The May 14 announcement put real brackets on a proposal that has been an idea, then a dead bill, then a budget talking point, for the better part of a decade. Here's what is actually in it.

On May 14, Governor Kathy Hochul announced the detailed framework for a recurring surcharge on luxury second homes in New York City — concrete brackets, regime distinctions, exemption paths, and a five-year sunset. State analysts project roughly $500 million in annual revenue. The proposal sits inside Albany's broader budget negotiation and has not yet passed the Legislature.

This piece walks through what's actually in the May 14 proposal, where it sits relative to the prior decade of attempts, and where the open questions still are. The companion Pied-à-Terre Tax Calculator runs the same math on a specific apartment. The April 29 Roebling Report on international precedent covers what comparable taxes have produced in Paris, Vancouver, and London.

A decade of attempts, briefly

State Senator Brad Hoylman-Sigal first introduced a pied-à-terre surcharge in 2014. The original bill (S.7941) died in the Rules committee. He reintroduced it in 2015–2016 (S.1053-A) — died in Local Government. Again in 2017–2018 (S.0069) — died in Cities. The 2019 revival (S.44B) had the support of then-Governor Andrew Cuomo and gained meaningful momentum in the wake of the $238 million Central Park South penthouse transaction widely cited as the political catalyst. It also died — under sustained pressure from real estate industry lobbying.

The current revival is structurally different from earlier attempts in two ways. First, the coalition is broader: a governor facing a state budget gap and a New York City mayor whose platform frames Manhattan ultra-luxury as fiscal infrastructure. Second, the May 14 proposal explicitly addresses the Class 2 (condo and co-op) valuation problem that has historically been the bill's hardest technical obstacle — by including a two-phase rollout with mandatory revaluation methodology development in years one and two.

The three regimes

The May 14 proposal includes three distinct tax regimes depending on property type and program phase.

Houses (Class 1), all years. Single-family townhouses use the NYC Department of Finance market value (which for Class 1 closely tracks sale price). Marginal brackets apply:

• Under $5 million: 0%
• $5 million to $15 million: 0.80% on the marginal slice
• $15 million to $25 million: 1.05% on the marginal slice
• Above $25 million: 1.30% on the marginal slice

A $20 million Manhattan townhouse would face roughly $132,500 in annual surcharge — $80,000 on the $5–$15 million slice plus $52,500 on the $15–$20 million slice.

Condos and co-ops, years one and two. Class 2 property is assessed by NYC using an income approach under RPTL §581, which produces a DOF "market value" typically 12 to 25 percent of actual sale price. The proposal uses this DOF figure as the tax base and applies higher rates to compensate:

• DOF value under $1 million: 0%
• $1 million to $3 million: 4.00%
• $3 million to $5 million: 5.25%
• Above $5 million: 6.50%

The thresholds are calibrated to the DOF basis, not sale price. A $5 million condo has a DOF-assessed value of approximately $1 million — exactly at the exemption threshold. A $25 million condo has roughly $5 million in DOF value, which produces $185,000 in annual surcharge under the early-phase brackets.

Condos and co-ops, year three and beyond. The proposal requires the city to develop a new condo/co-op valuation methodology during the first two years that better approximates open-market value. From year three onward, condos and co-ops are taxed under the Class 1 brackets above (0.80% to 1.30%) on the new market-value basis. The brackets are calibrated so that a $25 million condo and a $25 million townhouse converge at roughly the same annual figure in year three — which is the point of the design.

Exemptions

Four exemption paths return the surcharge to zero:

1. Primary residence. The owner spends six or more months per year at the property. Proof typically requires a NYS resident return at the address, a STAR exemption, or the NY State homeowner tax credit.
2. Occupied by an eligible family member. Spouse, child, sibling, parent, grandparent, or grandchild — and documentation of the relationship.
3. Long-term arms-length rental. The property is leased to a primary resident under a 1+ year arms-length lease. Executed lease and proof of tenant occupancy required.
4. New construction or sponsor inventory. No Certificate of Occupancy yet, or an unsold sponsor unit. Sponsor filings or absence-of-CofO documentation.

The exemption structure is straightforward in design but politically meaningful in effect. Family-member occupation specifically protects multi-generational holdings — the Park Avenue apartment held in trust for a college-aged child, the second residence used by an aging parent. Long-term rental moves inventory back into the housing supply, which is one of the proposal's stated secondary objectives. The new-construction exemption is the carve-out the development community asked for in prior cycles and got this time — sponsor inventory does not start the clock until first sale.

The five-year sunset

The proposal sunsets after five years unless renewed. The legislature and the governor would face a renewal decision in year six. This matters for the math: the five-year cumulative exposure is the most decision-relevant figure for a prospective buyer, because that is the full lifecycle of the program as written. The annual figure is the input; the five-year cumulative is the output that frames the decision.

For a $10 million condo, that means approximately $40,000 per year in years one and two, $40,000 per year in years three through five, and a $200,000 cumulative exposure over the program window. For a $25 million townhouse, approximately $185,000 per year and $925,000 cumulative. For a $50 million condo, approximately $510,000 per year in years one and two and $510,000 per year in years three through five — the brackets are calibrated to maintain magnitude across the methodology change.

What the proposal does not include

Two related policy threads are sometimes conflated with this proposal.

The 1% all-cash transfer tax. State lawmakers floated a separate one-percent surcharge on all-cash NYC residential sales the same week as the Hochul announcement. It is a different policy with different mechanics — a one-time transaction tax at closing rather than a recurring annual surcharge — and it has not been incorporated into the pied-à-terre bill. Treat the two as parallel proposals, not a single combined package.

A general luxury property tax overhaul. The pied-à-terre surcharge is targeted at non-resident ownership specifically. It is not a broader Class 2 property tax reform of the kind academics and policy researchers have proposed for years. The Class 2 valuation work the city is required to complete under this proposal could become a foundation for broader reform — but that is a separate political fight not embedded in the current bill.

What is still uncertain

Three pieces of the proposal remain unresolved as of mid-May.

The year-3+ valuation methodology. The proposal mandates that the city develop a new Class 2 valuation method during years one and two and apply it from year three. The methodology has not been built. Whether it produces something close to sale price (as the proposal assumes) or lands somewhere between sale price and the current §581 income-approach value will materially affect the math from year three onward.

The exemption administration mechanics. The four exemption paths are clear in concept but the administrative documentation requirements have not been finalized. Whether a $5 million Brooklyn family LLC structure qualifies for the family-occupation exemption depends on whether the regulation reads ownership at the entity level or at the beneficial-owner level. The drafting matters.

Legislative passage. The bill is in active Albany negotiation. The real estate industry is lobbying against it; earlier versions died at this stage. The political alignment behind it is stronger than 2019's, but it is not yet a vote count.

How to think about it

For owners of NYC residences valued above $5 million who do not use the property as a primary residence and do not have a family-member arrangement or long-term rental in place, the practical exposure is significant. For a typical $10 million Manhattan condo held as a second home, the proposal would add approximately $200,000 in cumulative exposure over the five-year program window — a meaningful drag on net carry that does not exist today.

For prospective buyers, the math is best read as an explicit input to the rent-vs-buy decision at the high end of the market. The Rent vs Buy Calculator does not yet model the pied-à-terre surcharge directly; the Pied-à-Terre Tax Calculator runs the surcharge math in isolation and produces both an annual and five-year cumulative figure for a specific apartment.

The proposal is not yet law. The Albany negotiation has several cycles to run, and earlier iterations of the same idea have died at later stages. But the May 14 announcement is the most concrete the framework has ever been, the political coalition behind it is broader than at any previous iteration, and the budget pressure motivating it is unlikely to dissipate. Owners and prospective buyers in the affected band should already be doing the math on their specific apartments — which is what the calculator is for.

Best,

Corey Cohen Principal, The Roebling Team at Compass c.cohen@compass.com · 646.939.7375