One of New York City Mayor Zohran Mamdani’s signature initiatives has encountered a significant legal obstacle just months after he took office.
The administration is already fighting back and says it intends to move forward, setting up another court battle over how one of the mayor’s most closely watched policies is being implemented.
A Staten Island judge on Monday temporarily blocked the rollout of Mamdani’s pied-à-terre tax while a lawsuit brought by homeowners challenging the city’s implementation process moves forward.
New York City quickly filed a motion seeking permission to appeal the ruling, a move that will stay the lower court’s order while the legal process continues.
“The City will continue with the pied-à-terre’s implementation,” mayoral spokesperson Matt Rauschenbach said.
The temporary restraining order directed the city to remove its public tax roll and prohibited officials from issuing additional notices while the order remained in effect, with the next hearing scheduled for Aug. 31.
The judge said from the bench that notices sent to homeowners caused irreparable harm because they failed to explain why recipients had been identified as potentially subject to the surcharge while warning that failure to request an exemption could result in taxation.
Mamdani had vowed only hours before the ruling that his administration would “vigorously defend” the city’s position.
“We disagree with today’s ruling, but we are confident in both the pied-à-terre surcharge and the City’s ability to implement it fairly and effectively,” Rauschenbach said following the decision.
The tax imposes a surcharge on non-primary residences in New York City valued at $5 million or more and on condominiums and cooperative apartments valued at at least $1 million.
The measure was included in the state budget and signed into law by Democratic Gov. Kathy Hochul in May as part of an effort to address New York City’s budget gap.
Hochul announced the proposal alongside Mamdani in April before signing the measure into law.
Mamdani, a democratic socialist who took office in January, campaigned extensively on increasing taxes on wealthy New Yorkers to help finance his affordability agenda.
The lawsuit filed Friday in state Supreme Court in Richmond County was brought by homeowners Simon Hedley, Rachel O’Brien and Carmine Morano, who allege the city incorrectly identified their properties as potentially subject to the surcharge even though they are their primary residences.
Importantly, the plaintiffs are not challenging the legality of the pied-à-terre tax itself.
Instead, their lawsuit focuses on how the Department of Finance implemented the program, including publication of a tax roll containing names, addresses and property values for more than 900,000 residential properties, including properties not subject to the surcharge.
Approximately 17,000 property owners received letters informing them that they might be subject to the new tax.
“We are very gratified by the judge’s decision, which has vindicated the rights of hundreds of thousands of New York City homeowners who were subjected to a process they never should have been a part of in the first place,” plaintiffs’ attorney Randy Mastro said.
Hedley presents an unusual challenge to the administration because he says he supports Mamdani and his policies, including higher taxes on wealthy residents, but believes the city mishandled the implementation.
Hedley said his Manhattan property, purchased 13 years ago, is his only home and primary residence, yet he received a notice in July indicating that he might be subject to the surcharge.
“Part of my issue was, I feel it would have been pretty straightforward for the administration or the Department of Finance just to cross-reference the tax records and not send out the letters in the way they did,” Hedley said.
“It seems to be they were throwing a very large net over the situation,” he added, saying he and others “were nervous about it,” CNN reported.
Hedley ultimately filed for an exemption by uploading a tax return and learned Monday morning that the city had approved it.
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