Bloomberg reported on 14/5, citing sources familiar with New York State's budget planning, that this new tax method, currently under legislative review for homes purchased with cash, could generate over 160 million USD for New York City's budget.

"Governor Kathy Hochul has announced a conceptual agreement with the state legislature regarding many items in the budget for fiscal year 2027. Details will be outlined in the complete budget legislation", her spokesperson stated, without mentioning the new tax on cash home transactions.

Buildings in Midtown Manhattan, New York in 11/2022. *Photo: AFP*

New York House Speaker Carl Heastie stated that the new tax is part of a plan to help New York City reduce its budget deficit. James Skoufis, a member of the New York State Senate Finance Committee, also confirmed that legislative bodies had discussed this option.

The number of cash home purchases in New York has increased due to rising mortgage costs, making many hesitant to borrow from banks. In a competitive real estate market like New York, cash payments are also an attractive option for sellers, as they offer a faster transaction process and less risk of falling through compared to waiting for bank loan approval.

In parallel, the state government is also promoting a new surcharge on second homes owned by wealthy New York residents.

The draft budget plan, which Governor Hochul sent to state legislative leaders on 14/5, proposes an additional tax of 4-6,5% for the next two years on second home purchase agreements for residents if the property has a "market value" exceeding one million USD. This tax would apply in addition to pre-existing tax obligations for real estate transactions.

New York Governor Kathy Hochul speaks on 11/5 during a visit to a childcare center in the city. *Photo: Reuters*

"Market value" is a specific calculation by the New York State government, unrelated to the actual transaction value of the property. A penthouse in Midtown Manhattan, for instance, was sold in 2024 for over 135 million USD, but its appraised market value was 4,2 million USD.

According to a sample calculation from the New York Governor's Office, for every 5 million USD of actual transaction value, the property's "market value" would be approximately one million USD.

Governor Hochul expects this measure to generate over 500 million USD annually for New York City's budget. After two years of implementation, the government will adjust the tax rates to 0,8% for homes valued between 5-15 million USD, 1,05% for the 15-25 million USD group, and 1,3% for properties valued at 25 million USD or more.

This proposal is expected to create a stable revenue stream for the budget from wealthy residents who do not live permanently in New York, although the real estate sector warns that changing tax mechanisms could reduce market stability. A report by the city audit agency also noted that actual budget revenue could be lower than projected if wealthy individuals abandon plans to purchase additional second homes in New York.

Thanh Danh (According to NY Post, Bloomberg, NYT)