New York seems to be having a budgeting problem, and the solution appears to be a ‘pied-à-terre’ tax that likely won’t raise millions, but will cost NYC residents millions. What is a pied-à-terre? It is a small secondary residence that someone keeps in a city they don’t live in full-time. It is typically used by a businessperson who stays in the city for work during the week, or a wealthy individual who owns a luxury condo they visit occasionally. These homes help save on hotel costs and, in some cases, can be deducted for business use. Meetings can take place there, dinners, and much more. Remember when I talked about the Kardashians using their properties to film and run their businesses? This is similar in a sense. The difference is that it is not a primary residence, and income activity plays a huge role in how these properties are viewed by the state.
And so, this tax is aimed at luxury second homes in New York City, but it may generate less revenue than promised. The ‘pied-à-terre’ tax targets non-primary residences, which are often high-value apartments used occasionally, but it doesn’t just affect out-of-town owners. It can ripple into the broader NYC housing ecosystem and indirectly impact residents in several ways.
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The tax is designed to target wealth and underused housing, but in practice, even taxes aimed at the wealthy rarely stay isolated—they move through the system.
There are higher costs that could potentially be passed down to renters, considering that many of these homes are rented out part-time or held by investors. The thing is, the rich will never sit around and watch their money dwindle. Staying rich is often more important than getting rich for the average wealthy man or woman. When we think about wealth and so-called trickle-down economics, it was never about simply handing wealth over. It was always about employment and income tax. Tax the W-2 workers, collect payroll taxes, and allow the wealthy to benefit from structured tax advantages. Rinse and repeat.
Real estate has always been a primary asset on the road to wealth. You can either own a home as a primary or investment property, rent out parts of your home and let tenants cover the mortgage, or use the equity from your primary residence to purchase an investment property where tenants again cover the mortgage while you take a portion of the profit.
But when you think about taxing the wealthy on their second homes, you also have to consider maintenance fees and other common charges that may go unpaid if owners decide to sell or tenants leave because the rent becomes too high. This can ultimately lead to budget gaps and increased costs for remaining residents. When tenants move out of a building and landlords cannot fill vacant units, they may raise the rent on those who remain.
Other sectors will, of course, be affected. Restaurants, services, and staff—such as cleaners and doormen—may lose income or even their jobs. If ownership declines, certain neighborhoods, especially in Manhattan, could see reduced spending and fewer jobs tied to luxury housing. The tax is designed to target wealth and underused housing, but in practice, even taxes aimed at the wealthy rarely stay isolated—they move through the system.
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THE DIFFERENCE BETWEEN A REVOCABLE AND IRREVOCABLE TRUST
So what about a trust? Many wealthy people tend to put their homes in a revocable or irrevocable trust. Both have drastically different meanings and uses because it comes down to control vs. permanence, so I’ll break them down.
An irrevocable trust is when you’ve permanently handed over your assets to a trust, which means they are no longer yours, but they can be protected this way. This is a trust that you cannot easily take from or change the terms of. Most people use it for asset protection, estate tax planning, Medicaid planning, and shielding their wealth from creditors.
Next, you have a revocable trust (living trust). This is where you keep control. You can change it, add or remove assets, and cancel it entirely at any time. You are still the owner for tax purposes because nothing really changes from the IRS or the state’s perspective. Think of it this way: you put assets in a different container, but they are still yours, and you can take them back whenever you want.
The wealthy in New York City have decided that since Zohran Mamdani and Kathy Hochul plan to execute policies that could increase taxes, they will either move their assets into trusts or move out of the city entirely to neighboring states such as New Jersey or Connecticut, all while still running their businesses and earning income from within the city.
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As NYC residents, we can try to find the silver lining in all of this, but state and federal laws differ greatly, and there will always be legal strategies that allow the wealthy to maintain their assets and pass them down for generations to come. There will likely be an influx of wealthy individuals placing their money, assets, and homes—whether primary or secondary—into trusts, though this does not automatically shield them from taxes tied to how the property is used.
In a revocable trust, property tax benefits are usually preserved. In New York, common benefits tied to a primary residence, such as STAR exemptions (where applicable), are typically still available when the home is in a trust, as long as the trust is structured properly and the owner remains the occupant and beneficiary. Real estate follows how you live, not how you title. Trust and estate attorneys in NYC are seeing a rise in clientele from wealthy individuals as they seek to reposition their assets during these proposed policy changes. Could these policies really make the city’s wealthiest residents pay higher taxes? The short answer is: not as easily as it sounds.
But will city taxpayers ultimately feel the impact if wealthy residents relocate or restructure? Possibly. Because while the wealthiest individuals may not spend every waking moment in the city, a shift in where they live and spend could mean fewer dollars flowing into local businesses. Dining, shopping, and discretionary spending may move to places like California or Florida, even if the income tied to their businesses is still generated in New York.
Image Credit: Justin Wee, Getty Images
Ashley Morton writes on real estate, focusing on high-value markets, investment strategy, and the evolving definition of luxury living. Her work examines how property, design, and location intersect to shape both personal lifestyle and long-term asset growth.
