New York state lawmakers have approved a new pied-à-terre tax on luxury second homes in New York City, according to a report on Wednesday, marking a major policy win for Mayor Zohran Mamdani's affordability agenda.

The tax, included in the state's budget package, will apply to certain non-primary residences valued at $1 million or more and is expected to raise approximately $500 million in revenue for the city.

The approval marks a significant step for a proposal that had sparked months of debate among business leaders, investors and policymakers.

How The Tax Works

According to a report by CNBC, the new tax will be implemented in two phases.

For tax years 2026-2027 and 2027-2028, condos and co-ops valued above $1 million by New York City's Department of Finance will be subject to the tax. Properties valued between $1 million and $3 million will face a 4% annual tax. Properties valued between $3 million and $5 million will face a 5.25% annual tax, while those above $5 million will face a 6.5% annual tax.

Beginning in the 2028-2029 tax year, property valuations will shift to a comparable-sales system. Tax rates will then fall to compensate for higher assessed values. Under the revised structure, properties valued between $5 million and $15 million will face a tax rate of 0.8%, properties valued between $15 million and $25 million will face a 1.05% rate and properties above $25 million will face a 1.3% rate.

Debate Over Affordability And Investment

Mamdani has made affordability a central focus of his administration. Earlier this week, he unveiled the "Block by Block" housing initiative, which aims to build 200,000 affordable homes and invest $5.6 billion into public housing across New York City.

The mayor has argued that higher taxes on wealthy property owners can help address affordability challenges and support public services.

The proposal has faced criticism from several prominent business leaders and investors. Amazon.com Inc. Amazon (AMZN) Executive Chair Jeff Bezos recently questioned whether higher taxes on wealthy individuals would meaningfully improve affordability for working-class residents. While Bezos said the pied-à-terre tax was "a fine thing" in principle, he cautioned that excessive taxation could become counterproductive.

Citadel founder Ken Griffin also emerged as one of the most prominent critics of the proposal after Mamdani promoted the tax in a video filmed outside Griffin's Manhattan penthouse. Griffin later warned that policies targeting wealthy investors could discourage investment and job creation in New York.

Shark Tank investor Kevin O'Leary also criticized the proposal, arguing that luxury second-home owners contribute to the city's economy through property taxes, maintenance spending and construction activity.

The approval moves the pied-à-terre tax from proposal to policy after months of debate between city officials, business leaders and investors.