New York City’s New Pied-à-Terre Tax: What Owners of Luxury Second Homes Should Know

A new Pied-a-Terre Tax was included in the new budget signed by Governor Hochul on May 28, 2026.  The new tax is aimed at high-value New York City homes that are not the owner’s primary residence. The tax is intended to ensure that non-residents with luxury second homes in the City contribute their “fair share” to New York’s coffers.

 

New York’s new pied-à-terre surcharge is scheduled to begin July 1, 2026, and applies to certain high-value New York City homes that are not used as a primary residence. The tax covers three main categories of property: one-, two-, and three-family homes worth more than $5 million, condominium units worth more than $1 million in the initial phase, and cooperative units worth more than $1 million in the initial phase.

 

Not every property is affected. The surcharge does not apply to standard rental apartment buildings, commercial properties, hotels, vacant land, new construction units without a certificate of occupancy, unsold sponsor units, or condos where more than three units are held under the same ownership.

 

The law will have two-phases for valuing property and setting rates.

 

For the first phase, covering fiscal year 2026–2027, one- to three-family homes are taxed using the city’s current market value approach, with rates of 0.8%, 1.05%, and 1.3%, depending on value. Condos and co-ops are treated differently in this first phase. Because their current assessed values are often far below actual market prices, the law uses a lower threshold of $1 million but much higher rates of 4.0%, 5.25%, and 6.5%. For co-ops, the value is determined by imputing a unit value based on the building’s total value and the unit’s ownership share.

 

For the second phase, covering fiscal years 2028–2031, the rules become more uniform. The threshold rises to $5 million for condos and co-ops, matching the threshold for one- to three-family homes. The tax rates also become the same across all covered property types: 0.8%, 1.05%, and 1.3%. At that point, condos and co-ops are expected to be valued using comparable sales, which should better reflect real market value.

 

Owners of luxury condos and co-ops may see a very different result in the early years than owners of houses, because the law is trying to account for the fact that condo and co-op assessments have historically been much lower than actual sale prices. Over time, the system is intended to move toward a more consistent valuation method across property types.

 

The Department of Finance would make an initial determination each year as to whether a property is a primary residence or second home, and owners will have an opportunity to provide evidence if they disagree with the determination.

 

In summary, New York City’s new pied-à-terre surcharge is aimed at high-value homes that are not used as a primary residence, with the tax beginning July 1, 2026. It generally applies to luxury one- to three-family homes, condos, and co-ops, but the rules differ by property type and will phase in over time, especially for condos and co-ops. Just as important, the primary-residence exemption may be broader than many owners expect, potentially covering certain family occupancy, qualifying long-term tenants, and some entity-owned properties. Because the Department of Finance has broad authority over valuation, residency determinations, and documentation, owners of high-value New York City second homes should pay close attention to how the final rules are administered.