The duplex penthouse at 988 5TH Avenue, listed for $24.95M by Noble Black.
While New York mayor Zohran Mamdani races through Q4 of his ‘tax the rich’ tenure, the former housing counsellor’s new annual pied-à-terre tax on luxury second homes is facing an ongoing tangle of administrative challenges and legal disputes, much to the frustration of many of the wealthiest property owners.
A hard-left mayor railing against the rich is as unsurprising as the critics’ refrain of a wealth exodus from the city, but has this direct aim at New York’s ‘ghost mansions’ affected the prime property mood? No, says super-broker Noble Black, the rich are still fighting to buy.
Black, who has more than $3.5 billion in sales under his belt, says that with the city’s limited supply of top-end turnkey trophy properties and a pool of extremely selective luxury buyers who don’t want to get their - or anyone else’s - hands dirty with renovation work, “the desire to own in New York remains strong”.
This claim broadly tracks with activity in the overall luxury market. Olshan Realty heralded a pacey October with 55 contracts at $4 million and above signed in the first two weeks of the month - a slight increase on the same period last year and above the 10-year average of 47.
The biggest issue for the wealthy appears to be finding the right property.
A buyer with $40 million to spend on a second property in the city is not indifferent to the tax, Black says, but is far more concerned with finding something exceptional that fits their specifications.
Two of his recent UHNW buyers have been so frustrated by the scarcity of appropriate luxury homes available both on and off-market that they have unsuccessfully tried to buy other buyers out of trophy property contracts.
“Potential sellers are also reluctant to move because selling means re-entering a market with limited replacement options,” he explains.
One seller, who Black says is currently getting a “great price” for their ultra-prime property, is only agreeing to a deal if it has an “incredibly extended” timeline before completion because they are still choosing where to move to.
NYC super-broker, Noble Black.
Back in July, appraisal and research firm Miller Samuel’s Jonathan Miller told CNBC that luxury inventory was down 40% on last year and is now at its lowest level since he began recording it in 2004.
Mamdani revealed the surcharge, which will see ultra-prime second homes taxed annually at up to 6.5% of the city’s estimated market value, in a provocative video filmed outside fund manager Ken Griffin’s $238 million penthouse in April. Under the surcharge, condos and co-ops valued at $1 million or more fall into 4-6.5% tax bands and one- to three-family homes valued at $5 million or more are taxed between 0.8 and 1.3% depending on their value tier.
The NYC Department of Finance (DoF) is required to value condos and co-ops as if they were rental apartments, which produces values far below sale prices. It’s this figure that determines which surcharge rate a qualifying second home falls into.
The current methodology homeowners are being told to use by the city to assess their eligibility for the tax paints a confusing picture. One super-prime four-bed condo that sold on Central Park South earlier this year for $37.25 million is listed by the city as having a fair market value (FMV) of $2.4 million. That means if it were a second residence it would be subject to an annual surcharge of around $96,000.
In July, the DoF mailed 17,000 notices to prime property owners who were suspected of being eligible for the tax with a deadline to apply for an exemption. The exemption deadline has been extended three times. Of those issued notices, around 10,000 had applied for an exemption by October 11, with some 5,700 of those applications approved, according to the New York Post.
Meanwhile, a slew of wealthy homeowners grouped together to bring three separate lawsuits against the tax - one over its rollout, two over its constitutionality. A Staten Island judge ruled against the city’s ‘confusing’ administrative process on September 29 and ordered it to restart the rollout. That order was paused on appeal, until an appeals court ruled last week the city can proceed with the rollout.
Mamdani, who during his mayoral campaign promised his administration would be Donald Trump’s “worst nightmare”, remains sanguine about the rollout, telling reporters, “with any new tax, there are more questions than there are answers.”
The city’s youngest mayor in over a century is hoping the charge on second homes held by the “ultra-wealthy and global elites” will raise $500 million a year to help plug a projected $12 billion budget gap he says he inherited from Eric Adams.
Adams’ former right-hand man, lawyer Randy Mastro, has represented plaintiffs in six lawsuits against the Mamdani administration since it took over in January, including two pied-à-terre suits.
“He sent out 17,000 notices, so he ain’t getting $500 million or more, since 10,000 of them or more will end up not owing the tax,” the veteran attorney told Fox News.
Black described the rollout as “chaotic” and doubts whether the tax will ever realistically be collected.
Whether the tax will survive its bumpy rollout, meet its revenue target and maintain UHNW interest in the city remains to be seen, but for now, New York’s richest buyers still appear to have a strong appetite.
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