10
Loading video...
By Giulia Carbonaro
Senior Reporter
0
Share
Newsweek is a Trust Project member
See more of our trusted coverage when you search.Prefer Newsweek on Googleto see more of our trusted coverage when you search.
An appeals court on Wednesday ruled that New York City Mayor Zohran Mamdani’s administration can proceed with the rollout of its controversial pied-à-terre tax, which targets certain high-value properties used as second homes.
The ruling reversed a previous decision by a lower court which concluded that the Mamdani administration mishandled the initial rollout of the tax, giving the Democratic socialist a major legal win for a key piece of his progressive agenda.
What Is the Pied-à-Terre Tax About?
The tax was proposed by Mamdani and New York Governor Kathy Hochul, a Democrat, in April. The proposal emerged as something of a compromise between the two, as the mayor earlier this year said he was ready to consider raising property taxes in New York City by 9.5 percent as a “last resort” to close the city’s projected multibillion-dollar budget if Albany did not introduce higher income taxes on the city’s richest residents.
Read More on News
It was then introduced as part of the New York State’s 2026 budget as the Non-Primary Residence Surcharge.
...
The new tax adds a surcharge on high-value non-primary homes, second homes kept for occasional use for non-residents who want a “foot on the ground”—a literal translation of the French “pied-à-terre.” These properties include one- to three-family residences with a market value of at least $5 million and residential condominiums and cooperative (co-op) units with a market value of at least $1 million.
The tax took effect on July 1, though homeowners affected can expect the tax to first appear on the property tax bill of January 1, 2027.
The city has estimated that the tax could affect 13,000 properties in the city and generate approximately $500 million annually, although the actual revenue remains uncertain.
Related Story
Mamdani’s Trump Playbook May Be Democrats’ Best Tool to Get Stuff Done
The Legal Fight Over the Tax
In August, a group of New York City homeowners filed a lawsuit objecting to the way the city’s Department of Finance was identifying potentially taxable properties.
The city published a list of approximately 900,000 potentially affected properties, and some 17,000 owners received notices suggesting that they may owe the surcharge, something that owners argued effectively required them to prove their properties were primary residences. Some said they were incorrectly identified as taxable.
On September 29, Judge Wayne Ozzi, a Democrat on the state Supreme Court, sided with the homeowners who challenged the tax implementation, ruling that the city failed to follow required procedures before mailing tax notices to those who could be affected. He also found that the rollout violated their due process rights.
“No crime is involved here, homeowners are being substantially harmed and penalized needlessly by DOF’s method of implementing the tax law,” Ozzi wrote in the ruling.
The judge ordered the Mamdani administration to remove the supplemental property list, cancel the notices, and redo the notification process using more accurate information.
The city immediately appealed the ruling, which did not strike down the tax itself.
...
“Today’s decision is wrong, and we will invoke a stay of the injunction. With a stay, we will continue implementing the surcharge fairly, efficiently and in full compliance with the law, as we have since day one,” Matt Rauschenbach, a spokesperson for the mayor, previously told Newsweek in an emailed statement.
The city appealed and the ruling was stayed, allowing the implementation of the tax to continue while the legal challenge went on.
Newsweek contacted Mamdani’s office and Randy Mastro, a lawyer representing the homeowners who brought the lawsuit, for comment by email on Thursday.
What the Appeals Court’s Ruling Means
On Wednesday, the appeals court reversed Ozzi’s September ruling and dismissed the homeowners’ lawsuit against the city. According to the court, the homeowners did not demonstrate sufficiently concrete harm from receiving notices or having their properties included on a preliminary public list.
The ruling was celebrated by Mamdani, who wrote in a statement: “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. 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.”
While this is a significant win for the mayor’s administration, removing a major obstacle in the way of the tax’s implementation, the court did not rule that the city’s administrative process was correct.
That is important because Mamdani administration is still facing a constitutional challenge to the tax, still pending, pushed forward by casino entrepreneur Steve Wynn and former U.S. Commerce Secretary Wilbur Ross.
The two argue that the tax discriminates against non-resident property owners, potentially violating the U.S. Constitution’s Privileges and Immunities Clause, and interferes with interstate commerce, potentially violating the Dormant Commerce Clause. They have questioned whether it can be permitted under constitutional rights, and argued that the surcharge may violate restrictions on the amount of real estate tax revenue that can be collected.
Arguments over the lawsuit are scheduled for December.
Contact Newsweek editors on this story: Matthew Robinson and Dave Siminoff.
View 0 Comments
Submit Correction
View Editorial & AI Guidelines