New York Lawmaker Proposes Extending Pied-à-Terre Tax to Upstate Municipalities

ALBANY, N.Y. — As New York’s state budget negotiations stretched weeks past their April 1 deadline, a Capital Region lawmaker in late April introduced a proposal to allow upstate municipalities to levy a pied-à-terre tax on second homes, mirroring a similar measure being debated for New York City. State Sen. Pat Fahy, a Democrat representing the Albany area, is leading a push to create an opt-in system for towns and cities outside of New York City to tax non-primary residences. The proposal comes as Gov. Kathy Hochul has backed a tax on second homes in New York City valued at $5 million or more to help the city address a projected $5.4 billion budget deficit. Fahy’s proposal seeks to extend the concept to address fiscal pressures and housing affordability crises in upstate communities. While a new tax stream might seem appealing for cash-strapped towns, the implementation details are critical. We've seen how poorly designed property taxes can create unintended consequences for local economies and small business owners who rely on seasonal tourism, potentially discouraging the very investment these areas need. The proposed upstate tax would differ from the New York City version in key ways. According to Fahy, localities could choose whether to implement the tax. She has also suggested a lower property value threshold to reflect different real estate markets, floating a figure of $2.5 million instead of the $5 million mark discussed for the city. Some versions of the plan would apply only to out-of-state owners. Revenue generated would be split, with half remaining in the municipality and the other half directed to the state’s Aid and Incentives for Municipalities (AIM) program, which provides critical funding to localities across the state. Proponents argue the tax is a necessary response to a housing market that has been supercharged since the COVID-19 pandemic. “During COVID, the second home market went on steroids,” Fahy told City & State. She noted that resort areas like Lake George, Saratoga Springs, and parts of the Finger Lakes have seen property values soar, pricing out local workers and residents. “It has, in so many ways, crushed the affordability in many of these upstate and Long Island communities. This is a way to level the playing field,” she said. Support for the idea has emerged from other upstate Democrats. Assembly Member Sarahana Shrestha, who represents Kingston, voiced frustration that the governor’s focus appeared to be solely on New York City’s financial issues. Shrestha stressed that any upstate pied-à-terre tax must include provisions for LLC transparency to prevent wealthy owners from using corporate structures to evade the tax. She also advocated for allowing each municipality to set its own value threshold. For property owners, especially those holding real estate through an LLC for liability or estate planning purposes, this proposal raises immediate questions. The call for LLC transparency, while aimed at preventing evasion, could complicate legitimate business structures. Navigating these new compliance layers will be essential. This is precisely the kind of complex regulatory change where specialized tax preparation and compliance services become invaluable for ensuring adherence while managing financial impact. The proposal is not without its detractors. State Sen. Pam Helming, a Republican whose district includes parts of the Finger Lakes, voiced staunch opposition, stating the focus should be on making New York more affordable, not on adding new taxes. Skepticism has also come from some Democrats. State Sen. James Skoufis of Orange County questioned the measure’s effectiveness, telling the Times Union that few upstate municipalities have a sufficient concentration of ultra-luxury properties to generate meaningful revenue. He suggested that direct state aid or other local revenue measures would be more effective solutions. The state’s top legislative leaders have signaled a willingness to discuss the idea, though they have stopped short of full-throated endorsements. Senate Majority Leader Andrea Stewart-Cousins said the concept was worth “more conversation” and would need to be evaluated on an area-by-area basis. Assembly Speaker Carl Heastie appeared similarly open, stating that he personally “would be open to other places looking at the pied-à-terre tax.” Ultimately, whether this tax helps or hurts local economies will depend entirely on the final details—the tax rate, the property value threshold, and how revenue is actually deployed. For businesses in these communities, from construction firms to retail shops, the impact could be significant if it cools the local real estate market. Business owners and investors considering property upstate should monitor these developments closely. Understanding the potential financial impact is the first step, and our team at C&S Finance Group LLC at csfinancegroup.com is equipped to help clients model these scenarios and plan accordingly. With the state budget still unresolved after multiple extensions, the fate of the upstate pied-à-terre proposal remains tied to the broader negotiations between Gov. Hochul and legislative leaders. Observers will be watching to see if the concept is formalized into legislative language and gains traction as part of a final budget agreement.