedings, foreclosing direct court access.
Phase 2 readiness. The DOF must implement a comparable-sales methodology for condos and co-ops by June 30, 2028 — a reform the city has attempted and not completed in over 30 years. The law does not specify a contingency if the methodology is not ready by that date.
Complex ownership structures. The statute does not clearly address tiered structures such as trusts holding majority LLC interests, or properties with multiple trust beneficiaries. DOF guidance is expected but has not been issued.
Revenue projections. The gap between the State’s $500 million estimate and the Comptroller’s $340–$380 million range will ultimately be determined by how many owners rent, restructure, or sell in response to the surcharge.
New York’s pied-à-terre tax is real, it is law, and it starts this July. It represents the most significant change to New York City’s luxury residential property tax landscape in recent memory — arriving at a moment when the city is navigating real fiscal pressure and a real debate about who bears the cost of living in one of the most expensive cities on earth.
The policy argument is clear: those who benefit from what New York City offers should contribute to what makes it function. The implementation details — valuation methodology, co-op collection mechanics, ownership structure ambiguities, and constitutional questions — remain works in progress.
For property owners, the window to understand your exposure and prepare your documentation is short. The DOF’s first round of determinations arrives in August. That clock is already running.
Not exactly. A pied-à-terre is an urban secondary residence used for work or convenience. A vacation home is typically leisure-focused and outside the city. Under the new law, the label does not matter — what counts is whether the property qualifies as the owner's primary residence.
No. The Mansion Tax is a one-time transfer tax paid at closing. The pied-à-terre tax is an annual surcharge. Owners of high-value second homes could owe both — the Mansion Tax once at purchase and the pied-à-terre surcharge every year after.
No. It applies to qualifying residential properties across all five boroughs — Manhattan, Brooklyn, Queens, the Bronx, and Staten Island.
Not necessarily. If the property is rented under an arm's-length lease of at least one year to a tenant who occupies it as their primary residence, it may be exempt. Short-term or informal arrangements are unlikely to qualify. Legal advice is recommended before relying on this exemption.
The DOF must issue initial determinations by August 30, 2026. If your property is flagged, you will have a limited window to contest it. Missing that deadline makes the determination final for the 2026–2027 fiscal year.
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