New York City Mayor Zohran Mamdani's initiative to tax wealthy residents faced a setback Monday when a judge halted the implementation of the city's pied-à-terre levy. Staten Island Supreme Court Justice Wayne Ozzi issued a temporary restraining order, delaying any action on the tax for luxury second homes until a hearing scheduled for August 31.
The restraining order stems from a lawsuit filed by three homeowners challenging the tax's rollout. Justice Ozzi also criticized Mamdani's administration for publishing a list of over 900,000 New York City homeowners who could be affected by the tax, many of whom received notices warning they would be liable unless they filed an exemption. Ozzi stated that the city was not legally permitted to publish such a list, calling the mid-year publication irregular. He ruled that the mailed notices were not proper notice under tax law and vacated any determinations based on them.
The judge further found that city officials should have conducted an "individualized statutorily-required initial determination" before issuing notices, rather than placing the burden on property owners. The ruling bars city officials from taking further action on the 17,000 notices sent by the Department of Finance, which warned recipients of potential five-figure tax bills unless they applied for an exemption.
The lawsuit was filed by homeowners Rachel O’Brien, Carmine Morano, and Simon Hedley. They argued that the tax rollout, which applies to three-family homes worth at least $5 million and condos and co-ops valued at $1 million or more that are not primary residences, caused "mass confusion." The plaintiffs contend that city officials ignored state-provided data on eligibility, and that homeowners were left to prove their primary residency status within a tight deadline.
The pied-à-terre tax is designed to progressively increase with the value of the home, reaching up to 1.3 percent for single-family homes over $25 million and 6.5 percent for condos or co-ops over $5 million. The tax is projected to generate approximately $500 million annually for the city.
City officials had countered the lawsuit by stating that the Department of Finance had already received 3,801 submissions challenging the initial determination of primary residence. One of the plaintiffs, Simon Hedley, had his appeal approved after submitting a tax return proving his Manhattan home was his primary residence. Lawyers for the city argued that a restraining order would prevent them from acting on the thousands of appeals already filed or in progress, potentially delaying tax bills.
However, under Ozzi's ruling, the city must remove the online list of potentially affected homeowners and cannot act on the list or the mailed notices until the August 31 hearing. New York City Councilman Frank Morano praised the judge's decision, noting that his father and wife were among the plaintiffs. He stated that while the ruling is temporary, "homeowners got heard" and that the fight to ensure government follows the law will continue.
Mamdani's administration intends to appeal the ruling. A spokesperson for the mayor stated that they disagree with the decision but are confident in the tax's fairness and the city's ability to implement it. The Law Department plans to file an immediate appeal, which they expect will stay the order and allow the city to proceed with the tax's implementation. Mamdani unveiled the pied-a-terre tax while outside billionaire Ken Griffin's Manhattan penthouse on Tax Day.