New York City has significant budget challenges. These include the public schools, debt services, shortfall in revenue from public housing and capital maintenance backlog in public housing, to name but a few of the issues.
New York City also has significant revenue challenges. The city’s major revenue sources are personal income tax, property tax, sales tax and business taxes. Two of these revenue streams, the two largest, are subject to stress.
There is an outflow of high-income households from New York State generally. The Citizen Budget Commission reports that between 2010 and 2022, New York State’s share of millionaires dropped from 12.7% to 8.7%. This generally equates to a loss of $11 billion in income tax revenue.
The property tax is also in distress. New York City is overly reliant on Manhattan co-ops and condominiums. Condos and co-ops in Manhattan pay four times the tax on comparably valued single-family homes located in the five boroughs. New buildings pay substantially higher taxes than older buildings, based on the comparable used. Older buildings, even the “white glove” buildings on Park and Fifth Avenues, are compared to rent-controlled buildings, while new buildings are compared with market rates.
Some of these issues were factored in the New York Court of Appeals decision in Tax Equity Now NY LLC v City of New York, 2024 NY Slip Op 01498, which found the system discriminatory. There are proposals that would require all primary residential properties in New York City to be evaluated and taxed on the same basis. In this scenario, there are likely to be property tax increases for no fewer than160,000 properties, many of them single-family homes located within the five boroughs. These proposals are not moving legislatively.
Earlier this year, when Governor Kathy Hochul refused to consider an income tax hike and eff orts for a 9.5% across the board property tax were equally rejected, New York City Mayor Zohran Mamdani sought a tax on second homes. In keeping with the general overtaxing of Manhattan apartments, the tax applies to single-family homes with a value of $5 million or more, but for co-ops and condominiums it applies to properties valued at $1 million or more.
The tax has been crafted to be targeted at the affected units only. Therefore, the pied-à-terre tax may not be applied to the building taxes; it must be a surcharge to the unit. It appears that only about 10,000 to 13,000 properties will be affected. For reasons that do not make sense, residents or owners of some 17,000 properties have been notified that the tax may apply to them. These residents and owners are understandably upset and angry, particularly those who are tenants or who pay New York State income tax.
Those improperly notified have a means of exempting the property. If you are a tenant, landlord or resident, redacted leases and New York State personal income tax returns with all but the address and proof of execution or filing redacted should be sufficient. Aggressively short timelines have been extended, allowing time to file the required paperwork.
According to the New York City Comptroller’s reports, the pied-à-terre tax will disappoint revenue- wise. Reportedly, it will not produce the $500 million claimed by the mayor — the comptroller estimates collections of $340 million to $380 million. It may spur more high-income New Yorkers to relocate to lower tax jurisdictions, including Florida or Texas.
Looming over all of this is the New York State Financial Control Board (NYSFCB), which is charged with ensuring the fi scal soundness of finances in New York City on behalf of bond holders. The NYSFCB may assert jurisdiction over the New York City finances in the event of a trigger, such as a failure to pay principal or interest on debt on time, ending a fiscal year in a GAAP-defi ned operating deficit of more than $100 million or a material deviation from the four-year financial plan. In recent years, pre-payments have avoided a technical default.
According to the NYSFCB report adopted August 12, 2026, New York City has an underlying deficit of $1.8 billion and is in the fourth year of deficit operations. These are troubling numbers, with other information provided by the NYSFCB suggesting that New York City’s financial woes are increasing. New York City leadership needs to focus on these issues or risk triggering the fiscal controls that might be imposed by the NYSFCB.
This column presents a general discussion. This column does not provide legal advice. Please consult your attorney for specific legal advice.
Carol A. Sigmond
Partner
Nossaman LLP
12 East 49th Street, 22nd Floor
New York, NY 10017
