New York reaches $268 Billion budget deal Including new tax on second homes

Minara Helen: New York Gov. Kathy Hochul (D) announced a tentative deal to impose a tax on second homes in New York City as part of a $268 billion budget that will also weaken the state’s climate law.

Budget discussions this year have been complicated by debates over how to fill the city’s $5.4 billion two-year budget gap, with Hochul and state lawmakers this week settling on the pied-à-terre levy aimed at high earners who don’t call the city home. The deal announced Thursday did not include details of how the second-home tax would work. The governor said she is in the process of working those out with the Democratic leaders and would share more information “soon.” Assembly Speaker Carl E. Heastie (D) said, however, that the deal was rushed and that he had not signed off on Hochul’s announcement.

Hochul proposed the levy in April for second homes in the city worth more than $5 million, saying it could raise up to $500 million annually. The governor told reporters Thursday the city’s “rather bizarre” method for assessing property taxes has made it difficult to determine how to structure the levy.

Hochul said she is not considering an upstate expansion of the second home tax, an idea individual lawmakers have floated in recent weeks. She reiterated the final budget will not include increases to corporate or income tax rates, and also dismissed a cut to the pass-through entity tax credit used by wealthy business owners that New York City Mayor Zohran Mamdani (D) made a last-ditch push to include.

The city Department of Finance currently assesses condos and co-ops on their income-producing potential rather than market value—allowing luxury apartments to be valued at a fraction of their sale price. That assessment method is currently being challenged in the state’s Supreme Court by a housing coalition, which claims the city’s property tax code discriminates against minority residents.

The method means that properties worth $200 million can currently be assessed at $7 million, Hochul said.

New York City officials will also have to ramp up their auditing efforts to ensure taxpayers aren’t skirting the new tax by asserting properties are used as a primary residence.

More broadly, the state budget deal Hochul announced Thursday includes $1.5 billion in operational aid for New York City, which Mamdani has celebrated as city budget officials work to address shortfalls. Hochul, who is up for reelection this fall, has faced pressure from lawmakers to both her left and right to make the state more affordable, though they disagree over how to get there.

Other measures in the proposed deal would create carveouts to the state’s environmental review process to streamline housing development and adjust the state’s insurance payout process as Hochul seeks to make inroads on residential affordability concerns.

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