New York passes the “pied-a-terre” tax: who pays and how much

New York City's new second-home tax (the pied-a-terre tax) is expected to sharply raise property tax bills for many wealthy luxury apartment owners. State lawmakers passed the tax on Wednesday to help close the city's budget gap.

The tax will apply to nonprimary residences valued at $1 million or more and is expected to raise about $500 million in revenue.

The 220 Central Park South building, center, stands in New York, U.S., on Wednesday, Jan. 23, 2019.
The 220 Central Park South building, center, stands in New York, U.S., on Wednesday, Jan. 23, 2019. Just days after buying one of the most expensive residential properties in London, Citadel founder Ken Griffin set a U.S. record with the $238 million penthouse at 220 Central Park South.

Phased rollout: property taxed in brackets during first two years

According to tax details obtained by CNBC, the property tax will roll out in two phases. During the first two tax years (2026-2027 and 2027-2028), condos and co-ops valued at more than $1 million by the New York City Department of Finance will be subject to the tax.

Properties worth $1 million to $3 million will face a 4% annual tax rate; properties worth $3 million to $5 million will face 5.25%; and those above $5 million will face 6.5%.

Although the rates look high, experts say the city's assessment and valuation system significantly understates actual market value, easing the burden. Valuations are often 10% or less of true market value.

Valuations updated gradually: rates fall after 2028-2029

The city will not overhaul the system overnight. Instead, it will update valuations and the tax gradually in the budget documents. Starting in the 2028-2029 tax year, property values will be based on comparable sales. Because valuations will rise sharply, tax rates will fall to offset that.

After the valuation changes, properties worth $5 million to $15 million will be taxed at 0.8%; those worth $15 million to $25 million at 1.05%; and those above $25 million at 1.3%.

Ken Griffin as an example: Manhattan tax bill could soar

New York property tax lawyer Robert Pollack said the tax is “incredibly complicated.”

After Mayor Zohran Mamdani posted a video showing Griffin's penthouse, billionaire Ken Griffin became the public face of the tax. Griffin responded that he might pull business and jobs out of New York in the future.

Ken Griffin: We will create jobs in Miami as a consequence of NYC Mayor Mamdani’s wealth tax video
Ken Griffin: We will create jobs in Miami as a consequence of NYC Mayor Mamdani’s wealth tax video

Under the new tax, Griffin, a Florida tax resident, would see his Manhattan property tax bill more than triple, according to CNBC calculations. Griffin bought his 24,000-square-foot penthouse at 220 Central Park South in 2019 for $238 million; however, government records show the city values the apartment at just $15.5 million.

According to city records, Griffin's property tax bill for the 2026-2027 tax year is $858,332. In the first two years of the pied-a-terre tax, his bill would more than double to about $1.87 million; starting in 2028-2029, it would rise to just under $4 million.

In addition, reports say Griffin also bought two apartments at 740 Park Ave. for a total of $83 million; the tax on those units would be $1.1 million starting in 2028. Altogether, his total Manhattan property tax bill would exceed $5 million.

Although some city officials say the wealthy can afford it, brokers and tax lawyers say the sticker shock will be significant. Pollack said, “All my clients already feel they pay too much. These numbers matter. I don’t care how rich you are.”