NY Democrats Cut Deal on Second-Home Tax, Climate Rollback (2)

New York Gov. Kathy Hochul (D) announced a tentative deal to impose a tax on second homes in New York City as part of a $268 billion budget that will also weaken the state’s climate law.

Budget discussions this year have been complicated by debates over how to fill the city’s $5.4 billion two-year budget gap, with Hochul and state lawmakers this week settling on the pied-à-terre levy aimed at high earners who don’t call the city home. The deal announced Thursday did not include details of how the second-home tax would work.

The governor said she is in the process of working those out with the Democratic leaders and would share more information “soon.” Assembly Speaker Carl E. Heastie (D) said, however, that the deal was rushed and that he had not signed off on Hochul’s announcement.

Hochul proposed the levy in April for second homes in the city worth more than $5 million, saying it could raise up to $500 million annually. The governor told reporters Thursday the city’s “rather bizarre” method for assessing property taxes has made it difficult to determine how to structure the levy.

Hochul said she is not considering an upstate expansion of the second home tax, an idea individual lawmakers have floated in recent weeks. She reiterated the final budget will not include increases to corporate or income tax rates, and also dismissed a cut to the pass-through entity tax credit used by wealthy business owners that New York City Mayor Zohran Mamdani (D) made a last-ditch push to include.

The city Department of Finance currently assesses condos and co-ops on their income-producing potential rather than market value—allowing luxury apartments to be valued at a fraction of their sale price. That assessment method is currently being challenged in the state’s Supreme Court by a housing coalition, which claims the city’s property tax code discriminates against minority residents.

The method means that properties worth $200 million can currently be assessed at $7 million, Hochul said.

New York City officials will also have to ramp up their auditing efforts to ensure taxpayers aren’t skirting the new tax by asserting properties are used as a primary residence.

More broadly, the state budget deal Hochul announced Thursday includes $1.5 billion in operational aid for New York City, which Mamdani has celebrated as city budget officials work to address shortfalls. Hochul, who is up for reelection this fall, has faced pressure from lawmakers to both her left and right to make the state more affordable, though they disagree over how to get there.

Other measures in the proposed deal would create carveouts to the state’s environmental review process to streamline housing development and adjust the state’s insurance payout process as Hochul seeks to make inroads on residential affordability concerns.

‘Tough Choices’

Hochul said Thursday she had reached “general agreement” with legislative leaders Heastie and Senate Majority Leader Andrea Stewart-Cousins, who had resisted the governor’s delay of state climate emissions targets. They also have criticized her proposals to limit fraudulent auto accidents that drive up insurance payouts, which Hochul coupled with a cap on damages that could be paid to victims in certain accident cases.

“Negotiations were not easy,” Hochul said, citing “substantive disagreements, tough choices, and powerful special interests trying to influence the outcome.”

Hochul has resisted calls to raise income taxes on millionaires and large corporations as New York Democrats prepare for competitive primary races in June. But New York City’s severe budget issues—which Mamdani has blamed on his predecessor’s fiscal mismanagement—ultimately convinced Hochul to compromise on another kind of tax increase.

Lawmakers also plan to send ratepayers rebate checks totaling $1 billion this fall to address consumer complaints about utility prices.

The state spending plan, which was due April 1, is also expected to include changes to the public pension system, a proposal that could cost state and local governments at least $1.5 billion, according to union estimates.

Hochul declined to say how much that proposal was expected to cost and said any pension system tweaks would be “much more scaled back monetarily.”

Public Safety

Hochul also announced a set of public safety measures, including a program to limit reckless driving with “super speeder” technology, which would install speed limiting devices in vehicles operated by drivers who rack up 16 or more speeding tickets in a year. Heastie confirmed the new technology would be included in the program.

The final deal will include protections from federal immigration agents, Hochul confirmed, saying states like New York should guard against federal overreach.