New York judge orders city to scrap Mamdani’s pied-à-terre tax rollout

New York (CNN) — New York City’s planned tax on secondary homes was dealt a major setback Tuesday after a Staten Island judge ruled in favor of the plaintiffs challenging the rollout.

The pied-à-terre tax, which places a surcharge on non-primary residences in New York City valued over $5 million, as well as co-ops valued at $1 million or more, was rolled out as part of Mayor Zohran Mamdani’s 2027 fiscal year budget in an attempt to close the city’s budget gap. Gov. Kathy Hochul had backed the idea.

Mamdani, who took office in January, promised to “govern as a democratic socialist” and campaigned on plans to make the city more affordable and improve New Yorkers’ daily lives. In his first few months in office, he delivered a rent freeze for tenants in rent-stabilized apartments across the city.

The plaintiffs in the lawsuit did not challenge the legality of the tax itself, but rather the rollout. Three petitioners alleged the city had incorrectly “identified their homes as potentially subject to the surcharge,” despite being their primary residences.

The city’s Department of Finance website posted a tax roll in July that included names and addresses of over 900,000 New York City homeowners, even if they were not subject to the tax.

Judge Wayne M. Ozzi of Richmond County ruled the roll must be removed from the website, but can be replaced with a secondary roll “reflecting those properties actually subject to the surcharge.”

Approximately 17,000 notices were also mailed to residents at the start of the process, which notified them that they would need to file for exemption or be subject to the tax. Tuesday’s ruling came one week before the October 6 exemption deadline.

Those previously mailed notices must be canceled as well, Ozzi ruled. New notices can be mailed in compliance with a list of rules, including that they can only be mailed only after “individualized initial determination utilizing any and all resources and information” available to the Department of Finance.

“We’re gratified that the court has recognized we were right all along. The fact is that this administration failed to follow state law when it burdened New York City homeowners with proving they live in their own homes or be on the hook for paying a new surcharge,” Randy Mastro, an attorney representing the plaintiffs, said in a statement following Tuesday’s ruling.

“Now the administration must go back and do what it should have done from the start: use all the information at its disposal to make an individualized ‘initial determination’ about who truly owes this surcharge before demanding that they pay it.”

A spokesperson for Mamdani said in a statement the decision was “wrong.”

“The pied-à-terre surcharge is about a basic principle of fairness: if you can afford a luxury second home in New York City, you can afford to pay your fair share for the schools, streets and parks that make this city work,” Matt Rauschenbach said.

“Our Administration is fighting every day to deliver for working New Yorkers. The ultra-wealthy are fighting in court to avoid paying their fair share. They have filed lawsuit after lawsuit to protect their privilege, and we will not back down.”

A city official told CNN it plans to invoke a stay on the ruling Tuesday evening.

In addition to the plaintiffs’ win in Richmond County, others are still looking to challenge the law’s constitutionality.

Also Tuesday, a group of Suffolk County homeowners and a co-op sued New York State over the pied-à-terre tax, arguing the law “unlawfully discriminates against nonresidents, applies retroactively, and imposes unconstitutional burdens on homeowners and cooperative buildings.”

The lawsuit also expressed concern over the roll and mail notices – that Ozzi ruled must be canceled – arguing the process “created widespread confusion, raised privacy concerns, and improperly shifted the burden onto homeowners to prove eligibility for an exemption.”

This story has been updated with additional information.

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CNN’s Gloria Pazmino contributed to this report.