The Pied-à-Terre Tax Is Back: What the Bills Say, What Changed, and What Albany Still Has to Fix

For more than a decade, New York legislators have been circling the same basic idea: New York City should be allowed to impose an additional property tax on very high-value residential properties that are not used as primary residences. The proposal has appeared in successive legislative sessions since 2013-2014, and the core policy target has remained remarkably consistent: expensive New York City residential property that is used as a second home, investment asset, or occasional landing pad rather than as someone’s primary home.

What has changed is the machinery. The early bills were simple. The later bills are more administrable, but also raise harder technical questions. And now that Governor Hochul has publicly proposed a $500 million annual pied-à-terre tax on luxury second homes valued at $5 million or more, the unresolved details matter much more. The Governor’s announcement describes the tax as aimed at luxury second homes in New York City valued at $5 million or more, expected to raise at least $500 million annually, and applying only where the home is not the owner’s primary residence, not rented to a primary resident, and not occupied by the owner’s family. The Mayor’s Office framed the proposal similarly, as an annual surcharge on one- to three-family homes, condominiums, and co-ops valued above $5 million where the owner has a separate primary residence outside New York City.

That public framing creates the central question for any final enacted version: is this a tax on non-primary residences, or a tax on non-New York City residents who own luxury homes here? Those are not always the same thing.

The first generation: a simple $5 million market-value surcharge

The original 2013-2014 bill, A10192/S7941, would have added a new RPTL § 307-b authorizing New York City to impose an additional tax on certain residential properties. It applied to class one properties, excluding vacant land, and residential condominium and cooperative property with a market value of $5 million or more, where the property was not the primary residence of the owner or the owner’s parent or child.

The early bill used a fixed statutory rate table. It started at 0.5% of excess value over $5 million, then rose through brackets, topping out at 4% of excess value above $25 million. It also defined market value as the current monetary value of the property using a comparable-sale-based valuation method as determined by the Department of Finance.

The early bills also tied primary residence to STAR. The property would be deemed the owner’s primary residence if it would be eligible for the RPTL § 425 STAR exemption, regardless of whether the owner actually applied for or received STAR. Proof of primary residence and relationship to the owner would be handled through certification required by local law or DOF rule.

That STAR cross-reference was important because it supplied a familiar property-tax concept of primary residence. But it also created potential confusion. STAR itself is not merely a definition of primary residence; it is an exemption statute with its own ownership, income, application, discontinuance, and review rules. RPTL § 425 provides that the property must serve as the primary residence of one or more owners, but it also contains income limitations, administrative processes, and burden-of-proof language that may not fit a luxury pied-à-terre tax.

The original bills also had teeth. The 2013 bill contained a standalone penalty section imposing personal liability for certain willful or fraudulent noncompliance and authorizing a $10,000 penalty tax for a material misstatement discovered within three years.

2015-2018: same concept, new dates

The 2015-2016 and 2017-2018 bills largely repeated the original model. They retained the $5 million market-value threshold, the fixed rate table, the class one / condo / co-op universe, and the STAR-based primary-residence concept. The main changes were timing changes: the 2015 amended bill moved the applicable fiscal year forward, and the 2017 bill applied to fiscal years beginning on or after July 1, 2018.

So through 2018, the proposal had not really matured. It had simply been reintroduced.

2019: the turning point

The 2019-2020 bill cycle is where the proposal changed materially. A4540 had multiple versions, including an A version and a B version. By the B version, the bill no longer looked like a single market-value surcharge. It became a more technical framework for different property types.

The modern structure applies to “residential properties and dwelling units,” not just residential properties. For one-, two-, and three-family residences, it uses a “five-year average market value,” defined as the average monetary value for the previous five years using a comparable-sale-based method as determined by DOF. For condominiums, the trigger is assessed value of $300,000 or more. For co-ops, the trigger is assessed value attributable to a tenant-stockholder of $300,000 or more.

The rate structure also changed. Instead of one fixed table, the modern bill authorizes a tax of at least 0.5% and no more than 4% of excess market value above $5 million for one-, two-, and three-family residences. For condos and co-ops, it authorizes a tax of at least 10% and no more than 13.5% of excess assessed value above $300,000. The local legislative body may establish a graduated rate schedule within those limits.

The exemption structure also matured. The later bills require exemptions for properties or dwelling units that are the primary residence of at least one owner, the primary residence of a parent or child of an owner, rented full-time to tenants for whom the property or unit is their primary residence, and — for certain condos and co-ops — supported by an appraisal showing a value below $5 million.

That full-time rental exemption is central to the current politics. The proposal is no longer simply “tax expensive non-primary residences.” It is closer to “tax expensive residential capacity that is not being used as a primary home by the owner, family, or tenant.”

2021-2026: the modern structure stabilizes

The 2021-2022, 2023-2024, and 2025-2026 versions preserve the post-2019 structure. The current A1044 keeps the same property-type distinctions, the same $5 million five-year average market-value trigger for one-, two-, and three-family residences, the same $300,000 assessed-value trigger for condos and co-ops, the same appraisal escape hatch, and the same full-time rental exemption. It moves the effective fiscal-year date to fiscal years beginning on or after July 1, 2026.

The current bill also delegates administration. It says the tax may be imposed, administered, collected, and enforced by the Commissioner of Finance in the same manner as other City taxes, unless otherwise provided by local law. It also leaves proof of exemption to local law or DOF rules.

That delegation is useful, but it leaves major implementation questions unanswered.

Open question 1: how does a taxpayer protest value or non-primary-residence status?

The bills do not create a dedicated protest process for pied-à-terre determinations. They do not say how an owner challenges DOF’s five-year average market value, how a condo or co-op owner challenges the $300,000 assessed-value threshold, how a co-op shareholder disputes the assessed value attributed to the shareholder, or how an owner challenges a denial of primary-residence, family-occupancy, rental, or appraisal-based exemption status.

Existing NYC assessment review procedures do some of this, but not all of it. The City’s Tax Commission process allows owners to seek correction of the tentative assessment; class one applications generally run from January 15 to March 15, and other property classes from January 15 to March 1. A Tax Commission appeal may be filed for excessive assessed value, wrong tax class, or certain denied or revoked exemptions, but it also says the Tax Commission process is not for disputing market value or abatement denials.

Most tax class two co-op and condo buildings already file Tax Commission protests of the assessed value of the whole building. Residential condo units in one building usually file together in one application, rather than separate applications per unit. Without additional resources, the Tax Commission could not handle a large increase in the number of individual apartment protests.

That is not a perfect fit. A pied-à-terre surcharge may involve a value determination that is not the same as the ordinary assessed value, and a residency determination that is not an ordinary assessment issue. A final law should therefore provide a clear notice and protest path for four things: valuation, unit allocation, exemption eligibility, and penalties.

Open question 2: what happened to the STAR primary-residence test?

The early bills expressly mirrored STAR. The owner’s primary-residence status was determined by whether the property would be eligible for the RPTL § 425 exemption, even if the owner had not applied for or received STAR.

The current A1044 no longer uses that STAR cross-reference. It simply requires an exemption for property or a dwelling unit that is the primary residence of at least one owner, the primary residence of a parent or child, rented full-time to a primary-resident tenant, or — for certain condos and co-ops — shown by appraisal to be worth less than $5 million. Proof is left to local law or DOF rules.

That is probably a good change. STAR is useful as a concept, but it is an awkward statute to import wholesale into a luxury-property surcharge. A high-income owner may clearly use a $5 million home as a primary residence even if that owner would not be eligible for STAR for income or administrative reasons. The modern bills avoid that trap by decoupling primary residence from STAR eligibility.

The downside is that the modern bills are less specific. RPTL § 425 contains burden-of-proof and review language for STAR discontinuance. It says the burden is on the owner to establish primary residence, and owners are entitled to seek administrative and judicial review of discontinuance as provided by law. Once the pied-à-terre bill drops the STAR cross-reference, that procedural apparatus is not automatically imported.

Open question 3: could the co-op/condo abatement become the practical primary-residence test?

A final enacted law may use the co-op/condo abatement system as a practical shortcut. That would make sense because the City already collects primary-residence information for co-op and condo abatement purposes.

The co-op/condo abatement requires class 2 status, and at the unit level DOF says the unit may be eligible if it is the owner’s primary residence, the owner does not own more than three residential units in the development, the owner is not receiving the clergy exemption, and the unit is not owned by a business such as an LLC or held by a sponsor, subject to limited exceptions. DOF also states that the board or managing agent applies on behalf of the development, and the owner certifies primary residence to the board or agent. RPTL § 467-a likewise contemplates that unit owners and shareholders may be required to submit information to verify primary residence.

But abatement eligibility should not be the whole test. A person can genuinely live in a unit as a primary residence and still fail the abatement rules for reasons unrelated to occupancy, including LLC ownership, sponsor status, ownership of multiple units, or building-level filing problems. The better final rule would be that co-op/condo abatement primary-residence certification creates a safe harbor or rebuttable presumption against pied-à-terre taxation, while failure to receive the abatement does not automatically make the unit taxable.

Open question 4: does $300,000 of condo/co-op assessed value really equal $5 million of market value?

The $300,000 assessed-value trigger is best understood as a proxy, not a true equivalency.

The math is this: class 2 property is assessed at 45% of DOF market value. So $300,000 of assessed value corresponds to roughly $666,667 of DOF market value. For that to equal a $5 million sales-based market value, DOF market value must be about 0.133 of true or sales-based value.

That sounds low, but the Property Tax Reform Advisory Commission’s final report shows why the proxy exists. The Commission noted that some members supported state legislation increasing property taxes on properties with market value exceeding $5 million that are not primary-resident owner occupied, and its footnote specifically observed that newer versions of the bills use assessed-value thresholds for condos and co-ops because those properties are not currently valued through a comparable-sales model.

The Commission’s data shows that high-end condo and co-op DOF values capture only a fraction of sales-based value. For co-ops, the FY2021 median ratio of DOF value to sales-based value was 0.16 for $5 million to $7.5 million units, 0.13 for $7.5 million to $10 million units, and 0.11 for units over $10 million. For class 2 condos, the FY2021 median ratios were 0.17, 0.15, and 0.12 for those same value bands. And these ratios may be different by borough.

So $300,000 AV is not a clean translation of $5 million market value. It is a screen. It may overinclude some units below $5 million and underinclude some above $5 million. That is why the appraisal escape hatch is important. The current A1044 exempts a condo or co-op unit with AV at or above $300,000 if the owner obtains a qualifying appraisal within the prior three years showing that the property or unit is worth less than $5 million.

Open question 5: class 2C caps are probably manageable — but the final law should say “market AV”

For tax class 2C co-ops and condos, the capped actual or billable assessed value should not be the main concern. DOF likely would use something closer to “market AV” — DOF market value multiplied by the 45% class 2 assessment ratio — rather than the cap-limited value on which ordinary taxes are calculated.

DOF’s own materials draw that distinction. DOF states that assessed value generally equals market value times the assessment ratio, but for class 1, 2A, 2B, and 2C properties, assessed value is modified by caps. It also defines “effective market value” for capped class 2A, 2B, and 2C properties by dividing capped assessed value by 45%. DOF’s class 2 guide explains that for class 2 properties with 10 or fewer units, assessed value increases cannot exceed 8% in one year or 30% over five years, so the assessed value is the lower of 45% of market value or the capped amount.

The current bill’s text, however, just says “assessed value.” A final law should clarify that the $300,000 condo/co-op screen uses uncapped market AV, not capped billable or taxable AV. That is not a fatal problem; it is a drafting point.

Open question 6: co-op buildings with valuable retail can distort the co-op allocation

The current co-op language defines assessed value attributable to a tenant-stockholder as the shareholder’s proportional share of the assessed value of real property owned by the cooperative corporation, based on the shareholder’s shares relative to total outstanding stock.

That can misfire in a mixed-use co-op. If the co-op corporation owns valuable ground-floor retail, garage space, signage income, or other commercial components, allocating the entire parcel assessment by residential shares could inflate the assessed value attributable to an apartment. The apartment may cross the $300,000 threshold not because the apartment is actually a $5 million residence, but because the shareholder is being allocated a slice of valuable nonresidential property.

A final law should require a residential-only allocation before applying the shareholder-share formula. In other words, the taxable base should be the residential assessed value attributable to the apartment, not the apartment’s pro rata share of retail value. This solution would require DOF to value different uses separately in a co-op, which is something DOF doesn’t already do.

Open question 7: mixed-use class 1 buildings raise the same problem

This issue is not limited to co-ops. Class 1 includes one-, two-, and three-family residential real property, including predominantly residential buildings with up to three units that may contain nonresidential spaces. DOF’s own definitions say class 1 includes most residential property of up to three units, including small stores or offices with one or two apartments attached.

That means an apartment-over-store building can be class 1. If that property has a $6 million or $7 million DOF market value because of the commercial component, should it be treated as a $5 million luxury residence? As drafted, A1044 does not answer that. It simply refers to one-, two-, or three-family residences with a five-year average market value of $5 million or higher.

The final law should either exclude mixed-use class 1 properties unless the residential portion alone exceeds $5 million, or require DOF to allocate value between residential and commercial components.

Open question 8: two- and three-family homes are not measured on an average-value-per-unit basis

This is one of the biggest drafting issues.

A1044 treats one-, two-, and three-family residences the same. The threshold is a five-year average market value of $5 million or more. The bill does not say $5 million per dwelling unit. It does not say $10 million for a two-family or $15 million for a three-family.

So, as drafted, a $6 million two-family house is over the threshold even though the average value per unit is only $3 million. A $9 million three-family house is over the threshold even though the average value per unit is also only $3 million.

That does not fit neatly with the public narrative of taxing “$5 million second homes.” The final law should decide whether the taxable object is the tax lot or the dwelling unit. The fairest answer is probably an allocation rule: tax only the non-primary, non-rented dwelling unit whose allocated residential value exceeds $5 million. A blunt property-level rule overincludes two- and three-family homes; a blunt average-value rule may underinclude buildings where one unit is clearly a luxury residence and the other units are not.

Open question 9: in rem or in personam?

One of the most important implementation questions is whether the pied-à-terre surcharge will be treated as a real-property charge against the parcel or unit, or as a personal tax imposed on the owner.

The current bill does not answer that question expressly. It authorizes the City to impose an additional tax on certain residential properties and dwelling units, and says the tax may be imposed, administered, collected, and enforced by the Commissioner of Finance in the same manner as other taxes administered by that Commissioner, unless otherwise provided by local law. That language gives the City flexibility; it does not, by itself, decide whether the tax is in rem or in personam.

The better argument for a property-tax-style surcharge comes from the structure of the bill, not merely from DOF administration. The tax is in the Real Property Tax Law, applies by reference to real property classifications and assessed values, and is triggered by the value and use of particular residential properties or dwelling units. For one-, two-, and three-family homes and condominiums, the administratively simplest model would be to place the charge as a separate line on the property tax bill. NYC property tax bills already show current and past-due property tax charges, other property-related charges, exemptions, abatements, credits, and general tax-calculation information.

Co-ops are harder. The bill says the additional tax attributable to each tenant-stockholder shall be added by the cooperative apartment corporation to amounts otherwise payable by or chargeable to that tenant-stockholder. That suggests a hybrid: DOF determines the co-op-unit-level surcharge, but the co-op corporation passes the charge through to the affected shareholder.

A final enacted law should say expressly whether the surcharge is: (1) an in rem real property tax lien; (2) an in personam tax on the owner; or (3) a hybrid, especially for co-ops. The answer affects billing, interest, lien priority, tax-lien-sale exposure, refund claims, mortgage escrow treatment, co-op board collection rights, and whether a taxpayer must pay first and challenge later.

Open question 10: is primary residence a 184-day test?

Not necessarily.

For income-tax purposes, New York City residency follows the State residency model. A taxpayer is a NYC resident if domiciled in New York City, or if the taxpayer maintains a permanent place of abode in the City and spends 184 days or more there during the taxable year. Any part of a day counts, and the taxpayer does not need to be present at the permanent place of abode for that day to count.

But a property-tax primary-residence test is not necessarily the same thing as income-tax statutory residency. A person can be a NYC statutory resident for income-tax purposes and still have a factual dispute over which particular home is the person’s primary residence. Conversely, a person can spend substantial time in a property without that property being the person’s primary residence.

This matters because the Governor’s announcement says the tax is aimed at people who own luxury homes but do not live in the City or pay City income tax. That framing is narrower than the current A1044 text, which is a non-primary-residence property tax, not expressly a nonresident-owner tax.

Open question 11: can NYC have it both ways?

This may become the most interesting litigation issue.

In income-tax audits, the City and State may benefit from arguing that a taxpayer is a New York City resident because the taxpayer maintained a permanent place of abode and spent 184 or more days in the City. For pied-à-terre purposes, the City may benefit from arguing that the same taxpayer’s New York City home is not the taxpayer’s primary residence.

Those positions are not always legally inconsistent. Income-tax statutory residency and property-tax primary residence are different legal tests. But they are politically and factually awkward. If NYC successfully taxes someone as a City resident on worldwide income, that should at least be strong evidence against taxing that same residence as a pied-à-terre.

A final law should include a coordination rule. A sensible rule would say that a final determination that an owner was a NYC resident for personal income-tax purposes creates a rebuttable presumption that the NYC dwelling used as the permanent place of abode is not subject to the pied-à-terre surcharge for the corresponding period. That would prevent inconsistent factual positions without giving taxpayers a free pass on multiple luxury homes.

The two-NYC-home hypothetical

Assume a taxpayer owns two New York City homes, each worth more than $5 million. The taxpayer spends 100 days per year in each, for a total of 200 New York City days. The taxpayer has no other home outside the City.

Under an income-tax analysis, the taxpayer may well be a NYC resident because the taxpayer spent 184 or more days in the City and maintained a permanent place of abode. But under A1044, there is no blanket exemption for “NYC income-tax residents.” The exemption is for a property or dwelling unit that is the primary residence of at least one owner, the primary residence of a parent or child, rented full-time to a primary-resident tenant, or qualifying under the condo/co-op appraisal rule.

So the taxpayer should not automatically get both homes exempt. The likely answer is that one home should be designated or proven as the primary residence, and the other could be subject to the pied-à-terre tax unless independently exempt. If the taxpayer truly splits time evenly between two homes, the final law should provide a designation rule rather than letting DOF argue that neither is primary.

That is especially important if the enacted law follows the Governor’s public framing. If the tax is meant to reach nonresidents who do not pay NYC income tax, then a NYC resident taxpayer should have a strong argument that at least one NYC home must be treated as a primary residence.

What a final enacted version may look like

A final law may look more like A1044 than the original 2013 bill. If it remains an enabling statute authorizing New York City to enact a local surcharge, then that will delay implementation as the City Council will need to hold hearings and votes on the final local law. The final law will likely keep the $5 million policy threshold, the full-time rental exemption, the family-occupancy exemption, the $300,000 condo/co-op assessed-value screen, and the appraisal escape hatch. It will likely allow the City to set graduated rates within statutory limits so the rate structure can be calibrated to the Governor’s stated $500 million revenue target.

But the final law should do more than authorize the tax. It should answer the technical questions that will determine who is actually taxed:

1. whether the condo/co-op $300,000 threshold uses market AV and should the threshold vary by property type and by borough;
2. whether co-op retail value is excluded before allocating AV to shareholders;
3. whether mixed-use class 1 properties are tested only on residential value;
4. whether two- and three-family homes are tested property-wide, per unit, or by allocation;
5. whether co-op/condo abatement primary-residence certification creates a safe harbor;
6. whether NYC income-tax residency creates a presumption against pied-à-terre treatment;
7. whether one owner with multiple NYC homes may designate one primary residence;
8. what administrative protest and judicial review procedures apply;
9. whether the surcharge is imposed in rem on the property, in personam on the owner, or through a hybrid structure — especially for co-ops.

Bottom line

The pied-à-terre tax has evolved from a simple fixed surcharge into a more sophisticated non-primary-residence property-tax regime. The policy target has stayed the same: high-value New York City homes that are not functioning as primary residences. But the drafting has moved from a broad market-value concept to a property-type-specific system built around five-year average market value for one- to three-family homes and assessed-value proxies for condos and co-ops.

The modern proposal is more administrable, but also more fragile. The hard part will not be saying “tax $5 million second homes.” The hard part will be deciding what counts as a $5 million home, what counts as a primary residence, how to treat mixed-use and multi-unit properties, and whether the City can call someone a resident for income-tax purposes while calling the person’s home a pied-à-terre for property-tax purposes.

That is where the final legislation will either succeed or fail.

 

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