Mamdani’s ‘Pied-à-Terre Tax’ May Boost Supply of High-End Rentals in NYC, Agents Say

A new annual tax on second homes in New York City could boost the supply of high-end rentals in the city, as owners seek to offset increased carrying costs, local real estate agents say.

The so-called "pied-à-terre tax," championed by Mayor Zohran Mamdani, passed in the state legislature this week and will initially be imposed on second homes valued at $1 million or more.

New York City real estate agent Michelle Griffith of Douglas Elliman says her clients are taking the news in stride, with one seller already adjusting strategy in light of the new law.

"One of my downtown clients made the decision today to pivot and list their apartment for rent at $40,000 per month rather than continue evaluating a sale in the current environment," she says. "I think that’s a good example of how some owners may respond in the near term—not necessarily by leaving New York or rushing to sell, but by becoming more strategic and flexible with how they hold and monetize their assets."

Rental units are exempt from the new tax, which targets second homes that may sit vacant for much of the year. In addition to raising revenue, Mamdani's plan is intended to boost the housing supply available to full-time residents, so an increase in rental supply would be welcomed by the mayor's office.

While many critics of the tax have warned that it could spur an exodus of wealth from the city, Griffith says she hasn't seen such a trend yet.

"I’m not seeing widespread panic selling or buyers suddenly abandoning New York," she says. "For most high-net-worth buyers and owners, this simply becomes another line item in the broader analysis of a real estate transaction or overall portfolio strategy."

Broker Donald Brennan, owner of Engel & Völkers New York City, also predicts more high-end rentals will soon hit the market.

"This policy is still incredibly new, but I could possibly see owners who hardly utilize their New York City apartments begin to explore rental opportunities to offset additional expenses," he says.

Brennan also notes that the tax could impact pricing strategy for sellers, influencing some to price below key thresholds to maintain appeal to second-home buyers.

"I’m currently advising the owner of an Upper West Side pied-à-terre that has been on the market for roughly 12 months," he says. "In light of this new tax, my recommendation has been to reposition the property below the $5 million threshold to stay ahead of shifting buyer psychology and preserve the broadest possible buyer pool."

The tax's graduated thresholds kick in at 4% for second homes valued above $1 million, 5.25% for homes valued above $3 million, and 6.5% for homes valued at $5 million and higher.

The tax is initially based on city-assessed values and later transitions to evaluations based on comparable market sales, at which point new thresholds and rates will apply.

Some agents warn of market disruption from new tax

Ben Jacobs, co-founder of The Chestler Jacobs Team at Douglas Elliman in New York City, tells Realtor.com® there's still a lot of confusion around the tax.

"We’re still waiting for more clarity around how exactly this will be implemented and enforced," he says. "One question many owners already have is, if someone purchased a pied-à-terre 10 years ago and has used it as a secondary residence ever since, are they now suddenly subject to an entirely new annual tax structure? There are still a lot of unknowns."

Jacobs believes the pied-à-terre tax will be disruptive to the market.

"A significant part of New York City’s ecosystem is driven by second- and third-home owners who spend substantial time here and contribute meaningfully to the city’s economy," he says. "My concern is that, over time, this tax could discourage that category of buyer from maintaining a home in New York altogether. It could also motivate some existing pied-à-terre owners to sell rather than take on another recurring carrying cost."

Jacobs—who's also a real estate agent in Miami—says, "Many of our clients who move to South Florida keep their New York City residence as a pied-à-terre. In my opinion, this will start to change. It won’t make sense for certain owners to pay an additional annual tax on their New York City home. It may eventually become difficult to justify, especially on higher-priced properties where those costs become significant over time."

Out-of-state real estate agents also feel the effects

Miltiadis Kastanis, executive director of sales at Compass in Miami, says he's already seen an uptick in conversations from Northeast-based clients reviewing their long-term ownership strategy—with some planning to exit New York altogether.

"In several cases, clients have accelerated timelines around purchasing in Miami Beach and surrounding South Florida markets specifically because they want more predictability surrounding taxes and carrying costs," he says.

Megan Sullivan of Douglas Elliman in Greenwich, CT—35 miles from New York City—tells Realtor.com that she's actively working with buyers from New York City and beyond.

"There’s still tremendous long-term confidence in New York City, but some buyers are reassessing the economics of maintaining a pied-à-terre as ownership costs continue to rise," she says. "Between mansion taxes, carrying costs, and now the potential for an additional annual tax burden, many are exploring alternatives that offer greater long-term value and flexibility. They increasingly view Greenwich as a safe and stable place to invest capital while remaining close to Manhattan."