Zohran Mamdani’s pied-à-terre property tax is a ‘go.’ Will it work?

From New York to Vancouver to London, a once-niche coverage concept is shifting into the mainstream of city finance: taxing pied-à-terre properties, second properties, trip flats, and luxurious models that sit partially or fully unused.

New York Metropolis is simply the most recent instance, with Mayor Zohran Mamdani and New York State Governor Kathy Hochul supporting the tax as a part of a state and metropolis effort to make up a giant price range gap. In a brand new price range proposal this week, Mamdani dropped plans to lift property taxes on many middle-class householders, a transfer that would have been a tough one for Mamdani to politically abdomen, however stored the pied-à-terre tax concept.

The concept has already resulted in a political disaster for the mayor after he posted a video standing exterior the constructing the place hedge fund billionaire Ken Griffin owns a unit, resulting in well-known politically conservative Griffin’s first vocal pushback towards Mamdani, and a menace to drag enterprise from New York sooner or later. Whereas that is a pressure that has been anticipated to percolate between the billionaire class and new socialist democratic mayor, actual property gross sales within the metropolis stay sturdy.

However there’s a extra basic query about this new type of property tax for New York to now take care of: does it work? There are present examples from world wide to assist in making an attempt to reply it.

Variations of second-home and emptiness taxes exist globally, throughout a number of main housing markets. In Canada, Vancouver’s “empty properties tax” and a federal “underused housing tax” are among the many most outstanding examples. Toronto not too long ago adopted with its personal emptiness levy. 

As housing affordability worsens, rents proceed to rise, and monetary pressures mount, cities are more and more focusing on what are sometimes extremely seen symbols of inequality: darkish luxurious condos in prime city neighborhoods.

Vancouver officers framed the town’s Empty Properties Tax as an try to “return empty or under-utilized properties to make use of as long-term rental properties for individuals who reside and work in Vancouver,” based on the Metropolis of Vancouver’s public supplies on this system. Town has additionally stated web income from the tax is reinvested into reasonably priced housing initiatives.

In Europe, London and Paris each apply types of surcharge or larger taxation on second residences and underused properties. Singapore imposes a number of the most aggressive overseas purchaser surcharges globally, reaching as excessive as 60% in sure circumstances.

‘Vacant properties’ taxes and house owner conduct

Paris is now shifting towards even steeper emptiness penalties. In keeping with reporting by Le Monde, the town plans to sharply enhance taxes on vacant housing, with native officers hoping to push hundreds of models again onto the market. Jacques Baudrier, Paris deputy mayor for housing, instructed the paper: “We hope that no less than 20,000 properties will return to the market in consequence.”

On the similar time, Paris officers have acknowledged the bounds of the coverage. A 2025 report from France’s Cour des Comptes discovered that regardless of broader emptiness taxes and better charges, the measures “don’t seem to have had a big impact on the general variety of vacant properties.”

In keeping with Thomas Brosy, senior analysis affiliate on the City-Brookings Tax Coverage Heart, these insurance policies typically fall into two classes: recurring property tax surcharges and one-time transaction taxes. The excellence issues, he stated, as a result of “it impacts how strongly homeowners alter conduct over time.”

The New York proposal is an annual tax on non-resident second properties price $5 million or extra.

An vital distinction, in distinction to the New York regulation which targets properties price $5 million or extra, is that many cities impose the costs with out particular regard to the worth of the property: “Typically, these insurance policies tax properties based mostly on occupancy or possession standing, not essentially on the property’s worth or the proprietor’s earnings or wealth,” Brosy stated.

“Anti–second residence insurance policies” are effectively established world wide, based on Paul Cheshire, professor of financial geography on the London Faculty of Economics. “New York is a follower, not a pacesetter,” he stated. However Cheshire argued that policymakers usually misdiagnose the issue: “The most important false impression is that these taxes will enhance housing affordability in giant ‘tremendous cities.’ The issue is principally constrained housing provide by way of coverage,” he stated.

Cheshire additionally famous that in lots of locations, second properties stay a comparatively small share of whole housing inventory, one thing he considered as probably limiting the potential scale of any tax. “Even in communities with excessive concentrations of second properties, it’s nonetheless solely round 15% of the housing inventory,” he stated, suggesting the taxable base is structurally constrained.

Brosy says the empirical proof from cities like Vancouver and Paris backs up that view. “They elevate some revenues and decrease emptiness, however they do not decrease rents or costs total — which ought to be anticipated, because the luxurious housing market is essentially disconnected from the broader housing market.”

One of the constant findings amongst specialists is that these taxes generate far much less income than policymakers initially count on. World tendencies could also be instructive in predicting the income the New York tax could find yourself producing. New York is anticipating as a lot as $500 million, however that quantity could show to be optimistic, based on Brosy.

New York Metropolis’s comptroller has some doubts

Mamdani stated in an announcement on Tuesday that New York’s first-ever pied-à-terre tax “will generate $500 million yearly.”

However New York Metropolis’s personal comptroller not too long ago issued a report saying that whereas the Vancouver information does present a notable decline in vacant properties within the years since that tax was carried out, its income projections for New York have to incorporate the potential for a a lot decrease take than the $500 million estimate put ahead. Whereas as a lot as $510 million is feasible, a $340 million to $380 million estimate could also be extra real looking “after accounting for properties that could possibly be already rented to major residents and for the behavioral modifications which have adopted taxes imposed elsewhere.”

The comptroller’s report added that even larger taxes may have a bigger behavioral impact.

“Behavioral responses to the tax — conversions to rental, primary-residence claims by kinfolk, gross sales, and attainable authorized challenges — introduce additional variability that can solely change into observable after implementation,” the report stated. “For these causes, the extra tax ought to be integrated into the Metropolis’s monetary plan with a prudent income assumption.”

The comptroller’s report advised that one influence on actual property transactions could possibly be initially constructive if there’s a wave of gross sales to keep away from the tax. But it surely went on to say, “Broad results on growth or rents … have typically not been important. Nonetheless, concentrated results on the posh market could possibly be felt extra deeply, as advised by London’s expertise.”

London’s coverage has been pointed to as a cautionary story.

Abir Mandal of the Tax Basis, typically considered as a center-right assume tank, says the income potential relies upon closely on design and enforcement, however even then stays modest relative to housing wants. From the present sample throughout quite a few international cities, Mandal stated the takeaway is constant: significant in absolute phrases, however marginal in fiscal context.

Even in Vancouver, probably the most aggressive examples globally, and the place emptiness charges did transfer considerably decrease after the tax coverage was carried out, vacancy-tax income stays comparatively small in contrast with the general scale of metropolis funds. The Institute on Taxation and Financial Coverage, discovered that Vancouver’s tax generated roughly 1% of whole metropolis tax income.

Mandal says empty properties can generate further tax income with out further taxation from one other perspective: their lack of drawing on public sources. “The most important false impression is that these are ‘free lunch’ taxes on absentee ‘speculators’ or the ultra-wealthy that elevate substantial income whereas enhancing affordability with out financial prices. In actuality, second properties, if unoccupied, impose decrease marginal service prices (no further strain on police, education, and so on.) whereas contributing to the tax base — making them web fiscal positives,” he stated.

Doubtlessly higher politics than fiscal administration

As to the politically-driven headline concern of whether or not such tax constructions trigger mass migration of ultra-wealthy patrons, the proof globally doesn’t mean that any single tax coverage change could have that impact. The consensus amongst specialists is that second-home taxes affect marginal selections however hardly ever decide whether or not rich people spend money on international cities. Brosy described the impact as incremental slightly than decisive: “They need to actually shift demand and push costs downward for trophy properties, however they’re unlikely to find out whether or not somebody owns in London, New York, or Singapore,” Brosy stated.

Nonetheless, when mixed with broader tax regimes, these tax insurance policies could contribute to gradual shifts in the place ultra-wealthy people allocate property, notably towards lower-tax jurisdictions. Policymakers in Europe and North America more and more face competitors from jurisdictions providing low or near-zero property taxation alongside residency incentives for rich buyers. Dubai’s rise as a magnet for international wealth has sharpened these comparisons, no less than earlier than the beginning of the U.S.-Iran battle, which may even have lasting implications.

Mandal identified that for the ultra-wealthy, it is extra a matter of cumulative influence slightly than single coverage: “Tipping factors emerge from cumulative burdens slightly than remoted surcharges,” he stated.

Proof from high-tax jurisdictions, equivalent to California/New York to Florida/Texas migration waves, and UK modifications prompting London exits to Dubai, point out sensitivity amongst many demographics, not simply the ultra-wealthy, together with retirees, investment-income reliant people, and enterprise homeowners. U.S. information reveals millionaire migration to lower-tax states. A single NYC tax will not empty Manhattan, however mixed with present excessive prices, it accelerates selections for these with versatile footprints, “particularly with many international cities offering a welcoming haven and powerful passports,” Mandal stated.

Politics is one other story. The taxes stay extremely enticing as a result of they aim a slender and prosperous slice of householders slightly than broad middle-class property homeowners, because the New York case reveals. The enchantment of pied-à-terre taxes could in the end lie much less of their fiscal energy than of their symbolism: they permit governments to be seen as responding to housing inequality with out imposing broader tax will increase on full-time residents.