NYC Drops Pied-À-Terre Tax Rules, Revenue Outlook Up

This story gives you a peek at the content coming to our new platform, TRD Policy Pro. Sign up to get early access here.

Hey there, let’s get into today’s news at the intersection of policy and real estate:

City tax officials quietly unveiled rules to implement the contentious pied-à-terre tax.
The NYC comptroller’s office now expects the pied-à-terre tax to meet — and potentially exceed — its annual revenue target, reversing an earlier warning.
Each year properties worth a combined $400 million are caught up in messy ownership disputes, according to new research.

In this edition we mention: Gov. Kathy Hochul, New York City Comptroller Mark Levine, the Center for NYC Neighborhoods and others.

We Heard

Fine print: City tax officials on Tuesday quietly unveiled proposed rules to implement New York City’s contentious pied-à-terre tax, slated to take effect July. The 17-page proposal answers some — though not all — of the questions dogging attorneys and owners since Gov. Kathy Hochul and state lawmakers approved the levy on pricey second homes as part of the state budget in May. Among them: How will the Department of Finance distinguish primary residents, who would be exempt, from part-time owners who could face the tax? The answer: DOF proposes to conduct an annual review and automatically classify a property as a primary residence if the owner listed it as their permanent address on their most recent tax return or received certain residency-based tax benefits during the prior fiscal year, including STAR, senior citizen and veterans exemptions. In an effort to prevent what officials describe as “gamesmanship,” properties held by LLCs, corporations and partnerships would qualify for the primary residence exemption only if the entity owns the entire property interest or all shares associated with a co-op unit. The provision would block minority investors in ownership entities from claiming the exemption. Tax officials can also weigh other factors to determine residency, including whether an owner occupied a unit for most of the previous calendar year — though it remains unclear how DOF would collect and verify that information. When it comes to enforcement, DOF would wield a pretty big stick. The agency could audit filings for up to six years after submission and issue subpoenas for documents and witness testimony. Owners who intentionally submit misleading information could face a penalty equal to 50 percent of the annual surcharge. If inaccurate information results in an underpayment, the penalty would be three times the tax shortfall, capped at 50 percent of the total levy owed for that year (for reference, in the tax’s first two years, a condo or co-op with a DOF market value of $5.1 million could face a $325,650 surcharge). Property owners would have 30 days to challenge penalties through a hearing before either DOF or the Office of Administrative Trials and Hearings, the city’s administrative court. Real estate professionals are encouraged to weigh in on the proposed rules at a hearing scheduled for July 9 at 11 a.m.
Revenue rebound: New York City Comptroller Mark Levine now expects the pied-à-terre tax to exceed its annual $500 million revenue target, a reversal from his April warning that the proposed levy could fall short of officials’ revenue goal by as much as $160 million. The stronger revenue outlook reflects in part a clearer estimate of the tax base, which the governor’s office had previously pegged at anywhere from 8,000 to 13,000 properties. After reviewing the final language, the comptroller’s office now estimates just over 13,586 units are subject to the tax, including roughly 7,721 condos. Levine told City Council members Tuesday during a budget hearing that his office is “quite confident” that the city will hit the $500 million mark — and in the best-case scenario revenues could even reach $1 billion if owners don’t change their behavior to avoid the levy or challenge assessments, which he doesn’t expect.
Heir trap: About $400 million worth of city properties are caught in messy ownership disputes each year — making homes vulnerable to foreclosure, deed theft and other predatory tactics, according to new analysis from the Center for NYC Neighborhoods. The organization found that about 350 so-called partition lawsuits are filed each year in the five boroughs, targeting homes left behind when owners die without a will or clear estate plan. Between March and July 2024, the group flagged 182 likely cases citywide, with an average property value of about $1.14 million. But that’s just the visible layer. Most heirs’ property disputes never make it to a judge, meaning filings likely understate the scale of the problem, according to the researchers behind the report. The organization estimates that the roughly 350 partition lawsuits filed in a year represent about $400 million in at-risk property — though that could be closer to $4 billion when factoring in cases that don’t surface in court. The pattern is concentrated in Central Brooklyn and Southeast Queens, where homes pass into fragmented ownership across multiple heirs, each holding only a sliver of the estate. That fragmentation creates openings: outside investors can buy up fractional shares for pennies on the dollar, then push to force a sale of the entire property. State lawmakers have moved in recent years to curb the tactics — but the underlying vulnerability remains.

Have a tip or feedback? Reach me at caroline.spivack@therealdeal.com.

The Catch-Up

Summit says it’s halfway through fixing violations tied to its Pinnacle rent-stabilized NYC portfolio, signaling progress on a long-troubled asset stack even as regulatory and tenant scrutiny lingers, reports The Real Deal’s Lilah Burke.

Many cities have embraced transit-oriented development policies to encourage more walkable neighborhoods. But most regions still lag far behind in building enough homes near reliable transit, reports Bloomberg.

A pair of City Council members plan to reintroduce a bill that would ban the city’s horse carriage trade, following the collapse of a horse in Central Park Tuesday, The New York Times reports.

The Kicker

“Crime is going down in New York City but what we saw the other night did feel criminal,” said Mayor Zohran Mamdani on “the absence of fair refereeing” during the Knicks’ Game 3 loss.