New York Governor Kathy Hochul and New York City Mayor Zohran Mamdani proposed a new tax on luxury second homes on Wednesday, prompting swift condemnation from business leaders who predicted it would harm the city's economy.

The pied-à-terre tax would impose an annual surcharge on non-primary residences valued at $5 million or more, including condominiums, co-ops, and one- to three-family homes owned by non-city residents. Officials described the measure as targeting ultra-wealthy individuals and global elites who treat such properties as wealth storage rather than homes, often leaving them vacant. The proposal is projected to generate at least $500 million annually to help close New York City's budget shortfall.

Hochul, who previously opposed many tax hikes sought by Mamdani, framed the surcharge as a fair contribution from those who benefit from city services like policing and parks without paying city income taxes. "If you can afford a $5 million second home that sits empty most of the year, you can afford to contribute like every other New Yorker," she said. Mamdani hailed the plan as fulfilling a campaign pledge. "When I ran for mayor, I said I was going to tax the rich. Well, today, we're taxing the rich," he declared in a video statement.

The announcement united the two Democrats amid ongoing budget tensions, following the state's commitment of an additional $1.5 billion to the city in the fiscal year 2027 budget. Mamdani, a democratic socialist who took office on January 1 after winning the 2025 election, has marked his first 100 days with initiatives like expanding city-owned grocery stores and universal childcare.

Criticism erupted almost immediately on social media and in public statements. Hedge fund manager Bill Ackman cautioned that non-residents who buy multimillion-dollar apartments bolster New York City's economy and that the tax "will harm the constituencies he is supposedly trying to help." Investor Jason Calacanis labeled it "class warfare" and warned, "NYC is cooked." Former X CEO Linda Yaccarino called Mamdani's announcement video "one of the scariest things I have seen."

Senator Ted Cruz suggested the tax would send business to real estate agents in Texas and Florida, while President Donald Trump accused Mamdani of "DESTROYING New York." Hedge fund manager Daniel Loeb retweeted content implying a move to Florida. Real estate professionals expressed fears of declining property values and reduced investment in the luxury market.

The proposal revives a similar pied-à-terre tax that failed in Albany years ago. Supporters argue it spares primary residents and focuses on vacant high-end properties, such as billionaire Ken Griffin's $238 million penthouse. Opponents contend it risks accelerating the outflow of capital and high earners that has already challenged New York since the pandemic.

As of Friday, the measure requires state legislative approval before it can take effect.