New York City has won an appeal in a challenge to the rollout of its pied-à-terre tax, marking a victory for one of Mayor Zohran Mamdani’s key agenda items. A state appeals court on Wednesday ruled that the Mamdani administration can continue rolling out the tax, reversing a September ruling by a Staten Island judge who said the city had mishandled the program’s launch and must redo it. While the lawsuit challenged the program’s rollout, not the tax itself, the surcharge still faces two ongoing lawsuits seeking to strike down the program.
Pitched by Mamdani as a way to fulfill his pledge to “tax the rich,” the surcharge applies to secondary one- to three-family homes valued at more than $5 million, as well as secondary condos and co-ops valued at $1 million or more, as 6sqft previously reported.
The now-dismissed lawsuit, filed by a group of homeowners in early August, stemmed from reports that some individuals with only one primary New York City residence received notices that they may be subject to the tax, creating what the plaintiffs called “mass confusion” surrounding the surcharge.
The confusion was amplified when the city’s Department of Finance published its twice-yearly report listing the names and addresses linked to nearly one million properties, as required under the new law.
After clarifying that the release fulfilled a state law requirement and covered most non-rental residential properties in the city, not just those likely to be subject to the surcharge, Mamdani later extended the deadline for submitting documentation twice.
Following the Staten Island judge’s September ruling that the administration must redo the program’s rollout, Mamdani immediately filed an appeal. With Wednesday’s legal victory, the city faces one fewer legal challenge.
The appeals court ultimately found that property owners “lacked standing” to sue because they had not experienced any “concrete or definable injury” from the program’s rollout. Additionally, the court found that the confusion cited by homeowners following the supplemental list’s release was “too generalized, tenuous, and ephemeral” to constitute a “cognizable injury-in-fact.”
Randy Mastro, a lawyer representing the plaintiffs, told the New York Times that it was unclear whether the homeowners planned to appeal the court’s decision. However, in a statement, he continued to lambast the tax rollout, calling it “lawless and chaotic” and saying it would go “unremedied.”
Mastro also said he believed the two other ongoing legal challenges to the program, which challenge the constitutionality of the surcharge itself, would be successful.
In a statement to The Hill, Mamdani celebrated the legal victory and committed to defending against the two remaining lawsuits.
“From day one, those with the most have attempted to use every legal avenue available to shield their wealth and avoid contributing more to our city,” Mamdani said. “We are heartened by the Appellate Division’s ruling in the City’s favor, and we will continue working with our partners in Albany to defend this law against the ongoing challenges in Suffolk County.”
The first of the other lawsuits, filed by Stephen Wynn, founder of Wynn Resorts, and former U.S. Commerce Secretary Wilbur Ross and his wife, Hilary Geary Ross, argues that the tax discriminates against wealthy out-of-towners. Wynn and the Rosses all live in Florida but own second homes in NYC, according to the Times.
Filed by the corporation that owns the Upper East Side co-op building known as The Montclair, as well as several homeowners, some of whom live in Florida and Suffolk County, the second lawsuit makes a similar challenge. The lawsuit is backed by the Real Estate Board of New York.
Officials say the tax could generate up to $500 million in additional revenue annually, although that figure has been questioned by City Comptroller Mark Levine. In a May report, Levine said that exclusions for rental units and “behavioral responses” to the tax could lower the actual revenue to between $340 million and $380 million.
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