A New York state judge has ordered New York City to cancel roughly 17,000 tax notices and start over with its new pied-à-terre surcharge after finding the city wrongly placed the burden on thousands of homeowners to prove they actually lived in their own homes. State Supreme Court Justice Wayne Ozzi sided with homeowners who challenged the Department of Finance's rollout of the tax, according to a report from Americans for Tax Reform. The ruling marks another setback for Mayor Zohran Mamdani's signature tax on second homes, less than three months after the city began sending notices.
The pied-à-terre tax targets New York City properties not used as primary residences, with rates that vary sharply based on property type and value. For the 2026-27 and 2027-28 tax years, one-, two-, and three-family homes valued above $5 million face surcharge rates ranging from 0.8% to 1.3%. Condos and co-ops encounter a much lower $1 million threshold but steeper rates—ranging from 4% to 6.5%—all on top of existing property taxes. Mamdani and Gov. Kathy Hochul pushed the tax through as part of the state's fiscal year 2027 budget, promoting it as a way to raise approximately $500 million annually from wealthy second-home owners to address the city's budget shortfalls. But the Department of Finance's first attempt to identify who owed the surcharge swept in thousands of people who said the flagged properties were actually their primary residences.
Justice Ozzi found that the city's rollout "unfairly shifted the burden to thousands of homeowners to prove their basic residency," according to the report. He also wrote that homeowners were being "substantially harmed and penalized needlessly" by the process. The judge ordered the city to cancel the roughly 17,000 notices already mailed, remove a supplemental tax roll containing more than 900,000 properties, and use updated information to determine which properties actually qualify for the surcharge. The city quickly appealed the ruling, triggering a stay that allows the tax to continue while the appeal moves forward.
The pied-à-terre tax faces legal trouble on multiple fronts. Former U.S. Commerce Secretary Wilbur Ross and casino developer Steve Wynn have filed a separate lawsuit challenging the tax's constitutionality, arguing it improperly discriminates against nonresidents. Ross faces a potential surcharge exceeding $83,000 on his Manhattan co-op, while Wynn's bill could top $183,000. That case attacks the tax itself, while the homeowners' lawsuit concerns how the Mamdani administration carried it out. The city ultimately granted thousands of exemptions as questions mounted over how the original list had been assembled, the report notes. The judge's ruling validates concerns raised during the first weeks of the rollout in August, when the city required affected homeowners to submit documentation establishing their properties were primary residences.
The pied-à-terre tax remains in effect, and the Mamdani administration is appealing the court order. But less than three months after the city began implementing the surcharge, its rollout has already produced thousands of disputed notices, multiple lawsuits, an appeal, and a court order directing the city to start the process over. The tax's future now depends on both the appeal of Ozzi's ruling and the separate constitutional challenge, with hundreds of millions in projected annual revenue hanging in the balance.