The New Price of Luxury: What New York City’s Pied-à-terre Tax Means to Part-Time Residents

This blog was prepared with the assistance of Gwendolyn Goodyear, a law clerk at Cole Schotz.

New York’s newly adopted pied-à-terre tax [1] adds yet another layer of complexity for owners of high-value residential property in New York City.

Beginning July 1, 2026, certain non-primary residences will be subject to the annual tax – a measure the Governor’s office estimates could generate nearly $500 million each year. Beyond projected revenue, the tax creates new compliance obligations for owners and, notably, for cooperative (“co-op”) boards now tasked with collecting the tax from tenant-shareholders.

Covered Properties

The tax applies only to non-primary residences that fall within the definition of “covered property”:

• One- to three-family homes valued at $5 million or more;
• Residential co-op units valued at $1 million or more; and
• Residential condominium (“condo”) units valued at $1 million or more.

To determine whether a home qualifies as a pied-à-terre, the Department of Finance (“DOF”) will look to the address listed on an owner’s New York State tax return, coupled with additional indicators of occupancy. A few narrow exemptions exist, namely for units occupied by full-time tenants, homes used as a primary residence by the owner’s immediate family and homes owned by New York residents who permanently reside in the City.

By August 30, 2026, the DOF will notify owners whose properties are subject to the tax. Owners may challenge such determinations by submitting proof of their primary residence.

Fiscal Years 2026-2027

Beginning July 1, 2026 through June 30, 2028, the tax will operate under a temporary framework:

• One- to three-family homes valued at $5 million or more will be taxed between 0.8% to 1.3%, depending on DOF assessed value; and
• Condo and co-op units with DOF assessed values of $1 million or more will be subject to rates between 4% to 6.5%, depending on such assessed value – a threshold lawmakers argue reflects a $5 million market value given DOF’s historically low assessments of such properties.

Fiscal Years 2028-2031

Beginning July 1, 2028, with a sunset date of June 30, 2031, the tax will shift to a new valuation model that applies the same rates to all one- to three-family homes, condos and co-ops valued at $5 million or more. Under this model, one- to three-family homes will be valued based on their current DOF assessed value, while condos and co-ops will be valued based on actual sales of comparable units:

• 0.8% for homes valued between $5 million and $15 million;
• 1.05% for homes valued at over $15 million and up to $25 million; and
• 1.3% for homes valued at over $25 million.

The shift to market-based valuations is expected to increase the number of properties subject to the tax.

Operational Burdens for Co-ops

The DOF will add a pied-à-terre tax for each subject unit directly to a co-op’s property tax bill and the co-op board must then collect the tax from specific tenant-shareholders.

If a tenant-shareholder fails to pay the tax, delinquencies could result in a lien on the entire co-op building. In response to such risk, co-op boards may tighten second home ownership policies or require more detailed residency disclosures from prospective purchasers. Co-op boards may need to revisit proprietary leases and collection procedures to address tenant-shareholder delinquencies.

Looking Ahead

The long-term impact of the pied-à-terre tax will likely hinge on how the DOF implements the new valuation framework and enforces residency requirements. Owners and co-op boards should expect the tax to influence buyer behavior, increase the appeal of rentals and introduce new friction in residential sales across the City’s luxury market.

Final State Budget Omits Proposed Cash-Buyer Tax

Separate from the pied-à-terre tax, the proposed 1% tax on all-cash home purchases valued at $1 million or more in New York City, initially introduced as part of the state’s budget package and designed to function similarly to the City’s mortgage-recording tax, did not become part of the final state budget.

We are continuing to monitor all legislative updates.

[1] New York State Governor Kathy Hochul signed into law the Fiscal Year 2027 Budget, which includes the pied-à-terre tax, on May 28, 2026.

Sources:

Assemb. Bill A10009C, 2025-2026 Leg., Reg. Sess. (N.Y. 2026)

Press Release, New York State Senate, State Senate Passes 2026-27 Budget, May 28, 2026, https://www.nysenate.gov/newsroom/press-releases/2026/state-senate-passes-2026-27-budget

Press Release, Assembly Speaker Carl E. Heastie, May 28, 2026, Assembly Announces Enacted $268.1 Billion SFY 2026-27 Budget Invests in New York Families and Communities, https://www.assembly.state.ny.us/Press/?sec=story&story=118381

Press Release, Governor Kathy Hochul, Video, Audio, Photos & Rush Transcript: Governor Hochul Announces Pied-à-Terre Tax Proposal for Luxury Second Homes Valued at $5 Million or More, April 15, 2026, https://www.governor.ny.gov/news/video-audio-photos-rush-transcript-governor-hochul-announces-pied-terre-tax-proposal-luxury

Press Release, Governor Kathy Hochul, Governor Hochul Announces Pied-à-Terre Tax Proposal for Luxury Second Homes Valued at $5 Million or More, April 15, 2026, https://www.governor.ny.gov/news/governor-hochul-announces-pied-terre-tax-proposal-luxury-second-homes-valued-5-million-or-more