New York City's recently implemented pied-à-terre tax is causing significant difficulties for homeowners who are struggling to prove their properties are their primary residences. The tax, signed into law in May by Gov. Kathy Hochul, targets unoccupied or secondary high-value residential properties, imposing an annual surcharge.
Homeowners are now tasked with proving to the city that they are primary residents, a process described as cumbersome and absurd by those affected. Karen Young, a homeowner for 30 years, spent hours attempting to submit documentation, only to find her uploaded files were not saved. She now must reassemble a substantial amount of paperwork, including obtaining her property's title deed from an estate lawyer, to avoid a surcharge of over $42,000 on her Jan. 1, 2027, property tax bill. "It's a cumbersome process to prove that I'm a primary resident, which just seems absurd. My jury summons come here, I pay my taxes from here, my utilities," Young stated.
The onus is on the homeowner to demonstrate that the city's assessment is incorrect. The tax, intended to target wealthy second-home owners, has generated widespread confusion, particularly after the administration published a searchable database of hundreds of thousands of residences and owners potentially subject to the surcharge.
Real Estate Board of New York president James Whelan expressed concern over the implementation, noting that "the fact that so many owners appear to be receiving inaccurate notices raises serious questions about the City’s readiness to administer the program. Even we did not expect implementation to be this flawed."
The legislation applies to one- to three-family homes valued at $5 million or more, and co-ops or condos worth at least $1 million. Homeowners who receive a bill but do not meet these criteria have the right to appeal.
High-end residential broker Donna Olshan characterized the law as "Swiss cheese," citing numerous potential loopholes and complexities. Issues raised include how the tax applies to properties undergoing renovations for over a year, homes in probate, or residences occupied by individuals in nursing homes or assisted living facilities. The scenario of a home being uninhabitable due to a fire also presents a potential pitfall.
Further complications arise for homeowners who rent out their apartments. The tenant must establish the unit as their primary residence, which carries tax implications. Refusing an out-of-state tenant due to concerns about their ability to substantiate primary residency could lead to fair housing complaints. Similarly, rejecting foreign students might result in national origin complaints, as asking about New York City tax payments is prohibited.
Questions also surround the assessment of mixed-use properties and those owned by LLCs, which cannot occupy a property. Benjamin M. Williams of Rosenberg & Estis highlighted that new owners should not be penalized for a previous owner's pied-à-terre status and that a reasonable transition period for closings, renovations, or relocations should be accommodated without taxation.
Stuart M. Saft of Holland & Knight pointed to the "Phase 2 valuation system" slated to begin in July 2028 as a significant flaw. This system, he argued, improperly calculates co-op and condo taxes based on outdated building share percentages rather than true unit-by-unit market values, setting a potentially unfair precedent.
The city's implementation of the surcharge is occurring in two phases. Phase 1, from July 1 to June 30, 2028, uses current Department of Finance market values. Phase 2, from July 1, 2028, to June 30, 2031, will use comparable sales data for valuation.
Another point of contention is that homeowners with multiple residences who live in the city can still be taxed on properties that are not their primary residence, challenging the tax's stated rationale of targeting wealthy individuals who do not pay local taxes.