A Staten Island judge on Tuesday threw out New York City’s rollout of its new pied-à-terre tax. He ordered Mayor Zohran Mamdani’s administration to cancel the notices it sent to property owners and restart the process of deciding who owes the surcharge.
State Supreme Court Justice Wayne Ozzi ruled that before deciding a property is a second home subject to the tax, the city must review all the information available to it and produce the records backing its claim. He did not rule on whether the tax itself is legal.
“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, a spokesperson for the mayor, told Fortune in a statement. “Today’s decision is wrong, and we will invoke a stay of the injunction. With a stay, we will continue implementing the surcharge fairly, efficiently, and in full compliance with the law, as we have since day one.
“New York is a city for the many—not a tax haven for the wealthy few,” he continued. “Our administration is fighting every day to deliver for working New Yorkers. The ultrawealthy 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.”
“While this lawsuit about the administration of the tax is a matter for the city and the courts to work through, the governor continues to believe that people who can afford a multimillion-dollar second home in New York City can afford to pay their fair share,” Jen Goodman, Gov. Kathy Hochul’s director of rapid response, told Fortune in a statement.
The city had been counting on at least $500 million a year from the surcharge, one of Mamdani’s signature tax-the-rich promises. It can appeal.
The city is expected to invoke an automatic stay of the ruling by filing an appeal Tuesday evening, according to a source with knowledge of the city’s plans.
The tax took effect July 1. It applies to one-, two- and three-family homes worth more than $5 million, and to condos or co-ops worth more than $1 million, when they aren’t the owner’s primary residence.
In July, about 17,000 owners got notices flagging them as possibly owing the tax. The city admitted it did not check owners’ income tax filings before mailing the warnings. Once it did, thousands of the flagged properties turned out to be primary residences.
Randy Mastro, who was first deputy mayor under Eric Adams, brought the lawsuit on behalf of three homeowners. It doesn’t challenge the tax itself, only how the city’s Department of Finance carried it out.
Mastro’s suit makes three claims: First, state law required the department to make an individual determination for each property before mailing a notice, and it skipped that step. Second, the city made homeowners prove they didn’t owe the tax instead of doing that work itself. Third, nothing in the law allowed the city to publish an online database of more than 900,000 properties with owners’ names and addresses.
Mastro said in August that he got one of the notices himself, despite living in Manhattan for decades. “I got one, and everyone knows I’m a New Yorker,” he said.
He has sued the Mamdani administration repeatedly since leaving City Hall. “There are few things more certain in New York City than death, taxes, and Randy Mastro filing a lawsuit against this administration,” Mamdani said in August.
On Tuesday, Mastro said in a statement that the court “recognized we were right all along.” He said the city must now decide owner by owner who owes the surcharge before demanding payment.
Fortune called former Commerce Secretary Wilbur Ross minutes after the ruling. He isn’t part of the Staten Island case, but he is bringing his own challenge to the tax. On Monday, Ross, his wife, Hilary Geary Ross, and casino developer Steve Wynn sued the state over the tax as well. While Mastro’s case targets the rollout, their suit targets the tax itself. It argues the tax is unconstitutional because it falls only on people who don’t live in New York City.
Ross said the ruling didn’t surprise him. “I had told you I was very confident that we were on the right side of the law,” he said. “I’m grateful that he did it so quickly, because a lot of people have been on pins and needles about this whole thing.
“Now undoubtedly there will be an appeal filed, so it’s not necessarily 100% over,” he said. “But we’re certainly off to a good start.”