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

New York Gov. Kathy Hochul (D) announced a tentative deal on a $268 billion state budget, with legislative leaders agreeing to impose a tax on second homes in New York City and weaken the state climate law.

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.

New York City will also receive $1.5 billion in operational aid, which Mayor Zohran Mamdani (D) has celebrated as city budget officials work to address a $5.4 billion two-year budget gap. Hochul, who is facing 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.

Hochul said Thursday she had reached “general agreement” with legislative leaders Assembly Speaker Carl 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.

Conversations were complicated by debates over how to fill New York City’s deficit, with Hochul and state lawmakers settling on the pied-à-terre levy this week aimed at high earners who don’t call the city home. Hochul announced in April the tax on second homes could raise up to $500 million annually, though details on how exactly it will be applied are still unclear.

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 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.