A growing number of places in the U.S. are rolling out taxes on second homes

A new target for housing solutions

What if owning a second home started costing a lot more each year? That idea is quickly becoming reality in several parts of the United States as officials look for new ways to manage housing shortages.

State and local governments are now focusing on second homes as a way to raise funds and free up housing. These new taxes are sparking attention as both a financial and housing policy tool.

Why second homes are under focus

Second homes are often seen as underused properties, especially when they sit empty for long periods. In cities facing housing shortages, this has become a growing concern for policymakers.

Officials argue that unused homes could help ease demand if they were rented out. That idea is driving new tax proposals aimed at encouraging better use of existing housing.

New York City joins the trend

New York City is planning to introduce a tax on high-value second homes. The proposal targets properties worth $5 million or more that are not regularly occupied.

This type of property, often called a pied-à-terre, is typically used only part-time. Lawmakers believe taxing these homes could generate revenue while pushing owners to use them more actively.

Rhode Island’s unique approach

Rhode Island is taking a different route with a tax focused on vacant luxury homes. The measure applies to properties valued above $1 million that remain empty for much of the year.

Nicknamed the “Taylor Swift tax,” it has gained attention due to a celebrity-owned home in the area. The policy is expected to take effect soon and could influence similar efforts elsewhere.

Other regions exploring similar ideas

Other regions are moving in different directions on vacant and second-home taxes. San Francisco’s Empty Homes Tax was approved but is not currently being enforced after a court ruling, while Montana has already adopted a higher 2026 tax rate for second homes, short-term rentals, and vacant residential lots.

The growing interest shows that this idea is spreading across different regions, though legal challenges and implementation details remain important hurdles. More areas may look at similar policies if early efforts prove workable.

How these taxes are meant to work

The goal of these taxes is to encourage homeowners to rent out unused properties. By adding extra costs, officials hope owners will choose to make homes available to long-term renters.

This could help increase housing supply without building new homes. It is seen as a quicker way to ease pressure in tight housing markets.

Little-known fact: A $238 million Central Park penthouse owned by billionaire Kenneth Griffin is assessed for city tax purposes at under $7 million.

Supporters highlight housing benefits

Supporters believe these taxes could improve housing affordability over time in cities facing a tight supply. They argue that empty or rarely used homes should not sit unused during an ongoing housing shortage.

By encouraging owners to rent out properties, overall supply in the rental market could increase slightly. Even small changes like this may help reduce pressure on rising rent prices in certain areas.

Critics raise economic concerns

Critics argue that these taxes could drive away wealthy homeowners who spend money locally in restaurants, shops, and services. Their spending often supports small businesses and helps local economies grow.

There is also concern that higher taxes might discourage new property investments in expensive housing markets. Some believe this could slow down development and reduce future housing growth over time.

Not all second homeowners are wealthy

Not every second homeowner fits the image of extreme wealth or luxury living. Critics say broad second-home taxes can also affect longtime owners, inherited seasonal homes, and families with deep ties to coastal or vacation communities.

For these owners, new taxes could create unexpected annual costs on top of existing property taxes, insurance, and maintenance. Some policies include exemptions for homes that are occupied or rented for much of the year, but owners may still need to document that they qualify.

What research from other places shows

Studies from cities outside the United States offer useful insights into how these policies work in real life. In Vancouver, the Empty Homes Tax has been linked to a major decline in declared vacant homes and more housing returning to use.

Some homeowners appear to have rented out or occupied properties instead of paying extra taxes. However, research also suggests that vacancy taxes may improve housing availability without necessarily lowering average rents.

Limits of these tax policies

Despite potential benefits, experts say these taxes are not a complete solution to housing shortages. Research on Vancouver found that the Empty Homes Tax reduced empty homes but did not significantly lower average rents or increase new construction.

These policies can improve housing availability in targeted cases, but their impact depends on how many eligible properties actually shift into long-term use. Larger supply challenges, including construction costs, zoning limits, permitting delays, and years of underbuilding, continue to shape the housing crisis.

Revenue benefits remain modest

These taxes can generate additional income for local governments that are dealing with budget pressure. However, the total revenue is often small compared to full city or state budgets.

For example, even large cities may only collect a fraction of what they need for major programs. Still, officials see it as one useful tool among several to address housing challenges.

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A small step in a bigger challenge

Taxes on second homes are part of a broader effort to tackle housing shortages across the country. While they may not solve the entire problem, they can still make a meaningful difference.

As more cities explore similar policies, the approach may continue to evolve and expand over time. For now, it represents one step toward making housing more available and accessible for residents.

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Do you believe second home taxes will help with housing affordability or create new issues? Share your thoughts in the comments, and don’t forget to leave a like.

This slideshow was made with AI assistance and human editing.

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