Upstate Dems push for pied-à-terre tax outside NYC

Upstate Democratic lawmakers want a piece of the extra revenue pie Gov. Kathy Hochul is serving New York City by taxing luxury second homes in the five boroughs.

Last week, Hochul announced a new late budget fight (as she tends to do) – proposing a pied-à-terre tax on second homes in New York City worth $5 million or more that are not rented out full-time or listed as the owner’s primary residence. Details remain scarce with no official language released to lawmakers or the public, but Hochul estimates it will generate a recurring $500 million for the city per year to help chip away at a projected $5.4 billion deficit.

State Sen. Pat Fahy told City & State that plenty of upstate communities – like Saratoga Springs, Lake George and Lake Placid – have high-value second homes that owners leave vacant for most of the year, which should be subject to the tax, too. 

“During COVID, the second home market went on steroids,” Fahy said. “It has, in so many ways, crushed the affordability in many of these upstate and Long Island communities. This is a way to level the playing field.”

As budget talks drag on more than three weeks past the deadline, the Albany state senator is leading a push to impose a pied-à-terre tax that municipalities outside the city would opt-in to. She wants to reduce the threshold from $5 million to $2.5 million to account for the lower cost of living in the Hudson Valley, Adirondacks and other parts of the state. She also wants half of the money raised by the tax designated to Aid and Incentives to Municipalities, or AIM, funding to help struggling localities.

“Expensive second homes are mostly unused, yet, when the owners are there, they are still using police, fire, water and infrastructure,” Fahy said. “They're still using all the services that are barely compensated for because those places are left empty most of the time.”

“We have seen an exponential growth in luxury housing, which has priced out the residents ... local residents can’t afford to live,” she added.

It’s not a $5.4 billion budget gap, but upstate cities and municipalities are strapped for cash, too.

The city of Buffalo has a projected deficit over $100 million, and there’s a $15 million gap in the city of Albany and a $9 million hole hanging over the city of Kingston. 

“Non-New York City members are getting frustrated that it seems like the governor is only trying to solve New York City problems,” said Assembly Member Sarahana Shrestha, who represents Kingston. “The governor is not the mayor of New York City. The governor is the governor of the state of New York.”

There’s support for the proposal, but lawmakers have not determined official details. Shrestha said any pied-à-terre upstate would need a provision requiring LLC transparency so second homeowners can’t hide behind them and evade the tax. And the Assembly member said the threshold for the tax should be set by each municipality.

"In my district, if you go to the town of Ulster, there may not be many, but if you go to Rhinebeck, if you go to Red Hook ... some of the homes are literal mansions,” Shrestha said. “When I canvass, sometimes some of the homes are mansions, tucked in there (with) very long driveways ... completely shuttered because they’re not there.”

Fahy said she’s spoken with several upstate Democrats in both chambers who support an optional pied-à-terre tax outside the city. Her office drafted a letter for lawmakers to sign and build momentum behind the proposal, but ultimately stopped circulating the document. 

A few upstate lawmakers declined Wednesday to weigh in on the idea on the record, telling City & State that although they back it private, they are hesitant to publicly support a new tax. 

Shrestha said she hadn’t heard the same but that reticence makes sense, which is one of the advantages of the budget process.  “The reason people love to put things in the budget is you're off the hook – you're voting for the budget, you're not voting for one right item,” she said.

Legislative leaders have long backed proposals to increase taxes on New York’s millionaires and billionaires, so expanding the pied-à-terre is mainly up to Gov. Kathy Hochul. 

During an interview Tuesday with Citizens Budget Commission President Andrew Rein, Hochul’s Director of State Operations Jackie Bray said the governor supports a specific pied-à-terre tax in New York City to narrowly target the ultrawealthy who don’t call the state home. And the governor told reporters at an unrelated event Tuesday she would not back any other new taxes in this year’s budget. Hochul has already announced targeted funding to help offset deficits in other cities, like $40 million in aid for Buffalo.

Last week, Hochul said she wouldn’t have proposed the pied-à-terre tax if it was not necessary, but she also said local leaders cannot rely on the state alone for financial rescue.

“It is the responsibility of the mayor and the City Council to find more savings, as they will have to do in Buffalo and Albany and Syracuse and elsewhere,” Hochul said. “Working together – that’s the collaboration that is essential to bring to us more savings as we continue to try and start closing out our budget as well.”