Pied-à-Terre Taxes Aren't a Solution to Poor Property Valuations
New York City systematically undervalues high-end condos — a tax policy error rooted in housing policy error.
The City’s luxury condos have their assessed values diluted by a pool of comparable properties that includes rent-stabilized units with a much lower market value. Rent control and rent stabilization thus not only reduces the stock of housing in New York and undercuts its quality, but it also reduces assessed values of similar properties not subject to rent control.
On the campaign trail, Mayor Zohran Mamdani called for reforms to improve property tax valuations, even as he champions the housing policies that have created the valuation problem (among other, more consequential, policy outcomes). But the only policy proposal to emerge thus far doesn’t involve correcting the calculation of the tax base. Instead, it relies on a dramatic, economically inefficient, and poorly-targeted rate increase on a small subset of that base: second homes.
The proposed pied-à-terre tax falls on the sort of residents most likely to change their behavior in response to higher tax burdens, it reduces the attractiveness of new construction, and it sends a signal that New York is not interested in getting its fiscal house in order.
Ken Girardin (a fellow at the Manhattan Institute) and I have a short piece in City Journal evaluating the tax proposal, which is only the latest instance in the long and regrettable history of policymakers identifying a legitimate policy deficiency and addressing it, not with real reform, but with a poorly-designed patch that creates more problems than it solves.
You can read our piece here.
Obligatory Marketing Note
My new consultancy provides tax policy research, writing, and other services, both project-specific and on retainer (or in visiting fellow-style roles). If you are in the market for tax policy research or know someone who is, please let me know.
Please Share this Substack
If you find this Substack valuable, please do me a favor and share it with colleagues and others who may be interested. And if you haven’t yet subscribed (it’s free), please consider doing so!