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

From New York to Vancouver to London, a once-niche policy idea is moving into the mainstream of urban finance: taxing landed properties, second homes, holiday apartments, and partially or fully unoccupied luxury units.

New York City is the latest example of this; Mayor Zohran Mamdani and New York State Governor Kathy Hochul support the tax as part of the state and city’s effort to close a major budget deficit. In a new budget proposal this week, Mamdani gave up her plans Increasing property taxes on many middle-class homeowners was a move that might have been difficult for Mamdani to digest politically, but he retained the idea of ​​the variegated tax.

The idea sparked a political crisis after the mayor posted a video of himself standing in front of the building where hedge fund billionaire Ken Griffin owns a unit; This video led to Griffin’s first verbal objection to Mamdani, a well-known political conservative, and a threat to pull business from New York in the future. Although this is a tension that is expected to percolate between the billionaire class and the new socialist democrat mayor, real estate sales in the city remain strong.

But there’s a more fundamental question New York must now grapple with about this new form of property tax: does it work? There are existing examples from around the world that will help answer this question.

Different versions of second home and vacancy taxes exist in many major housing markets globally. Vancouver in Canadaempty house tax“and a federal”underutilized housing tax” is among the most prominent examples. Toronto recently followed with its own example vacancy tax.

As housing affordability worsens, rents continue to rise, and financial pressures mount, cities are increasingly targeting what are often highly visible symbols of inequality: dark luxury apartment buildings in prime urban neighborhoods.

vancouver framed officials According to the City of Vancouver’s public materials on the program, the city’s Vacant Homes Tax is an initiative to “return vacant or underused properties for use as long-term rental homes for people living and working in Vancouver.” The city also said net revenue from the tax is reinvested. affordable housing initiatives.

in Europe, London And Paris both impose surcharges or higher taxes on second homes and underutilized properties. Singapore It imposes some of the most aggressive foreign buyer surcharges globally, as high as 60% in some cases.

‘Empty homes’ taxes and landlord behavior

Paris is now moving towards even tougher vacancy penalties. As reported by Le Mondethe city plans to do this sharply increase taxes While there are vacant residences, local officials hope to put thousands of units back on the market. Paris deputy mayor Jacques Baudrier told the paper: “We hope that at least 20,000 homes will return to the market as a result.”

At the same time, Paris officials acknowledged the policy’s limits. A. 2025 report from France’s Cour des Comptes Despite wider vacancy taxes and higher rates, the measures were found to have “no significant impact on the overall 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: recurring property tax surcharges and one-time transaction taxes. This distinction is important, he said, because it “impacts how strongly owners adjust their behavior over time.”

New York offer It is an annual tax imposed on nonresident second homes valued at $5 million or more.

An important distinction is that many cities tax homes without specific consideration of the property’s price, unlike New York’s law, which targets properties worth $5 million or more: “In general, these policies tax homes based on occupancy or ownership status, not on the value of the property or the income or wealth of the owner.” Brosy said.

According to Paul Cheshire, professor of economic geography at the London School of Economics, “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: “The biggest misconception is that these taxes will increase housing affordability in major ‘supercities’. The problem is essentially restricting housing supply through policy,” he said.

Cheshire also noted that in many places second homes accounted for a relatively small share of the total housing stock, which he viewed as potentially limiting the potential scale of any tax. “Even in communities with high concentrations of second homes, this is still only around 15% of the housing stock,” he said, arguing that the taxable base is structurally limited. he said.

Brosy says empirical evidence from cities like Vancouver and Paris supports this view. “They increase incomes somewhat and reduce vacancy, but they do not reduce rents or prices overall – which is to be expected as the luxury housing market is largely disconnected from the broader housing market.”

One of the most consistent findings among experts is that these taxes generate far less revenue than policymakers initially expected. Global trends can be helpful in predicting the revenue a New York tax could generate. New York expects a figure of around $500 million, but according to Brosy, this figure may be optimistic.

New York City auditor has some doubts

Mamdani said New York’s first land tax “will generate $500 million each year,” an announcement Tuesday said.

But recently New York City’s own comptroller published a report While Vancouver data shows a significant decline in vacant homes in the years since the tax was introduced, revenue estimates for New York should include a much lower take-up potential than the $500 million estimate put forward, he says. While up to $510 million is possible, an estimate of $340 million to $380 million may be more realistic “when accounting for properties currently available for rental to primary residents and changes in behavior following taxes imposed elsewhere.”

Even higher taxes could have a larger behavioral impact, the auditor’s report added.

“Behavioral responses to the tax (switching to renting, relatives’ primary residence requests, sales, and potential legal challenges) lead to further variability that will only become observable after implementation,” the report said. “For these reasons, the surtax should be included in the City’s financial plan with a conservative revenue assumption.”

The auditor’s report suggested that if there was a wave of sales to avoid taxes, the impact on real estate transactions could initially be positive. But he continued: “Broad impacts on development or rents have not been significant overall. However, as the London experience has shown, concentrated impacts on the luxury market may be felt more deeply.”

London’s policy was stated as follows: a cautionary tale.

Abir Mandal of the Tax Foundation, widely seen as a centre-right think tank, says revenue potential depends heavily on design and implementation, but even then it remains modest relative to housing needs. Mandal said the takeaway from the current model across multiple global cities is consistent: significant in absolute terms, but marginal in financial context.

Even in Vancouver, one of the most aggressive examples globally, where vacancy rates dropped significantly after the tax policy was implemented, vacancy tax revenue remains relatively small compared to the scale of the city’s overall finances. Institute on Taxation and Economic PolicyIt found that Vancouver’s tax accounts for about 1% of total city tax revenue.

Mandal says that from another perspective, vacant homes can generate additional tax revenue without additional taxes: their inability to benefit from public resources. “The biggest misconception is that these are ‘free lunch’ taxes on absentee ‘speculators’ or the ultra-wealthy, who generate significant income while increasing affordability at no economic cost. In reality, second homes, if vacant, add to the tax base while introducing lower marginal service costs (no added pressure on police, education, etc.), making them a net fiscal positive,” he said.

Potentially better policy than fiscal management

As for the politically driven headline issue of whether such tax structures cause a mass exodus of ultra-wealthy buyers, the evidence globally does not suggest that a single tax policy change will have this effect. The consensus among experts is that second-home taxes influence marginal decisions but rarely determine whether wealthy individuals invest in global cities. Brosy described the impact as incremental rather than decisive: “They should certainly shift demand and drive prices down for trophy properties, but they’re unlikely to determine whether someone owns property in London, New York or Singapore,” Brosy said.

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

Mandal noted that for the ultra-rich, it’s a matter of cumulative impact rather than a single policy: “Tipping points emerge from cumulative burdens rather than isolated surcharges,” he said.

Waves of migration from California/New York to Florida/Texas and evidence from high-tax jurisdictions that triggered changes in the UK from London to Dubai point to vulnerability among many demographic groups, not just the ultra-rich, including retirees, individuals dependent on investment income, and business owners. US data shows millionaires are migrating to low-tax states. A single New York tax wouldn’t drain Manhattan, but combined with existing high costs it accelerated decisions for those with flexible footprints, “especially given that many global cities provide welcome havens and strong passports,” Mandal said.

Politics is another story. As the New York example shows, taxes remain highly attractive because they target a narrow, wealthy slice of homeowners rather than broad middle-class property owners. The appeal of unconventional taxes may ultimately stem more from their symbolism than their fiscal power: They allow governments to be seen as responding to housing inequality without imposing broader tax increases on full-time residents.