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When Mayor Zohran Mamdani’s controversial pied-à-terre tax took effect, some critics warned it could drive wealthy residents and investment out of New York City.
But inside Manhattan’s high-end real estate market, brokers and market data paint a more nuanced picture: while the policy has triggered confusion among buyers and sellers, some high-net-worth buyers appear to be adapting rather than leaving.
“Any time you add more taxes and your barrier to entry is harder, then it’s not going to be great for the real estate,” Douglas Elliman’s No. 2 agent by volume in Manhattan, Michelle Griffith, told Fox News Digital. “Am I for the pied-à-terre tax? Absolutely not. What I always look at is the opportunity cost… So that remains to be [seen].”
“[The next] two quarters will not tell us the full impact. This is uncharted territory: prior taxes were one-time closing costs, not a recurring annual charge, and whether it produces capital flight is a question we may not be able to answer until 2029,” Douglas Elliman Senior Vice President of Research and Analytics Charles Snyder also told Fox News Digital.
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About one month ago, a New York judge temporarily blocked parts of Mayor Mamdani’s rollout of the new tax on luxury second homes, ordering City Hall to take down a controversial list containing the names, addresses and property values of more than 900,000 New York City property owners. The Aug. 10 order temporarily restrained the Mamdani administration from moving ahead based on the disputed property roll or mailed notices and barred the city from enforcing its deadlines against homeowners caught up in the rollout. The city appealed that same day, automatically staying the temporary restraining order and allowing the rollout to continue while the case proceeds.
The signed order would also have prevented the city from imposing, assessing or collecting the surcharge against homeowners identified on the supplemental roll or sending a notice without first making an individualized determination and providing the notice required under state tax law.
The tax has sparked a legal battle, while opponents have warned it could push wealthy New Yorkers toward lower-tax states such as Florida, Texas and Tennessee. However, recent Manhattan transaction data shows continued luxury-market activity despite uncertainty surrounding the surcharge.
“The luxury market entered the tax era from a position of strength rather than weakness. Manhattan contracts rose 4% year-over-year in Q2 to 3,188, closings above $10 million were up 31%, and July, the first month under the tax, saw 98 contracts signed at $4 million and above, down 24% from June but up 5% from a year ago,” Snyder said.
“[Luxury property historically] absorbs [tax increases], but not right away and not for free,” Snyder added. “After the 2019 mansion tax expansion, luxury closings fell 20% in 2017, and the luxury median dropped to $5.4 million from $6.5 million. The catch is that this tax is an annual charge on top of the closing taxes, which raises the odds that this may have a greater impact on the luxury market.”
“The number one word to summarize the pied-à-terre tax is confusion. It’s created so much confusion in the market, not only for our buyers and our sellers, but whether it’s real estate attorneys… real estate professionals. And I think part of why it’s so confusing, is the valuation,” Griffith noted. “If you were to sell the apartment, what is it worth? But now, in having conversations about the pied-à-terre tax, it’s the Department of Finance’s (DOF’s) assessed value… I’ll give you an example: I was looking at an apartment this morning. It sold for $9.5 million, but the Department of Finance’s assessed value was $1.5 [million].
“[It’s] a lot of unknowns that people are trying to get their head around. So we always say, anytime there’s uncertainty, what happens in the market, certain people pause. So whether it’s a presidential election, whether the mayor’s being elected, and whether we’re talking about pied-à-terre taxes, it’s creating some moments of pause. But really what it’s created is uncertainty,” she continued.
In the tax’s first two years, through June 30, 2028, condo and co-op units that are not used as a primary residence may be subject to the surcharge if their DOF market value is at least $1 million, with rates ranging from 4% to 6.5%. One-, two- and three-family homes that are not used as a primary residence may be subject to the surcharge if their DOF market value is at least $5 million, with rates ranging from 0.8% to 1.3%. Beginning July 1, 2028, the $5 million threshold and 0.8% to 1.3% rate structure will apply to covered properties, while DOF will value condo and co-op units under a new methodology that considers comparable condo and co-op sales.
“There is no mass exodus. Our big crisis is inventory.”
“I would say probably one of the biggest levels of confusion is people are saying, ‘Well, if my property is worth a million dollars, am I going to be taxed?’ And that’s because we’re not looking at fair market value. We’re looking at the DOF assessed value, which can sometimes be a fifth or less of the actual valuation,” Griffith said.
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When asked whether property valuations are clustering around the $1 million and $5 million tax thresholds, Snyder responded, “Not in a measurable way yet, and through mid-2028 the law is harder to game than the mansion tax because the trigger is assessed value on the city’s roll, not sale price. That changes in July 2028, when the condo and co-op threshold moves to $5 million of market value tied to comparable sales, and at that point we would expect real clustering just below $5 million, the same pattern the market has shown at the mansion tax thresholds.”
Douglas Elliman data shows that luxury supply tightened following the tax announcement: Q2 new listings fell 7% year over year, with $5 million to $10 million condo listings dropping 10%. In July, the first month the tax took effect, new listings for properties priced at $4 million or more fell 53% from June and 41% from the previous year.
“There is no mass exodus. Our big crisis is inventory,” Griffith said. “The biggest challenge we have in the market right now is inventory. The lack of inventory at every single price point is making it a very difficult market to transact in. And things that come to market are going into bidding wars immediately… Although I know the headlines are much more sensationalized talking about the pied-à-terre tax, really, our biggest challenge is lack of inventory.”
“Unsold sponsor inventory is down 15% year-over-year to 3,334 units, the lowest level since 2014, suggesting owners are waiting rather than a wave of forced selling,” Snyder said.
Market metrics from Douglas Elliman also indicate that properties are not taking longer to sell (July median condo days-on-market fell 14% to 88 days), but buyers are demanding higher price concessions. Additionally, sellers with properties hovering just above key benchmarks such as $5 million are being forced to price below the line to satisfy pied-à-terre buyers capitalizing the recurring tax cost into their offers.
“I had a couple of properties that we sold this summer and they were priced slightly above five. Bids came in, they were slightly below that number, and then we have serious conversations with our sellers and we say, ‘Listen, this is going to come up multiple times. Most of the buyers that have been serious about this property are all looking at it as a pied-à-terre, so you’re likely gonna have to be below that $5 million mark,” Griffith explained.
“I think certain clients are evaluating their usage and how much time they’re spending in New York,” she said. “But I want to be completely transparent. No one’s rushing and listing it for sale or listing it to rent… I think certain people that maybe don’t want to sell the property and keep it in their portfolio are thinking about renting.”
“We are confident in both the pied-à-terre surcharge and the City’s ability to implement it fairly and effectively,” Matt Rauschenbach, a spokesperson for the mayor, previously said. “This surcharge asks those who own second homes valued at $5 million or more to contribute their fair share to the city they benefit from.”
Griffith and Snyder warned that aggressive tax surcharges could backfire if transaction volume drops or prices fall, potentially reducing city revenue from real property transfer and mansion taxes and offsetting some revenue from the new surcharge.
“The early behavioral signal is that some high-end buyers are choosing to rent in Manhattan for now and others are being far more selective about what they buy, which reads as a delay in commitment and a higher bar for the right property rather than a departure from the city,” Snyder detailed. “At the same time, our Florida new development portfolio is having a banner year, but most of that product will not deliver for one to three years, and we do not yet know how many of those buyers will be NYC relocators.”
“You don’t come to Manhattan for anything to be easy,” Griffith admitted. “I think the biggest thing is, we need to reduce the size of our budget, right? They keep talking about, how are we going to get money to make up for the deficit? Well, you need to also decrease spending. So maybe we need to shift that conversation into, are the programs effective? Where’s the money going? How is it being utilized, and how do you decrease spending?”
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Fox News’ Stepheny Price and Maria Paronich contributed to this report.
