New York City Mayor Zohran Mamdani is weighing a controversial new tax as he aims to raise an ambitious $500 million in revenue.
However, experts warn it could have disastrous effects eerily similar to London’s now-desolate luxury housing market.
The pied-à-terre tax, championed by New York Governor Kathy Hochul, would implement a wave of taxes on second homes that could send wealthy homeowners running for the hills.
Secondary homes valued at $5 million or more would be subjected to the surcharge. Those who would be targeted would be those who live outside the city or don’t pay city tax but have luxury homes in any of the five boroughs.
But as Gea Elika, principal realtor of luxury Elika Real Estate, told the Daily Mail, even though these homes are bought for visiting, they can be easily traded for hotels.
‘People forget these are second homes,’ Elika said.
‘A pied-a-terre is a want, not a need. It’s a choice between owning a piece of the city or just booking a hotel when you’re in town. Tilt the math enough, and that choice flips overnight.’
Although the surcharge would generate an estimated $500 million annually in city revenue, London’s similar tax has led to a 20 percent drop in property value since 2015.
Elika argued that the estimated revenue for New York City would be just a fraction of its optimistic projection.
Mayor Zohran Mamdani and his wife Rama Duwaji standing in front of the city-owned $100million Gracie Mansion, where they moved into on January 12 at the start of his term
Mamdani is pushing for a pied-à-terre tax to implement taxes on second homes that could send wealthy homeowners running for the hills and generate an estimated $500million for city revenue (PICTURED: Billionaire’s Row looming over Central Park)
ELIKA Real Estate principal agent, Gea Elika, told the Daily Mail that his wealthy clients are playing the waiting game to see how far the mayor goes in his increased taxes
Instead, he argued, the city would bleed out ‘the transfer taxes, mansion taxes and the building jobs that disappear when ownership stops being active.’
Take the British capital’s once-booming market, which has cooled as wealthy buyers and landlords exited, pushing rents to record highs.
Among those who have pulled out of London’s real estate market are international buyers, who at the city’s height made up half of homebuyers.
February’s numbers showed how sharp the decline has gotten, with sales transactions across the city dipping 31.2 percent compared to the previous year’s 10 percent drop, according to property analysts LonRes.
London’s luxury housing market is taking a major hit, with sales of homes over $6.8 million plummeting 55 percent, forcing sellers to slash prices by an average of 13 percent as inventory remains stagnantly high.
A London-based realtor told the NY Post that the higher tax led to the exodus and that current homeowners who bought in circa 2017 are having to sell for a loss.
Now, fears among business owners in New York City are growing over the mayor’s intentions to pursue the tax increase, with Partnership for New York City issuing a statement last week urging caution.
‘A surcharge that discourages high-end nonresident purchases or causes those buyers to bid lower could erode property assessments and transfer tax receipts citywide, potentially offsetting much or all of the projected $500 million gain,’ they wrote.
Pictured, from left to right: The 10, 15, 30, and 55 Hudson Yard skyscrapers, which offer apartments priced between $1 to $20 million
The pied-à-terre tax is also being championed by New York Governor Kathy Hochul
The group emphasized the mayor should focus on a solution ‘grounded in evidence’ rather than ‘politics or assumptions’.
Elika says her wealthy clients are playing the waiting game.
‘Mamdani’s rhetoric is predictable, and the buyers I represent are responding accordingly,’ he said.
‘Most of my clients are sitting on the sidelines, waiting to see just how far this administration is willing to swing.’
This bid for a surplus in city revenue comes as Mamdani is also exploring a controversial plan to delay billions in pension payments as City Hall scrambles to plug a growing budget hole.
The proposal – now under discussion with state officials – would allow the city to push back retirement contributions into its vast municipal pension system, freeing up at least $1 billion in the next fiscal year.
But critics warn the move amounts to little more than kicking the can down the road. It would swap short-term relief for a far bigger bill later, and risk problems that have pushed big cities to crisis in the past.
The city currently faces a $7.1 billion budget gap. As Mamdani resists significant spending cuts, he is considering delaying required payments to city pension funds as a temporary fix.
Elika said that if his wealthy clients were to sell their properties and take their money with them, that the estimated $500 million would fall short
For the mayor, the potential upside of delaying payments is short-term relief from a projected $5.4 billion deficit through June 2027.
He has sought to close that gap with a series of risky and politically unpopular proposals, including tapping the city’s reserves and raising property taxes.
He is also urging Governor Hochul to increase income taxes on wealthy residents – a proposal popular among Democratic state lawmakers but unlikely to win her support – and requesting additional state aid as he navigates his first budget as mayor.
The Daily Mail has reached out to Hochul and Mamdani’s offices for comment.
