A new tax on second homes and a major commitment to invest pension fund capital on affordable housing were announced this week in New York City. The two efforts are aimed at tackling the affordability crisis.
On April 15, Mayor Zohran Mamdani and Governor Kathy Hochul said they are proposing New York’s first pied-à-terre tax. This could generate an additional $500 million in annual revenue for public services.
The pied-à-terre tax will levy an annual surcharge on one- to three-family homes, condos, and co-ops worth more than $5 million, if the owners have a separate primary residence outside of New York City.
A pied-à-terre is a home that’s kept for occasional use. Other cities that have implemented comparable taxes are London, Vancouver, Sydney, and Paris—places with an ample stock of luxury units owned by “foreign oligarchs and the ultrarich” that, for most of the year, sit vacant.
The tax is supported by 93 percent of New Yorkers, and opposed by the real estate lobby. City Council Speaker Julie Menin, who consistently disagrees with Mamdani on policy issues, supports the tax and said it is “a smart, sensible proposal.”
Saskia Sassen, David Harvey, and other geographers have discussed how, after the 2008 economic crisis, large swaths of buildings in global cities were bought by foreign investors to evade taxes by storing cash in real estate, a loophole this new tax would crack down on.
Moving forward, the pied-à-terre tax will be felt in places like Hudson Yards and along Billionaire’s Row, where pencil towers loom over Central Park.
After the tax was announced, on April 16, New York City Comptroller Mark Levine shared a new commitment to invest $4 billion in pension fund capital toward affordable housing, as part of a new program called the NYC Housing Investment Initiative.
New York City already allocates $2 billion in pension fund capital toward affordable housing, so this recent commitment doubles that investment.
With New York City Retirement Systems (NYCRS), the NYC Housing Investment Initiative will commit approximately $1 billion per year over the next four years to finance new mixed-income, workforce, and affordable housing; and the preservation of existing affordable housing.
The initiative will likewise augment office-to-residential building conversions. The goal is to use “pension capital responsibly to generate risk-adjusted returns while addressing a critical city need,” the Comptroller’s Office said.
A portion of the pension fund capital will go toward the AFL-CIO Housing Investment Trust (HIT), to support the construction of middle-income housing by union employees.
Today, HIT is working with Bernheimer Architecture and leadership at Penn South, a limited equity co-op in Chelsea, to upgrade the midcentury campus and make it more energy efficient. This new commitment from the Comptroller’s Office could augment HIT to carry out similar projects around the city.
Chang Suh, CEO of the AFL-CIO HIT, told AN, “We are excited to expand our partnership with NYCRS and to continue the important work of responsible investing in producing more affordable housing” in New York City. “This nation needs more resources to increase the supply of affordable and mixed income housing,” he said.
“Capital and financing plays a critical role in making housing more affordable as well as supporting good jobs in the construction industry,” Suh continued, before affirming that HIT will “provide construction and permanent financing for housing projects” throughout the city.