Zoran Mamdani’s pied-à-terre property tax is “go.” Will it work?

From New York to Vancouver to London, once niche policy ideas are moving into the mainstream of urban finance. It would impose a tax on pied-a-terre properties, villas, holiday homes and partially or completely unoccupied luxury homes.

New York City is just the latest example, with Mayor Zoran Mamdani and New York Governor Kathy Hochul supporting the tax as part of the state and city’s efforts to plug large budget holes. In his new budget this week, Mamdani dropped plans to raise property taxes for many middle-class homeowners, a measure that may have been politically difficult for him to accept, but he retained the idea of ​​a pied-à-terre tax.

The idea has already sparked a political crisis after the mayor posted a video of hedge fund billionaire Ken Griffin standing outside a building where he owns a unit, leading to Mr. Griffin, a prominent political conservative, speaking out against Mr. Mamdani for the first time and threatening to pull his business out of New York in the future. Despite the tensions expected to permeate between the billionaire class and the new socialist-democratic mayor, real estate sales in the city remain strong.

But there are more fundamental questions about this new form of property tax that New York City is currently grappling with. Does it work? There are existing examples from around the world that can help answer that.

Versions of the second home tax and vacancy tax exist around the world across several major housing markets. In Canada, the most prominent examples are the City of Vancouver’s Vacant Houses Tax and the federal government’s Vacant Houses Tax. Toronto also recently introduced its own vacancy tax.

As housing affordability worsens, rents continue to rise, and fiscal pressures mount, cities are increasingly targeting dark luxury condominiums in prime urban locations, a prominent symbol of inequality.

Vancouver officials framed the city’s vacant homes tax as an attempt to “return vacant or underutilized properties for use as long-term rental housing to people who live and work in Vancouver,” according to public documents about the city’s vacant homes tax program. The city also said net proceeds from the tax will be reinvested into affordable housing efforts.

In Europe, London and Paris both apply some type of surcharge or high tax on holiday homes and underutilized real estate. Singapore has some of the most aggressive foreign buyer surcharges in the world, reaching 60% in some cases.

Taxes on “vacant houses” and actions of homeowners

Paris is currently moving to make fines for vacant rooms even tougher. Le Monde newspaper reports that the city plans to significantly increase taxes on vacant properties, and local authorities hope to put thousands of them back on the market. “We hope that as a result, at least 20,000 homes will be put back on the market,” Jacques Baudrier, Paris’ deputy mayor for housing, told the newspaper.

At the same time, Paris authorities acknowledged the limitations of this policy. France’s Cour des Comptes report for 2025 says that despite the broader vacancy tax and higher tax rates, the measures “do not appear to have had a significant impact on the total number of vacant properties”.

These policies generally fall into two categories: recurring property tax levies and one-time transaction taxes, said Thomas Blossie, senior fellow at the Urban-Brookings Tax Policy Center. He said this distinction is important because it “influences how strongly owners adjust their behavior over time.”

New York’s proposal would impose an annual tax on nonresident vacation homes worth more than $5 million.

In contrast to New York’s law, which targets real estate valued at $5 million or more, the key difference is that many cities impose taxes without regard to the value of the property specifically. “Typically, these policies tax housing based on occupancy and ownership status, not necessarily the value of the property or the owner’s income or assets,” Blossie said.

Paul Cheshire, a professor of economic geography at the London School of Economics, said “anti-second home policies” are well established around the world. “New York is a follower, not a leader,” he said. But Cheshire argued that policymakers often misdiagnose the problem, arguing that “the biggest misconception is that these taxes will improve housing affordability in large ‘supercities’.” “The problem is mainly due to policy constraints on housing supply,” he said.

Mr Cheshire also said second homes remained a relatively small proportion of the total housing stock in many places, which could limit the potential size of the tax. “Even in areas where second homes are concentrated, they still represent about 15% of the housing stock,” he said, suggesting that the tax base is structurally constrained.

Blossie says empirical evidence from cities like Vancouver and Paris supports that view. “They increase a portion of income and reduce vacancy rates, but they do not reduce rents or prices overall. This is to be expected, as the luxury housing market is largely decoupled from the broader housing market.”

One of the most consistent findings among experts is that these taxes generate far less revenue than policymakers originally anticipated. Global trends could be helpful in predicting the revenue that the New York tax could ultimately generate. Brothy said New York City is looking at up to $500 million, but that number could prove to be optimistic.

New York City’s Comptroller has some questions.

Mamdani said in Tuesday’s announcement that New York City’s first pied-à-terre tax “will generate $500 million annually.”

However, New York City’s comptroller recently released a report saying that while data from Vancouver shows a notable decline in vacancies in the years since the tax went into effect, New York City’s revenue projections should include potential revenues that are much lower than the $500 million estimate provided. While up to $510 million is possible, an estimate of $340 million to $380 million may be more realistic “given the properties that may already be available for rent to primary occupants and changes in behavior due to taxes imposed elsewhere.”

The Auditor General’s report added that even tax increases could have a significant impact on behavior.

“Behavioral responses to the tax – conversions to rentals, claims of primary residences by relatives, sales and potential legal challenges – will lead to further fluctuations that will only be observable after implementation,” the report said. “For these reasons, additional taxes should be incorporated into the city’s fiscal plan, which assumes prudent revenue generation.”

The Auditor General’s report suggested that the impact on real estate transactions could initially be positive if sales spike to avoid taxes. But it went on to say that “broader impacts on development and rental rates…are generally not significant. However, as the London experience suggests, concentrated impacts on the luxury goods market may be felt more deeply.”

London’s policies have been cited as alarming.

Abir Mandal of the Tax Foundation, generally considered a center-right think tank, says the revenue potential will depend largely on design and implementation, but will still remain modest compared to housing needs. Mandal said the results from existing patterns across a large number of global cities are consistent, meaning they make sense in absolute terms, but have limitations in a financial context.

Even in Vancouver, one of the most aggressive examples globally, where vacancy rates have fallen significantly after implementing tax policies, vacancy tax revenues remain relatively small compared to the size of the city’s overall finances. The Institute on Taxation and Economic Policy found that Vancouver’s taxes generate about 1% of all city tax revenue.

Mr. Mandal said the other aspect of vacant properties is that they are not using public resources, and they can generate additional tax revenue without additional taxation. “The biggest misconception is that these are ‘free lunch’ taxes on absentee ‘speculators’ and the ultra-wealthy that will raise significant revenues while improving affordability at no financial cost. In fact, if second homes are vacant, they have lower marginal service costs (no additional pressure on police, schooling, etc.) while contributing to the tax base, which is a net fiscal positive,” he said.

Politics may be better than fiscal management

As for the politically driven headline question of whether such a tax structure would cause mass migration of the ultra-wealthy, there is no evidence globally that a single tax policy change would have such an effect. The consensus among experts is that while second home taxes influence sensitive decisions, they rarely determine whether wealthy people invest in global cities. Mr Blossie said the effect would be incremental rather than decisive: “It certainly should shift demand for trophy properties and drive down prices, but it is unlikely to determine whether someone owns in London, New York or Singapore.”

However, these tax policies, when combined with a broader tax system, may contribute to a gradual shift of the ultra-wealthy to allocate their assets, particularly to low-tax jurisdictions. Policymakers in Europe and North America increasingly face competition from jurisdictions that offer low or near-zero property taxes to wealthy investors along with residency incentives. Dubai’s rise as a magnet for global wealth, at least before the U.S.-Iran war, has sharpened these comparisons and could have lasting effects.

Mandal noted that for the ultra-wealthy, it is a matter of cumulative impact rather than single policies: “The tipping point will emerge from cumulative burdens, not individual levies.”

Evidence from high-tax jurisdictions, such as waves of immigration from California/New York to Florida/Texas, and changes in the UK encouraging exit from London to Dubai, suggests that many groups are sensitive, not just the ultra-wealthy, such as retirees, individuals who rely on investment income, and executives. US data shows billionaires are moving to lower-tax states. Imposing a single tax on New York City wouldn’t empty Manhattan, Mandal said, but combined with existing high costs, it would “accelerate decision-making for people with flexible footprints, especially as many global cities offer welcoming havens and powerful passports.”

Politics is another story. As the New York case shows, the tax remains highly attractive because it targets a small group of wealthy homeowners rather than the broader middle-class property owners. The appeal of a pied-a-terre tax may ultimately lie less in its fiscal power than in its symbolism. In other words, the pied-a-terre tax allows the government to be seen as addressing housing inequality without imposing widespread tax increases on full-time residents.