NYC City Council Hearing Today to Establish Oversight Over Second-Home Tax Rollout — It Has Not Gone Well

Two City Council committees meet today at 1 p.m. to look at how New York City is handling its new second-home tax.

No one from the Mayor's office is coming. The administration is sending written testimony instead of a witness. Speaker Julie Menin called that "unfortunate."

The tax is only a few months old. In that time the city has published a list with the names and addresses of more than 900,000 property owners. It has mailed warning letters to 17,000 of them. More than 4,000 have already contested. Three homeowners have sued. A judge blocked the rollout. An appeals court let it resume five days ago.

Today was the Council's chance to ask the city what happened. With no agency witness in the room, most of those questions will go to the written record instead. And the Council staff report written for the hearing has problems of its own — starting with the tax rates.

What the Tax Does

The tax applies to homes that are not your main home. The city calls it a surcharge on non-primary residences. Most people call it the pied-à-terre tax.

The city lists five ways to be excused. Your home is not taxed if it is the main home of any of these people:

Note the wording on renters. It is not enough to rent the place out. It has to be the tenant's main home.

If none of those apply, the tax depends on what the city says your home is worth. Houses are taxed above $5 million. Apartments — condos and co-ops — are taxed above $1 million.

The Mayor has said the tax is meant "specifically for the richest of the rich." Governor Hochul put the revenue at $500 million. The city Comptroller, studying an earlier version of the bill, estimated $340 million to $380 million once rented units and owner behavior were counted.

Problem One: The Council's Rate Chart Does Not Match the City's

The report written for today's hearing lists the tax rates. Those rates do not match the ones on the Department of Finance website.

Four of six rate brackets are different.

An apartment the city values at $6 million pays 5.25 percent on the Council's chart. On the city's chart it pays 6.50 percent. Anywhere between $3 million and $10 million, the report shows a lower rate than the city does.

Problem Two: Apartment Values Are Not Real Prices

Underneath the rates sits a bigger question. What is a home actually worth?

For a house, the city's value is close to what the house would sell for. For an apartment, it is not. A state law bars the city from pricing apartments off real sales. Instead it has to treat the building as if it were a rental and work out a value from rent.

The city's Comptroller measured the gap. The median apartment is valued by the city at about one-fifth of what the Comptroller's sales-based estimate says it is worth.

That is why apartments are taxed above $1 million and houses above $5 million. The city treats them as equal: an apartment it values at $1 million "is comparable to a single-family home valued at $5 million or more."

The trouble is that the ratio is not steady. It falls as apartments get more expensive — from about a quarter at the middle of the market to roughly a ninth at the top one percent. So the five-to-one swap works least well at the top, which is where this tax is aimed.

The law does eventually fix this. Starting in 2029, apartment values must be worked out using sales of comparable apartments. Until then, two years of bills run on the rental math.

The Council's report explains how the city works out these values. It never asks whether they hold up.

Problem Three: Two Dozen People Are Running This

On July 23 the Mayor's Office said the city had "funded 13 additional positions within DOF to implement the program and assist property owners." It added 11 more at the office that handles tax appeals.

Twenty-four new staff. Seventeen thousand letters. More than 4,000 challenges already, with a September 18 deadline still ahead and appeals due in March.

The Council's report never mentions these numbers, even though the Mayor's Office published them almost a month ago.

Problem Four: The Court Fight Is Not Over

Three homeowners sued the city on August 7. They are Rachel O'Brien, Carmine Morano, and Simon Hedley, represented by Randy M. Mastro of Dechert LLP, a former first deputy mayor. All three say the property is their main home. Only Hedley received a mailed letter. O'Brien's and Morano's homes appeared on the published list.

They are not trying to strike down the tax. Their case is about how the city is running it. They argue the law required the city to figure out who owes the tax before sending notices — and that instead the city put that job on residents.

On August 10, a Staten Island judge, Justice Wayne M. Ozzi, ordered the city to stop.

What the judge actually ordered

The order is short and specific. It told the city to stop doing three things until the court could hold a hearing on the homeowners' request for a longer freeze.

One. Take down the list. The city must stop posting the roll of more than 900,000 owners' names, addresses, and values on its website. It must also stop letting the public see it any other way.

Two. Stop acting on the list or the letters until the sorting is done right. The city cannot charge, assess, or collect from anyone on the list or anyone who got a letter "without first making the individualized determination and then providing the proper notice required by Tax Law §§ 1351(i) and 1352(a)(2)."

In plain terms: check each property one by one, send a proper notice, and only then bill anyone.

Three. Stop the clock. The city cannot enforce any deadline in the letters. The order names the August 21 date "as extended to September 18, 2026."

How that lines up with the rollout

Each piece of the order targets a different part of the rollout.

The middle one is the heart of it. The order does not say the city cannot collect this tax. It says the city has to do the steps in the right order. Figure out who owes it. Then tell them. Then charge them.

That is the reverse of what happened.

What the order did not do

This is worth being careful about. A temporary restraining order is not a ruling that the city broke the law.

An order like this freezes things in place until a hearing can be held. No facts have been decided. The language the judge signed is standard for this kind of order.

It is also worth repeating that the homeowners are not attacking the tax. If they win everything they asked for, the tax still stands. The city would just have to run it differently.

Right now, none of it is in force

The city filed an appeal on August 10, which froze the order automatically. On August 13 an Appellate Division justice confirmed the freeze would hold.

So the list is back up. The letters stand. September 18 is still the deadline.

Here is what the Council's report leaves out. That freeze runs only until August 31. On that day both sides return to Justice Ozzi's courtroom to argue whether the rollout should be halted while the case goes on. The report never gives the date. A Council member reading it today would not know the next deadline is less than two weeks away.

Problem Five: The City Published Hundreds of Thousands of Names

The city posted a public list of properties that "may be subject to the charge." It held more than 900,000 properties, and close to a million entries in all. It included owner names, addresses, and values. It went up on July 24 — one day after the warning letters started going out.

The city already knew most of those people would never owe the tax.

Two separate analyses put the number of properties actually worth enough to qualify at about 24,000. The New York Times published that figure on July 29. A week later, former Finance Commissioner Martha Stark filed an affidavit in the lawsuit reaching roughly the same count. And of those 24,000, only the ones that are not somebody's main home would be taxed at all.

The Council report cites the Times for the number. It does not mention the affidavit.

Some property owners believe the list was, in the report's words, "merely a way for the Mayor to shame wealthy homeowners." The city says it had to publish it, pointing to city rules requiring the list be made public.

Problem Six: The Wrong People Got Letters

The city mailed letters to 17,000 owners. The letters said they would owe the charge unless they applied to be excused.

By the time the Council's staff wrote their report, 4,290 owners had contested. Nearly 2,000 of them — about one in nine of everyone who got a letter — had already been told they do not owe the tax. More than 2,000 more challenges were still open.

Those are only the people who wrote back.

The city has since explained why this happened. Its records could not confirm the home was somebody's main residence. In its own words: "our records did not allow us to confirm that the property is being used as a primary residence." One example it gives is an owner who gets a co-op or condo tax break but did not have a "sufficient tax filing on record."

Problem Seven: The City Had a Way to Check

The law that created this tax says the state tax department has to hand New York City its state income tax records. Those records would show who actually lives in the city full time. That is exactly the question the city was trying to answer.

According to the Council's own report, "it does not appear that the City requested this information."

That is uncertainty, not a finding. But if it is right, the city did not use a data source the law expressly made available — one that goes straight to the question the letters were asking.

Problem Eight: People Were Given Almost No Time

The tax passed in May. The city did not finish writing its rules until the middle of July. It began mailing letters on July 23.

The first deadline to respond was August 21 for houses and August 24 for apartments. That gave owners about four weeks to gather documents and prove they live in their own homes.

After complaints, the city pushed both deadlines to September 18.

The extra four weeks help. They do not change who has to do the work. It is still on the owner to prove the home is their main residence, or that they qualify some other way.

Problem Nine: The Bill Arrives Before You Can Fight It

If you think the city has your home's value wrong, you can challenge it at the Tax Commission. The calendar works against you.

There is also a choice most people will not know they are making. You can ask the Department of Finance to excuse you. Or you can take your case to the Tax Commission. You cannot do both.

The city says it plainly: if you go to the Commission, "you will not be able to apply for an exemption from the Department of Finance."

The Council's report handles this in one hard-to-parse sentence — that an owner "may simultaneously, but not separately" challenge the city's residency decision before the Commission. It never states the consequence the city spells out.

What the Report Gets Right

The report is careful and heavily footnoted. Its background section is the most complete public explanation of how this tax works — how homes are valued, what notices the city owes people, and how to appeal.

It also points out something worth noticing. The rules in the city's own tax code were "introduced in the State fiscal year 2027 budget and added to the City's Administrative Code by the State Legislature." The City Council did not write them. Albany did. That is squarely one of these committees' jobs to examine, and it gets a single sentence.

Questions the Written Testimony Should Answer

With no one from the administration in the room, these go to the record instead.

What to Watch Next

August 31. Both sides return to Justice Ozzi's courtroom. If his order comes back, three things change at once: the list comes down, the September 18 deadline stops, and the city cannot bill anyone until it has checked each property and sent a proper notice.

September 18. The deadline for owners to prove they should not be charged.

January 1, 2027. The first bills arrive.

March 2027. The window to appeal a value closes — March 1 for houses, March 15 for apartments.

This article is factual background and is not legal, financial, or investment advice.