NEW YORK CITY— The Mamdani administration will have to dismantle its rollout of a new tax on high-value second homes after a Staten Island judge ruled the process unfairly shifted the burden to thousands of homeowners.
Justice Wayne M. Ozzi of State Supreme Court in Richmond County sided with three homeowners who challenged the City's implementation of the surcharge.
Ozzi did not strike down the tax itself, which lawmakers approved as part of the state budget, and only applies to New York City homes used as second residences rather than primary homes.
The ruling requires the City to remove a public database containing nearly 960,000 residential property records, and replace it with a narrower Supplemental Roll limited to properties actually subject to the surcharge.
The City must also cancel previously mailed notices and send new ones only after making an individualized determination that a property is not a primary residence.
Those notices must explain why the City reached that conclusion and identify the records or documents supporting it.
The Department of Finance initially contacted about 17,000 property owners whose homes could potentially meet the requirements for the surcharge.
The letters warned that their properties "may be subject" to the tax and instructed homeowners to submit records showing the properties served as their primary residence.
"No crime is involved here, but homeowners are being substantially harmed and penalized needlessly by DOF's method of implementing the Tax Law," Ozzi wrote.
He found that the City's notice process was "arbitrary and capricious, affected by errors of law, and in violation of the recipients' due process rights."
Gov. Kathy Hochul introduced the measure, which would impose a surcharge on high-value properties.
For condominiums and cooperative apartments, the property must have a market value of at least $1 million. One-, two- and three-family homes face the surcharge when their market value exceeds $5 million.
Mayor Zohran Mamdani backed it as part of his administration's effort to raise revenue from high-value properties.
The tax could bring in roughly $500 million a year for City services, according to projections cited in the case.
The homeowners argued the City had put the burden on residents before completing its own review.
Steven Banks, the City's lawyer, argued homeowners had not shown enough harm to halt the rollout.
As more information became available, the Finance Department updated its records, including 2025 tax data from New York State.
The City planned to send new notices to more than 11,000 owners who still needed to prove their primary residency or face the surcharge.
Some properties were held by trusts or LLCs, while others lacked sufficient tax or residency records. The deadline to submit documentation was extended to Oct. 6.
By Sept. 16, the department had approved residency documentation from about 4,700 owners and was reviewing thousands more.
Matt Rauschenbach, a spokesperson for Mamdani, said the City recognizes its responsibility to make the process understandable when it introduces a new requirement.
"As the mayor has said, we also know that whenever government asks something new of New Yorkers, we have a responsibility to make the process clear, transparent and accessible," Rauschenbach said in August.
The Finance Department published a supplemental property roll on July 24 containing about 959,710 residential records.
The list covered far more properties than the number likely to face the surcharge.
Martha E. Stark, a former New York City finance commissioner hired by the homeowners as an expert, reviewed the data and found about 24,218 properties met the necessary value thresholds.
That represented about 2.5 percent of the properties included in the published roll.
Her analysis found:
But, meeting the value threshold alone does not trigger the surcharge. The property also must serve as a non-primary residence.
And, the published database did not establish that second condition, Ozzi noted.
The administration plans to appeal. It may also ask an appellate court to pause Ozzi's order while the case proceeds.
The timing could affect the City's revenue plans. The first tax bills typically go out in November, with payments due in the following months.
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