Zohran Mamdani’s property tax pied-à-terre ‘walks.’ Will it work?

From New York to Vancouver to London, a once-priority policy idea is spilling over into the urban financial sector: taxing pied-à-terre properties, second homes, vacation apartments, and luxury units that are partially or fully occupied.

New York City is the latest example, with Mayor Zohran Mamdani and New York State Governor Kathy Hochul supporting the tax as part of a state and city effort to plug a large budget hole. In a new budget proposal this week, Mamdani scrapped plans to raise property taxes for many middle-class homeowners, a move that would have been politically difficult for Mamdani, but he kept the idea of ​​a pied-à-terre tax.

The idea has already resulted in a political crisis for the mayor after he posted a video standing outside the building where the billionaire hedge fund Ken Griffin owns the unit, leading to the push of Griffin’s first known voice against Mamdani, and a threat to pull business from New York in the future. Despite the tension expected to erupt between the billionaire class and the new Democratic mayor, real estate sales in the city remain strong.

But there is a more important question about this new type of property tax that New York must now face: does it work? There are examples from around the world to help in trying to answer it.

Versions of second home and vacancy taxes exist around the world, in all major housing markets. In Canada, Vancouver’s “empty housing tax” and the federal “unused housing tax” are among prominent examples. Toronto recently followed through with its own vacancy tax.

As housing availability worsens, taxes continue to rise, and financial pressures increase, cities are increasingly targeting what are often the most visible signs of inequality: black luxury condominiums in urban neighborhoods.

Vancouver officials created the city’s Empty Homes Tax as an effort to “rehabilitate empty or unused properties for use as long-term rental housing for people who live and work in Vancouver,” according to the City of Vancouver’s public property plan. The city also says revenue from the tax goes back into affordable housing programs.

In Europe, London and Paris both apply some form of surcharge or higher tax on second homes and low-use properties. Singapore imposes some of the most aggressive foreign buyer surcharges in the world, reaching as high as 60% in some cases.

‘Vacant property’ taxes and landlord behavior

Paris is now looking at an even higher penalty. According to a report by Le MondeThe city plans to significantly raise taxes on vacant homes, as local officials hope to put thousands of units back on the market. Jacques Baudrier, Paris’s Deputy Mayor for housing, told the newspaper: “We hope that at least 20,000 homes will return to the market as a result.”

At the same time, officials in Paris have acknowledged the limits of the policy. A 2025 report from France’s Cour des Comptes found that despite extensive vacancy taxes and high prices, the measures “do not appear to have had a significant impact on the total number of vacant homes.”

According to Thomas Brosy, senior research fellow at the Urban-Brookings Tax Policy Center, these policies generally fall into two categories: property tax penalties and one-time taxes. The distinction is important, he said, because it “affects how owners adjust behavior over time.”

New York’s proposal is an annual tax on non-residential second homes valued at $5 million or more.

An important difference, unlike New York’s law that targets properties worth 5 million dollars or more, is that most cities impose fees without regard to the price of the property: “Generally, these tax housing policies are based on residence or ownership status, not necessarily the value of the property or the owner’s income or wealth,” said Brosy.

“Anti-secondary domestic policies” are well established around the world, according to Paul Cheshire, professor of economic geography at the London School of Economics. “New York is a follower, not a leader,” he said. But Cheshire argued that policymakers often overlook the problem: “The biggest misconception is that these taxes will improve the availability of housing in the big ‘big cities’. The problem is mainly the supply of housing through policy,” he said.

Cheshire also noted that in many areas, second homes remain a small share of the total housing stock, something he considers likely to limit the potential scale of any tax. “Even in communities with second homes, there’s still about 15% of homes left,” he said, suggesting the tax base is limited.

Brosy says strong evidence from cities like Vancouver and Paris supports that view. “They’re increasing incomes and low vacancies, but they’re not lowering rents or prices overall — which is to be expected, since the prime housing market is so cut off from the housing market.”

One consistent finding among experts is that these taxes generate far less revenue than policymakers originally expected. Global trends may be instructive in predicting the revenue New York’s tax system may ultimately generate. New York is expecting as much as $500 million, but that number may be optimistic, according to Brosy.

The New York City regulator has some doubts

Mamdani said in an announcement Tuesday that the first-ever pied-à-terre tax in New York “will bring in $500 million annually.”

But the New York City regulator recently issued a report saying that while Vancouver data shows a significant decrease in vacant housing in the years since that tax was introduced, its New York benefit projections should include a much lower take-up than the $500 million estimate put forward. While an estimate of $510 million is possible, an estimate of $340 million to $380 million may be realistic “after accounting for properties that may have been leased to primary residents and behavioral changes that have resulted from taxes imposed elsewhere.”

The regulator’s report added that higher taxes can also have a significant impact on morale.

“Tax responses – changes in rental tax claims, primary residences for relatives, sales, and potential legal challenges – present other variations that will only be seen after implementation,” the report said. “For these reasons, the additional tax should be included in the City’s financial plan with a prudent projection of revenue.”

The watchdog’s report suggested that one impact on real estate could be positive initially if there is a wave of sales to avoid the tax. But it went on to say, “Broad effects on development or rental … have generally not been large. However, concentrated effects on the luxury market can be felt deeply, as London’s experience suggests.”

London’s policy has been identified as a cautionary tale.

Abir Mandal of the Tax Foundation, which is often considered a center-right think tank, says the revenue potential depends heavily on the design and enforcement of the law, but remains modest compared to housing requirements. From the pattern that exists across most cities around the world, Mandal said the takeaways are consistent: reasonable in terms, but small in terms of finances.

Even in Vancouver, one of the most aggressive examples in the world, and where vacancy rates have fallen significantly after the implementation of the tax policy, the income from the vacancy tax remains small compared to the average city budget. The Institute on Taxation and Economic Policy, found that Vancouver’s tax generated about 1% of the city’s total tax revenue.

Mandal says that empty households can generate more tax revenue without additional taxes from another perspective: their lack of drawing public services. “The biggest misconception is that these are free ‘daytime taxes’ for non-existent or very rich ‘observers’ who raise a lot of money while improving accessibility without economic costs. In fact, second homes, if they are not occupied, put low marginal service costs (no more pressure on the police, school, etc.) while contributing to the tax base,” he said of the taxman.

Politics can be better than financial management

As for the politically driven topic of whether these tax structures are driving mass migration of the wealthiest consumers, the evidence around the world does not suggest that any single change in tax policy will have that effect. The consensus among experts is that second home taxes have a limited influence on decisions but rarely determine whether wealthy people invest in global cities. Brosy described the result as increasing rather than deciding: “Of course they should change the demand and lower the prices of the medal places, but it is unlikely that they will decide whether there is an owner in London, New York, or Singapore,” said Brosy.

However, when combined with broader tax laws, these tax policies may contribute to a gradual shift in wealth sharing among the wealthiest, especially in low-tax jurisdictions. Policymakers in Europe and North America are increasingly facing competition from jurisdictions that offer lower or near-equal property taxes to encourage residency for wealthy investors. Dubai’s rise as a global wealth magnet has sharpened those comparisons, at least before the start of the US-Iran war, which could have lasting effects.

Mandal pointed out that for the very rich, it’s a big problem to have a cumulative effect instead of a single policy: “The points of validation come from cumulative burdens rather than isolated additional costs,” he said.

Evidence from high-tax areas, such as waves of migration from California/New York to Florida/Texas, and the UK’s reforms encouraging an exodus from London to Dubai, show sensitivity among many demographics, not just the super-rich, including retirees, people dependent on investments, and business owners. US data shows the migration of billionaires to low-tax states. NYC’s single tax won’t empty Manhattan, but combined with existing high costs, it accelerates the decisions of those with flexible feet, “especially since many cities of the world offer a welcoming environment and strong passports,” Mandal said.

Politics is another matter. Taxes are always more attractive because they target a small and wealthy segment of homeowners instead of middle-class property owners, as the New York case shows. The appeal of pied-à-terre taxes may ultimately lie less in their financial power than in their symbolism: they allow governments to be seen as responding to housing inequality without imposing broad tax increases on full-time residents.