Second-home taxes are wildly unpopular among people with second homes. However, most of the rest of a state's electorate tend to be pretty cool with them.
That may help explain why California, Hawaii, Montana, New York, Rhode Island, South Carolina, Vermont, and the District of Columbia are right now implementing such taxes. And others may well follow as they find it increasingly hard to balance their budgets.
"This year, ... more states are beginning to face revenue pressure as expenses outpace revenue growth and revenues normalize," says MultiState, a private consultancy offering government relations services. And things look set to get even worse.
"As of December 2025, we predict that ten states will face a challenging fiscal outlook in the short term," continues MultiState's report. "An additional 13 states are in a conditional status – meaning things could easily change or the projected deficits don't begin for a few years. States facing challenging or conditional revenue environments are more likely to pursue business tax increases." And they may turn to second-home taxes, too.
The Famous New York Model
Second-home taxes have probably garnered the most publicity over New York City's proposal. "From New York to Vancouver to London, a once-niche policy idea is moving into the mainstream of urban finance: taxing pied-à-terre properties, second homes, vacation apartments, and luxury units that sit partially or entirely unused," said CNBC earlier this week.
"New York City is just the latest example, with Mayor Zohran Mamdani and New York State Governor Kathy Hochul supporting the tax as part of a state and city effort to make up a big budget hole," CNBC's report continued. "In a new budget proposal this week, Mamdani dropped plans to raise property taxes on many middle-class homeowners, a move that could have been a difficult one for Mamdani to politically stomach, but kept the pied-à-terre tax idea."
Mamdani plans to raise a second-home tax on pieds-à-terre (an alternative name for second homes in a city, from the French, meaning a foot on the ground) worth more than $5 million. In NYC, they number about 13,000 properties, representing roughly 0.4% of the city’s more than 3.7 million homes.
On May 10, The Financial Times (FT) took a sanguine view: "A time-honoured New York ritual is playing out again as millionaires and billionaires threaten to flee the global financial capital where they own luxurious second homes."
The FT reckoned the tax would be a rounding error for the owners of these elite properties, and that few of the loud threats to quit the city would actually be carried out.
“Can I afford the tax? Yes," one person affected told the FT. "Is it going to deter me? No. But I think it’s shameful. I provide a lot of money to people who are blue-collar workers who work for me, servers in restaurants. If we’re not there, there are going to be less people being paid."
The Rich Can Afford to Pay Second-Home Taxes
Last December, soon after Mamdani's election, we published, "Real Estate Contracts in NYC Indicate Rich Residents Moving In, Not Out." It suggested that, while high state taxes may incentivize people on moderate incomes to relocate, they rarely have much effect on high-net-worth individuals.
We cited a poll that reported 7% of high earners had said they'd definitely quit NYC, and another 2.2 million New Yorkers would consider it to avoid Mamdani's higher taxes. However, signed contracts for Manhattan homes costing $4 million or more climbed 25% during the month of Mamdani's election (he won on Nov. 4, 2025), compared to October.
What's Next?
With 46% (23 out of 50) of states facing existing or imminent budget crises, we may see more governments implementing a statewide second-home tax or allowing counties and cities to introduce their own. Much will depend on whether the eight states currently moving forward succeed or fail.
Critics suggest these taxes are likely to raise some revenue, but less than supporters expect. And they'll involve some costs, perhaps, as in NYC's case, including rejigging the system for assessing property taxes. Meanwhile, there might be endless legal challenges over individual valuations.
Of course, some states will be ideologically opposed to taxing wealthy people more. But others may well adopt second-home taxes if the current crop of initiatives proves reasonably fruitful.
How well they work will depend on how they're targeted. If they hit the moderately affluent middle classes, second homeowners may sell up and buy in a state with a kinder tax regimen.
Of course, that might not be a wholly bad thing if the sale happens in a place with a shortage of housing. It could free up units for locals to buy.
However, for second-home taxes to be electorally popular, they probably need to target the seriously wealthy, as NYC has. But very few places have as many centimillionaires and billionaires as the Big Apple.
