Zohran Mamdani Backed Off a Broad Property Tax Hike—Now, He Wants To Tax Pricey Home Sales

At a chilly February press conference, New York City Mayor Zohran Mamdani unveiled what he called his "option of last resort": a broad 9.5% property tax increase to help close the city's budget gap if Gov. Kathy Hochul refused to raise taxes on New York's wealthiest residents.

It was a striking piece of political theater from a mayor who has shown early and often that he's an adept political operative. It may also have been his first misstep.

The announcement came amid a national movement to cut or abolish property taxes. Even in a city of renters, the plan didn't land. In southeast Queens, homeowners rallied against the proposal.

"You ran on affordability. This is not affordability. This is actually suicide for us right here in southeast Queens,” James Johnson, a homeowner in Cambria Heights, told NY1 at a rally.

Now, Mamdani appears to be changing course. Instead of leaning on the threat of a broad-based property tax increase, his administration is advancing a narrower package that includes a property tax surcharge on high-value homes and fees on expensive home sales.

There have been concerns that Mamdani's efforts to raise taxes would cause wealthy New Yorkers to flee the city. If so, the costs of the city's post-pandemic wealth migration would add up. Between 2019 and 2023, the state of New York had a net income outflow of $76.7 billion—the second highest in the country—according to new data released by the IRS.

Mamdani's policy on taxing pricey homes may be easier to defend politically, but the strategy could carry unintended consequences for renters, condo and co-op owners, and the new construction the city so desperately needs.

New plan and new tactics

The alternative package, first reported by New York Focus, swaps out the threat of a broad property tax increase for a narrower set of revenue proposals aimed higher up the market.

On the real estate side, it includes a 1% property tax surcharge on Class 1 and Class 2 homes worth $5 million or more. It would function as a levy added to an owner's existing property tax bill.

It also tacks on a 1% transfer tax on cash-only transactions above $1 million, and an expanded mansion-tax-style levy on residential sales above $5 million. 

Together, these proposals are projected to raise roughly $1.2 billion annually, according to the mayor’s materials.

It’s a clear attempt to put more pressure on the most expensive homes and transactions rather than taking a broad swipe at the tax base.

Mamdani’s tactics have shifted just as noticeably. Instead of leaning on public showmanship to pressure Albany, he is taking a quieter approach to shopping the more tailored package.

That may be easier for Hochul—who is up for re-election and has been vocal about not raising taxes—and state lawmakers to back, but that does not mean the plan’s effects would be more contained.

“I would expect the effects and unintended consequences to vary by real estate class,” says Jake Krimmel, senior economist at Realtor.com®.

A surcharge on Class 1 properties worth $5 million or more would likely affect only the top of that market, he explains. But the implications for Class 2 properties could be much broader. 

“Since the majority of New York renters live in Class 2 real estate, this could result in market rent increases for tenants in these buildings,” he says.

That risk is notable because Mamdani’s original property tax proposal was widely criticized for how it could affect renters.

A 9.5% increase would have translated into a meaningful jump in carrying costs for rental housing. Based on an estimated average property tax bill of $5,886 per rental unit, that would have pushed the figure to roughly $6,445 per unit, according to previous research from Realtor.com.

Taxing turnover in a slow market

But the bigger risk may be what these taxes do to a market that is already barely moving.

“New York City's market is pretty stagnant already,” says Krimmel, noting that home sales in the city are down 25% since 2022.

That makes the shift toward taxing high-end sales especially consequential. A study of a similar tax in L.A. showed that these taxes change market behavior by giving owners, buyers, and investors more reason to hold off on deals.

Since a 4% to 5.5% sales tax on home sales above $5 million was enacted, the odds of an L.A. property selling above the tax threshold fell by as much as 50%, with especially sharp declines in non-single-family deals, a 2025 report from UCLA's Lewis Center found.

The authors argue that while the tax has raised meaningful affordable-housing revenue, it has also slowed turnover in ways that could hurt housing production, commercial revitalization, and long-term property tax growth.

New York City’s proposal is not the same as L.A.'s, but the broader question is similar: If the city raises more money by taxing transfers, does it also give sellers, buyers, and investors a reason to step back?

That risk is especially important because the cash-only transfer tax appears aimed at affluent buyers and investors, a slice of the market that often drives high-dollar deals. If enough of that activity slows, the city could end up leaning harder on a shrinking pool of transactions.

The new development dilemma

“There's also the question of what this does to new construction,” says Krimmel. “All-new, large multiunit buildings would surpass the $5 million threshold, so impacts on new development are also really important to consider.”

That tension is especially notable because Mamdani has also put forward an ambitious housing agenda, including a 10-year, $100 billion plan to triple the city’s production of publicly subsidized homes, freeze rents on stabilized apartments, and invest more in preserving public housing.

The need for more housing is not in dispute. New York City’s official net rental vacancy rate is just 1.4%, the lowest since 1968. In the third quarter of 2025, the median asking rent reached $3,599, up 5.4% from a year earlier, according to data from Realtor.com.

In June 2025, nearly 103,000 people were sleeping in city shelters each night, including more than 35,000 children, according to the Coalition for the Homeless.

That is what makes the tax question so consequential: If the city leans harder on high-value residential property, it could end up putting added pressure on exactly the kind of multifamily development it says it wants more of.