Melissa Cohn says the reaction to NYC's new luxury second-home surcharge sounds familiar, because she's heard it all before
New York City has a long history of tax proposals and political moments that critics believed would drive wealthy buyers out of the market. The mansion tax was one. The supplemental mortgage recording tax was another. Mayor Zohran Mamdani's election prompted the same warnings. Each time, the luxury market kept moving.
The pied-à-terre tax, passed by the New York State Legislature on May 27 and taking effect July 1, is the latest entry on that list. The annual surcharge applies to second homes in New York City valued at $5 million or more that are not the owner's primary residence. It is projected to generate roughly $500 million a year from approximately 11,200 qualifying properties.
When Mamdani promised this tax during his campaign, it led to headlines saying there would be a mass exodus from the city of wealthy property owners. In fact, Mamdani’s election alone triggered a flurry of online posts promising a departure from the Big Apple. One veteran broker said that simply hasn’t happened.
Melissa Cohn (pictured top), regional vice president at William Raveis Mortgage, has been working with high-end New York City buyers for decades. She has watched this cycle play out more than once, and because of this, is unsurprised by the actual outcome of these changes.
"I think in the end, it probably will not have a huge impact on the city," Cohn told Mortgage Professional America. "Remember when the mansion tax started, and everyone said people aren't going to buy, and this is a problem, and it's going to ruin the real estate market? And nothing really happened."
Defying sensational headlines
The mansion tax was first introduced in New York in 1989, then expanded significantly in 2019 when a supplemental mortgage recording tax kicked in on transactions starting at $2 million. The reaction both times was the same: alarm, predictions of market disruption, then business as usual.
Cohn said the reason is pretty simple. The kind of person who has the net worth to buy a property worth $5 million or more is unlikely to be phased by a small tax on that property value.
"Anyone who's buying a $5 million second home is not going to worry about it," she said. "If you're wealthy enough to be able to live in New York City and to buy a multi-million-dollar home as a second home, then you're probably a little bit less cost sensitive."
The public reaction to the proposal has been louder than the likely market impact, she said. The same noise surrounded Mamdani's election last year, and that did not move the needle either.
"Did that change the market? No, it did not phase the high end of the market," Cohn said. "People like to talk, people like to sensationalize. And then in five years this will maybe be a good thing because it'll help the city."
Cohn also made the case that the revenue generated is actually in the interest of anyone who owns property in New York. The city is running a significant budget deficit, and the services that make New York attractive to buyers do not pay for themselves.
"There's such a big budget deficit that if you want to buy in New York City, you want to make sure that the city is the New York City that we know and love," Cohn said. "You don't want crime to increase. So you would think that yes, it's in their best interest to be able to accept that tax."
Implementation could be bumpy
Cohn acknowledged the rollout will not be entirely smooth. Co-ops are the most complicated piece, since the building holds a single deed rather than individual owners holding title to their units.
"The co-op building has one deed, so someone's buying a second home as a co-op, how they're going to be able to track that is going to be a little bit more complicated," she said. "You have to make sure that they're not taxing the building and they're actually just taxing the individual buyer."
Those details will get sorted out over time, she said. What does not change is why people buy in New York in the first place, and Cohn said she is not seeing any shift in that sentiment.
"The mass exodus never happened," Cohn said. "People who have established lives, children, family, schools in New York aren't going to run away because there's a mayor that's here for four years. Mayors come and go. Your home doesn't."
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