How a Staten Island Lawsuit Is Challenging Mamdani’s Second-Home Tax

The fight over a contentious tax on high-end second homes in New York City escalated on Tuesday as Mayor Zohran Mamdani’s administration grappled with a lawsuit seeking to derail the tax.

The lawsuit, brought by a group of homeowners, did not question the legality of the tax itself, but rather argued that it had been rolled out improperly. A Staten Island judge on Monday sided with the homeowners, issuing a temporary restraining order to halt the rollout. The city appealed the order on Tuesday morning, which essentially prevented it from being enforced.

Randy Mastro, a lawyer for the homeowners and a critic of Mr. Mamdani, soon fired back, arguing in a letter to the court that the judge’s order remained in effect and that the city had no right to disregard it.

While the parties wait for an appeals court to weigh in, the dispute appeared to have caught the attention of President Trump, who derided the tax on social media on Tuesday and wrote that he was “looking to see” if the federal government had “any legal right” to stop it. (Mr. Trump, a former New Yorker, has often fixated on issues in the city during his presidency and sought to intervene, including by trying to end the congestion pricing toll.) The White House did not respond to a request for comment on Mr. Trump’s post.

The tax, levied as a surcharge on an annual property tax bill, applies to condos and co-ops that are used as second homes, also known as pieds-à-terre, and have a “market value” (as determined by the city’s Finance Department) of at least $1 million. It also applies to one-, two- and three-family homes with a “market value” of more than $5 million.

After Gov. Kathy Hochul unveiled the tax proposal in the spring, it was backed by Mr. Mamdani and his supporters, who hailed it as a way to make good on the mayor’s promise to “tax the rich” to support city services. The tax is expected to raise $500 million annually for the city, which is facing a budget gap.

But when the proposal became law in May, it created a tight timeline. The city finalized rules on how to implement the surcharge in mid-July and was required by state law to tell property owners whether their homes would be subject to it by Aug. 30.

Here’s what to know about the lawsuit.

Who is suing and why?

The lawsuit was brought in State Supreme Court on Staten Island by three New York City homeowners. Two of them live on Staten Island and are the wife and the father of Frank Morano, a Republican member of the City Council representing communities on the borough’s South Shore. The third plaintiff lives in Manhattan.

Mr. Morano shared Mr. Trump’s message on his X account on Tuesday afternoon, celebrating the judge’s decision and declaring that he had “been fighting this pied-à-terre mess from the beginning.”

The lawsuit targets two main actions taken by the city. The first is a data set published on the Finance Department’s website that lists nearly one million properties that “may be subject to the charge” and includes owners’ names and addresses. The second is letters that were sent out by the city to roughly 17,000 homeowners whom the city had more specifically identified as potentially subject to the tax. Some homeowners have said they received letters in error, despite being full-time city residents.

The lawsuit argued that city officials should have done more to determine who might have to pay the tax before publishing the data and issuing the letters.

“The city has to bear the burden of making the determination that a property qualifies for the tax, then give notice,” Mr. Mastro, who was also a city official in the Adams and Giuliani administrations, said in court on Monday.

Steven Banks, the head of the city’s Law Department, argued against the need for a temporary restraining order, saying that the lawsuit’s claims “do not present any genuine urgency or cognizable irreparable harm.”

In an interview with the television station PIX11 on Tuesday, Mr. Mamdani said he disagreed with the judge’s order. But he said he was confident the city could implement the tax properly.

“With any new tax, there’s always going to be more questions than there are answers,” he said, noting that the city had extended a deadline for homeowners to show they were exempt from the tax by four weeks, to Sept. 18. “We want to make sure that New Yorkers have the time to ask any of those questions.”

What did the judge say?

In the courtroom on Monday, the judge, Wayne M. Ozzi, seemed to indicate support for the homeowners, saying that “sending out notices to 17,000 homeowners who might be subject to a surcharge doesn’t satisfy the intent of the legislation.”

Justice Ozzi, a Democrat, was first appointed to the bench in New York by Gov. David Paterson in 2010. Before his appointment, he spent decades working in the state’s court system, according to his biography page.

Justice Ozzi’s order on Monday was not the first time he had ruled against a New York City mayor’s plans. In 2023, he issued a preliminary injunction blocking Mayor Eric Adams’s attempt to open an emergency shelter for migrants at a former school on Staten Island.

What comes next?

The city’s appeal of Justice Ozzi’s temporary restraining order will now come before the State Supreme Court’s Appellate Division.

Despite the order, and Mr. Mastro’s objections, the data set is still online. The city said it had received roughly 4,300 applications from people who believed they were exempt.

Still, the legal case presented a speed bump to a core part of the mayor’s agenda, one that is likely to draw even more scrutiny ahead of a hearing next Tuesday before the City Council about the rollout.

Stephen Louis, counsel to the Center for New York City and State Law at New York Law School, reviewed Mr. Mastro’s letter, which argued that the city’s appeal had no effect on the judge’s order, and said the case law was not clear one way or another.

“The position of the Law Department is wholly reasonable and certainly not so obviously wrong as Mastro ***erts,” Mr. Louis said.

If the appellate court agrees to keep the restraining order in place, though, it could impose further delays on the city.

Still, the first tax bills do not go out until November, said Benjamin Williams, a tax lawyer at Rosenberg & Estis. A second round of bills would go out next spring, he said, meaning it is possible the city could resolve any issues and still collect the revenue it needs for this fiscal year.

In his post, Mr. Trump claimed that wealthy New Yorkers would move out of the city because of the tax — a sentiment echoed by Mr. Morano.

Mr. Williams, however, said it was “far too early to say that tens of thousands of people will flee New York because of this tax.” But he added that he did have clients who were considering selling their second homes.