Spotlight: New NYC Second Home Tax Signed Into Law
One of the most significant real estate developments of 2026 is New York State's approval of the new "Second Home Tax," commonly referred to as the pied-à-terre tax. Beginning July 1, 2026, owners of certain non-primary residences in New York City may be subject to an additional annual tax based on the property's assessed market value.
The law will be implemented in two phases. During the initial phase, which runs from July 1, 2026 through June 30, 2028, the tax is based on the "market value" assigned by the NYC Department of Finance. Importantly, this is NOT the same as a property's likely sale price. Many condominiums that would sell for several million dollars have Department of Finance market values that are significantly lower. For properties with a Department of Finance market value between $1 million and $3 million, the additional tax is 4% of that value annually.
A key question is what qualifies as a second home. To avoid the tax, a property must be used as a primary residence by someone: either the owner, a family member, or a tenant occupying the property under an arm's-length lease.
By July 1, 2028, the city is required to transition to a new valuation methodology intended to align more closely with actual market prices. At that point, the tax structure changes significantly. For example, properties valued between $5 million and $15 million will generally be subject to an annual pied-a-terre tax of 0.8% of value. A property valued at $8 million would therefore face an annual pied-a-terre tax of approximately $64,000 per year.
The practical impact will vary widely depending on the property and how it is used. Some owners of high-value second homes may see little immediate impact because their current Department of Finance market values remain relatively low. Others may face substantial new carrying costs, particularly once the revised valuation system takes effect in 2028.
The city is still developing the valuation methodology, reporting requirements, and billing procedures that will govern implementation, so additional guidance is expected over the coming months. If you own a second home, are considering purchasing one, or simply have questions about how the new law may affect a particular property, please reach out. We are happy to discuss your situation and help you understand the potential implications.
The Market Overview
The New York City market remained resilient in May. Buyer activity strengthened meaningfully across both Manhattan and Brooklyn. Manhattan ended the month with 3,561 properties in contract, up 17% from April and more than 8% above May 2025 levels. Brooklyn also saw a surge in activity, with properties in contract rising more than 20% month over month.
Inventory remains a defining factor. Manhattan supply increased modestly from April but was still nearly 9% below last year's levels. Brooklyn inventory expanded seasonally and now sits slightly above May 2025 levels, giving buyers somewhat more choice than they had a year ago. Even so, well-priced properties continue to attract attention and move quickly, particularly in desirable neighborhoods and move-in-ready condition.
Pricing was relatively stable. The Manhattan median price per square foot was $1,422, down 2.8% from April and 1.3% year over year, while Brooklyn reached $1,050 per square foot, up 2.5% from April and more than 9% from a year ago. At the high end of the market, Manhattan recorded 146 signed contracts above $4 million, including 34 deals above $10 million, underscoring continued strength among luxury buyers.
Best Wishes,
Boris Fabrikant, Esq and Collin Bond, Esq.
