Governor Kathy Hochul announced a $268 billion New York State budget framework on Thursday that includes a first-of-its-kind pied-à-terre tax on luxury second homes in New York City, a measure designed to help close Mayor Zohran Mamdani’s $5.4 billion budget gap without raising broader income or corporate taxes. The deal, which arrived 37 days past its April 1 deadline, marks the latest budget agreement of Hochul’s tenure and the most delayed in New York since 2010.
But the celebration may be premature. Within hours of Hochul’s Albany announcement, Assembly Speaker Carl Heastie publicly disputed that any deal had been reached, telling reporters, “There’s no deal” and calling the governor’s announcement “very premature.”
What the Pied-à-Terre Tax Does
The proposed tax targets one-to-three family homes, condominiums, and co-ops in New York City valued at $5 million or more, when the owner maintains a primary residence outside the city. The annual surcharge is aimed at out-of-city ultrawealthy buyers and global elites who use New York real estate as a wealth-storage vehicle rather than a home.
State officials project the levy will generate at least $500 million in annual revenue for the city, though independent analyses have raised questions about that figure. According to The Real Deal, an analysis from the New York City Comptroller’s office estimates the tax could apply to more than 11,200 properties but may collect between $340 million and $380 million once rental exemptions and shifts in owner behavior are factored in.
The measure marks the first time such a tax will be enacted in New York State, after more than a decade of failed proposals from successive mayoral administrations. According to the Mayor’s Office, the tax has the support of 93 percent of New Yorkers in recent polling.
Hochul Holds the Line on Income and Corporate Taxes
Despite the new pied-à-terre tax, Hochul rejected broader tax hikes pushed by Mamdani allies and progressive groups, including increases to personal income taxes on those earning $5 million or more and a higher corporate tax rate on large businesses.
“There’s not a corporate tax. There’s not an income tax. I held true to what I said,” Hochul told reporters during her announcement, referencing her campaign-era pledge ahead of her November reelection bid.
She also turned down a last-minute push from Mamdani and City Council Speaker Julie Menin to roll back the state’s Pass-Through Entity Tax (PTET) benefit, a change the city estimated could have brought in $1 billion in additional revenue.
The decision drew criticism from progressive allies. Gustavo Gordillo, co-chair of the New York City chapter of the Democratic Socialists of America, told NY1 that Hochul “consistently underestimates the political costs of ignoring what New Yorkers want,” pointing to recent Siena polling showing the governor’s lowest approval and favorability ratings in a year.
Tipped Wages, Climate Law, and Immigration Provisions
Photo Credit: Unsplash.com
Beyond the pied-à-terre tax, the budget framework includes several other measures with significant implications for New York industries and workers.
The plan eliminates state income taxes on up to $25,000 in tipped wages starting in tax year 2026, mirroring part of President Donald Trump’s federal tax agenda and offering relief to New York’s hospitality and service sectors.
The deal also adjusts the 2019 Climate Leadership and Community Protection Act, moving the deadline for the state to release carbon emissions regulations from 2030 to 2028 while introducing a new interim target of a 60 percent emissions reduction by 2040. The 2050 net-zero target remains unchanged.
On immigration, the budget bars New York local police from being deputized by Immigration and Customs Enforcement and prohibits state and local law enforcement from acting as civil immigration agents. All law enforcement officers will also be banned from wearing masks except in cases of operational necessity. The provision follows reported comments from Trump administration border czar Tom Homan suggesting more ICE agents could be sent to New York.
The agreement also includes $40 billion in school aid, the highest education allocation in state history, and $28 billion in total aid for New York City, an increase of $9 billion since Hochul took office.
Wall Street and the Griffin Effect
The pied-à-terre tax has already drawn pushback from Wall Street’s wealthiest. Billionaire Citadel founder Ken Griffin, whose $238 million Central Park South penthouse Mamdani singled out in a Tax Day video, called the mayor’s messaging “creepy and weird” and said New York “doesn’t welcome success” under the new administration. Griffin announced Citadel plans to expand in Miami over New York City in response, according to CNN Business.
The episode highlights a structural quirk of the city’s property tax system: Griffin’s 23,000-square-foot penthouse, the most expensive home ever sold in the United States, is currently assessed at just $9.4 million by the city’s Department of Finance, which values condos and co-ops as if they were rental buildings rather than at market value.
That assessment gap has prompted Hochul’s office to back off using assessed values to determine which properties qualify for the new tax. According to The Real Deal, the governor’s team now plans to use comparable sales data and other valuation mechanisms to identify properties worth more than $5 million, addressing concerns that the city’s Department of Finance routinely undervalues high-end residential real estate.
What Comes Next
The framework still needs final approval from the state legislature, and Heastie’s pushback signals significant unresolved issues remain, particularly on the financial side of the budget. Voting on the budget bills could take place as soon as next week.
For the pied-à-terre tax to begin generating revenue in fiscal year 2027, which starts July 1, 2026, the city would need to establish a new property valuation and collection system in less than two months — a timeline several real estate analysts have described as ambitious.
Republican gubernatorial candidate Bruce Blakeman criticized the budget in a statement, calling it a “triple threat” of higher taxes, record spending, and rising utility costs. Hochul, meanwhile, framed the deal as proof that the state can address affordability and city finances “without raising statewide taxes at all.”
For Mamdani, the pied-à-terre tax represents a partial victory — a tangible step toward his “tax the rich” platform — but falls well short of the broader income and corporate tax overhaul his campaign envisioned. As the mayor put it Thursday, his administration is “fighting every day” to ensure the wealthy “contribute what they owe,” with more battles in Albany likely ahead.
