Judge Strikes Down Zohran Mamdani’s Unpopular Second-Home Tax

Zohran Mamdani’s signature “tax the rich” proposal suffered another setback in court Tuesday after a judge faulted New York City for mishandling the rollout of its so-called “pied-à-terre” tax.

The measure would charge an annual surcharge to affluent property owners whose New York City residences are not their primary homes, including second properties valued above $5 million.

State Supreme Court Justice Wayne Ozzi of Staten Island sided with homeowners who sued the city. They argued that officials failed to adequately determine which properties and owners qualified before beginning the collection process.

“Homeowners are being substantially harmed and penalized needlessly by D.O.F.’s method of implementing the tax law,” Ozzi wrote.

The judge specifically criticized the city for publishing a database covering nearly 1 million properties that might be subject to the levy, along with the names of roughly 17,000 owners.

The tax, signed into law by Democratic Gov. Kathy Hochul, remains valid. But its collection is now uncertain, with the city required to receive the money by next spring.

Ozzi ordered the city to take down the broad property list and replace it with a narrower version showing only homes definitively subject to the surcharge.

“Our administration is fighting every day to deliver for working New Yorkers,” Mamdani spokesperson Matthew Rauschenbach told The New York Times.

“The ultrawealthy are fighting in court to avoid paying their fair share. They have filed lawsuit after lawsuit to protect their privilege, and we will not back down.”

Rauschenbach said the city would “continue implementing the surcharge fairly, efficiently and in full compliance with the law.”

New York City appealed Ozzi’s decision Tuesday night and invoked an automatic stay, allowing officials to continue putting the tax program into effect while the case proceeds.

“City Hall botched this rollout and should have just admitted the errors and fixed its own mistake, instead of wasting time and taxpayer dollars by fighting it in court,” said Randy Mastro, an attorney representing the homeowners.

The residents challenging the city say the rollout created “mass confusion” because officials disregarded state data identifying property owners who could qualify for the new tax.

According to the homeowners, city officials shifted the burden onto longtime New Yorkers, leaving many of them scrambling to prove that their properties were primary residences before a one-month deadline expired.

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The lawsuit does not challenge the tax’s underlying legality. The law applies to three-family homes valued at $5 million or more and to condos and co-ops worth at least $1 million when they are not primary residences.

Rates rise with the property’s value, reaching 1.3 percent for a single-family home worth more than $25 million and 6.5 percent for a condo or co-op valued above $5 million.

City officials estimate that the measure could generate approximately $500 million in annual revenue.

Critics of Mamdani’s proposal argue New York relies heavily on high earners and commercial real estate taxes to fund city services – and fear alienating billionaires and large employers could backfire economically.

Still, Mamdani appears determined to keep pushing his tax agenda despite the public fallout.

However, last month it was revealed the mayor is extending an olive branch to the community by establishing the Business Advisory Council, including CEOs of Chobani, Etsy and the WNBA New York Liberty team. 

Hamdi Ulukaya, the billionaire CEO of Chobani, had urged Mamdani in April to ‘have a regular dialogue with the business community,’ Kathryn Wylde, the former CEO of the Partnership for New York City, who was also at the meeting, told the Wall Street Journal. 

‘It’s an honest effort by the mayor to get direct input from a group of business people that are not part of his natural constituency,’ Wylde added. 

‘He isn’t used to messaging to this constituency, and doesn’t necessarily anticipate how they’re going to react to various policies or statements.’

There are 15 business leaders who have agreed to be a part of the council and will meet quarterly with Mamdani and Deputy Mayor for Economic Justice Julie Su, the mayor’s office said in an announcement. 

The advisory is intended to advise City Hall on finance, technology, real estate, sports, entertainment, retail and healthcare.

Prominent council members include: CEO of the New York Liberty Keia Clarke, CEO of Etsy Kruti Patel Goyal, CEO of Brandon Blackwood New York Brandon Blackwood, President and CEO of Northwell Health John D’Angelo, President and CEO of Amalgamated Bank Priscilla Sims Brown and acclaimed restaurateur Marcus Samuelsson. 

The council represents business leaders across multiple sectors, including healthcare, fashion, sports, food and finance. 

However, tech and Wall Street leaders are noticeably absent. The New York Times reported before the official announcement that Jose Tavarez, the president for New York City at Bank of America, Ken Chenault, the former chief executive of American Express, and Charles Phillips, a private equity executive, were approached to join the council but ultimately did not. 

A spokesperson for the mayor’s office told the Times that they could not discuss specific conversations with candidates, but that some executives choose not to participate due to time commitments, media attention, or clearance from their companies.