New York City’s Pied-à-Terre Tax Is Now in Full Effect
Starting today, the highly anticipated—and highly scrutinized—New York City Pied-à-Terre Tax is officially in effect.
I'm going to try not to make this newsletter too technical and instead provide a broad overview of the city's newest property tax.
Many people don't realize that this tax was initially proposed more than 10 years ago by a group of state legislators in Albany, but it failed to gain enough traction to pass. It resurfaced again in 2019 and was supported by then-Mayor Bill de Blasio and former Governor Andrew Cuomo, but intense opposition from real estate developers ultimately led to it being stripped from the state budget.
Finally, in 2026, with the support of the current mayor and governor, the legislation passed and goes into effect today.
So, what exactly is it?
New York State has enacted a phased annual tax on certain high-value New York City residential properties that are not used as primary residences. The tax applies to one-, two-, and three-family homes, condominiums, and cooperative apartments. I’ve included a graph below to help you understand the costs.
The tax will be implemented in phases. Phase One begins on July 1, 2026, and runs through June 30, 2028. Phase Two begins in July 2028 and continues through June 30, 2031. The tax is currently scheduled to remain in effect for five years and will expire after June 30, 2031, unless it is extended or replaced. I've included a chart below to help explain the various phases and associated costs.
The reason the city and state created a two-phase system is, in part, because there is significant uncertainty surrounding the true market value of many properties. For example, I have a client who owns an apartment on Central Park South that he purchased for roughly $2.5 million. Over the years, he has made substantial improvements, and today the property is estimated to be worth between $4.25 million and $4.5 million. Yet if you look at the city's records, the property's estimated market value is listed at just over $650,000.
Because municipal assessments often bear little resemblance to actual market values, lawmakers needed a transitional period to create a more accurate valuation framework. During Phase One, the city will broadly apply the Pied-à-Terre tax to qualifying non-primary residences valued at $1 million and above. Over the following years, officials will refine their valuation methods and develop a more precise system for determining market value.
How those valuations will ultimately be calculated remains highly debated. However, the intent of Phase Two is to narrow the scope of the tax so that it primarily applies to properties with market values of $5 million and above. As the program evolves, property owners should expect additional guidance and clarification from the city and state regarding valuation methodologies and tax obligations.
Here’s the chart to help explain the various phases and associated costs.
How has this new tax affected sales in the short term?
In short, it hasn't.
The 2026 market has been a solid rebound market following the lows of 2023, the gradual recovery of 2024, and the continued improvement seen in 2025. Even though inventory has remained roughly 10% lower than this time last year for much of the season, the overall market has experienced between 7% and 10% growth in contract signings.
The luxury market, in particular, has significantly outperformed the broader market, with some of the largest sales in New York City real estate history occurring over the last several months.
Many pundits predicted that this tax would drive ultra-high-net-worth buyers out of New York City and drain demand for luxury properties. So far, that simply has not happened. Of course, it is still far too early to fully understand the long-term effects of this tax. Those impacts may not be known for months—or even years—to come.
However, much of the pre-tax rhetoric and media coverage has proven to be overstated. There has been no mass exodus of wealthy residents from New York City. In fact, the strength of the luxury market over the past six months and beyond serves as further proof that New York will continue to attract all types of buyers, including high-net-worth individuals.
If you would like more information about the Pied-à-Terre Tax and how it may affect your property, please feel free to reach out for a comprehensive analysis of your home and whether it may qualify under the new rules.
The Hoffman Team is dedicated to educating our clients on all aspects of the real estate market, including its newest twists and turns involving property taxes and related legislation. We look forward to helping you navigate and understand these nuances in the months and years ahead.
THE HOFFMAN TEAM IN THE NEWS
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LOCAL HAPPENINGS
FIFA World Cup 2026 Watch Party
July 19th, 2026
Gather on Central Park's iconic Great Lawn for the largest FIFA World Cup 2026™ Final watch party in the world, featuring giant screens, live entertainment, and the historic FIFA World Cup™ Final Halftime Show.
Shakespeare in the Park - The Winter's Tale
July 25th, 2026
Tony Award-winning director Daniel Sullivan returns to Free Shakespeare in the Park with a spellbinding new production of THE WINTER’S TALE.
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