NYC Court Allows Mamdani's Luxury Second-Home Tax to Proceed

New York City may continue implementing a tax on luxury second homes after a state appellate court reversed a lower court order that had paused the process.

On November 4, the Appellate Division of the Supreme Court, Second Department, vacated a September ruling issued by a Staten Island judge. That earlier decision had granted temporary protection to a group of property owners and required the city to fix its notification procedures.

The appellate judges determined that the plaintiffs did not prove they suffered a concrete injury. This lack of specific harm meant the owners did not have standing to bring the case to court.

The plaintiffs argued that the Department of Finance implemented the levy incorrectly. They claimed the city sent notices to people whose properties might not be subject to the tax, including some primary residences. They also challenged the municipal government’s decision to publish a public registry of potentially affected properties.

The court ruled that receiving an informational letter or appearing on a public list does not, by itself, constitute enough damage to justify a lawsuit. The judges noted that the owners failed to show that the publication of their data led to harassment, fraud, or other identifiable prejudice.

This decision does not mean the city won on every point. The court did not determine that every administrative step was correct. The ruling focused strictly on the plaintiffs' standing and did not resolve all objections regarding how the tax is applied.

The tax targets specific high-value residential properties that are not used as a primary home by the owner, a tenant, or qualifying immediate family members. For the 2026-2027 and 2027-2028 fiscal years, the levy applies to single-family, two-family, and three-family homes with a market value over $5 million. It also covers condominiums and cooperatives valued at $1 million or more.

Tax rates vary by property type and value. Houses valued between $5 million and less than $15 million face a 0.8 percent surcharge. Higher-value homes face rates up to 1.3 percent. Condominiums and co-ops see rates starting at 4 percent for units valued between $1 million and less than $3 million, rising to 6.5 percent for units valued at $5 million or more.

The city estimates the tax could generate about $500 million annually. Controller Mark Levine previously calculated a lower figure of $380 million, based on approximately 11,200 properties. The Department of Finance has already granted more than 8,800 exemption requests, a number that shows the difficulty in identifying which properties must pay.

Mayor Zohran Mamdani defended the tax during his campaign, arguing that wealthier owners should contribute more to public services. In a statement, he said the levy would help fund safer streets, cleaner parks, and essential public services. His administration will continue defending the measure against pending legal challenges. Two other lawsuits remain, including one filed by casino operator Steve Wynn and former Commerce Secretary Wilbur Ross. They argue the tax is unconstitutional because it discriminates against owners who do not permanently reside in New York.