NYC's $5.4B Budget Crisis: Mamdani Threatens Property Tax Hike After 'Years of Fiscal Mismanagement'

NEW YORK — For the first time since 2003, New York City property owners are facing a potential tax increase — and a steep one at that. Mayor Zohran Mamdani's preliminary budget includes a jaw-dropping 9.5% property tax hike that would hit more than 3 million homes, condos, co-ops, and 100,000 commercial buildings.

The reason? A $5.4 billion budget gap that Mamdani attributes to what he calls "gross fiscal mismanagement" — though a closer look reveals the crisis has roots that extend far beyond his predecessor's administration, and include spending commitments championed by Mamdani himself.

The Ultimatum

"Today, I'm releasing the City's preliminary budget," Mamdani wrote in a Tuesday post on X. "After years of fiscal mismanagement, we're staring at a $5.4 billion budget gap — and two paths."

The first path: convince Albany to raise taxes on what Mamdani calls "the ultra-wealthy" — those earning more than $1 million annually — and hike corporate taxes.

The second path, which he describes as a "last resort": raise property taxes by 9.5% and raid the city's reserve funds.

"This would effectively be a tax on working and middle class New Yorkers, who have a median income of $122,000," said Mamdani, apparently acknowledging that his fallback plan would hurt the very people his progressive platform promised to protect.

The Numbers Behind the Crisis

The preliminary $127 billion budget proposal represents a $5 billion increase over last year's spending — even as Mamdani warns of fiscal catastrophe.

The 9.5% property tax increase alone would generate $3.7 billion annually, according to the mayor's office. Combined with nearly $1 billion drawn from the city's Rainy Day Reserve Fund and hundreds of millions more from the Retiree Health Benefit Trust, the plan would technically balance the books — but at what cost?

For a typical homeowner, the Citizens Budget Commission estimates an additional $700 per year in property taxes. For landlords of market-rate apartments, those costs would likely be passed directly to tenants through rent increases.

And the problem doesn't end in 2027. Despite the tax hikes and reserve raids, Mamdani's own budget projects continuing deficits of $6.7 billion in 2028, $6.8 billion in 2029, and $7.1 billion in 2030.

Who's Really to Blame?

Mamdani has pointed fingers at former Mayor Eric Adams for "underbudgeting" essential services and at former Governor Andrew Cuomo for allegedly reducing state funding to the city.

But a detailed analysis from Vital City tells a more complicated story.

"What is surprising about Mamdani's surprise is that New York City's dire fiscal condition has been widely known for the last year but was conveniently ignored by Mamdani and the New York City press corps during the mayoral campaign," the analysis notes.

NYC Comptroller Brad Lander — a Mamdani ally — estimated in August 2025 that the city would face a $4.2 billion gap in FY 2026, growing to $8.8 billion in FY 2027. The Independent Budget Office, Citizens Budget Commission, and State Comptroller all issued similar warnings throughout 2025.

So how did Mamdani, who served in the state legislature, claim not to know?

The Programs Mamdani Supported

Perhaps more damning: many of the spending commitments driving the deficit are ones Mamdani himself voted for or championed.

Class Size Reduction: As an assemblyman, Mamdani voted for a law mandating smaller class sizes that the Independent Budget Office estimates will ultimately cost $1.6 to $1.9 billion annually, plus more than $10 billion in capital costs for new classrooms. He pledged to implement it as a mayoral candidate "regardless of whether the State provided additional funding."

Universal Pre-K Expansion: The city used temporary federal pandemic aid to expand 3-K and childcare programs. When that funding dried up, it created a $900 million annual hole. The city now spends $1.3 billion on 3-K alone.

New Progressive Priorities: Mamdani's campaign platform promised fare-free buses, a Department of Community Safety to respond to 911 calls, expanded homeless services, and a four-year rent freeze — all expensive proposals that would add to, not reduce, the budget gap.

The Political Gambit

Mamdani's budget presentation appears to be less about fiscal responsibility and more about political pressure.

"Mamdani explicitly intends to use his proposed property tax hike...as a means of pressuring Hochul and state officials to acquiesce to more taxes on the wealthy," notes Reason magazine.

The timing is telling. Just one day after Governor Kathy Hochul announced $1.5 billion in additional state aid to help the city — money that reduced the deficit from $7 billion to $5.4 billion — Mamdani responded by threatening property tax increases if she doesn't give him even more.

"Talk about a thank-you to the governor," editorialized amNewYork.

Swift Pushback From All Sides

The property tax proposal immediately drew fire from across the political spectrum.

City Council Speaker Julie Menin called the plan a "non-starter," saying that "at a time when New Yorkers are already grappling with an affordability crisis, dipping into rainy day reserves and proposing significant property tax increases should not be on the table whatsoever."

City Comptroller Mark Levine warned: "Our property tax system is profoundly unfair and inconsistent, and an across-the-board increase in this tax would be regressive."

Queens Borough President Donovan Richards declared: "This is absolutely a non-starter for me."

Governor Hochul, who's up for reelection this year, said flatly: "I'm not supportive of a property tax increase. I don't know that that's necessary."

Even Mamdani himself seemed to acknowledge the plan's problems, telling reporters: "I agree that this is not something that should be on the table."

Impact on Property Owners and Renters

The proposed tax hike has landlords and property owners sounding alarm bells.

"Roughly one-third of rent-regulated housing is already struggling due to rising costs, with property taxes the biggest expense," said Kenny Burgos, CEO of the New York Apartment Association, in a statement. "This proposal, coupled with Mamdani's pledge to freeze rents for four years, virtually guarantees the physical destruction of tens of thousands of units of housing."

Ann Korchak, board president of Small Property Owners of New York, was even more blunt: "The mayor has declared war on thousands of immigrant property owners, most of them multigenerational families, who have their entire life's savings invested in their small buildings."

She added: "Owners of small rental properties are sick and tired of being treated like ATM machines every time the city needs to balance the budget."

For tenants, the impact could be equally severe. Market-rate landlords can pass property tax increases directly to renters, and even rent-stabilized buildings may seek relief through the system's allowable increases for property tax hikes.

The Reform That Never Came

Ironically, Mamdani campaigned on reforming New York's notoriously unfair property tax system, which favors wealthy homeowners in predominantly white neighborhoods while overtaxing multi-family buildings and homeowners in Black and brown communities.

In his inauguration speech, he pledged: "It will be New Yorkers who reform a long-broken property tax system."

Instead, less than 50 days later, he's proposing to raise taxes across the board using that same broken, regressive system — without fixing any of the inequities.

"To rely on a property tax increase and a significant draw-down of reserves to close our gap would have dire consequences," Comptroller Levine warned.

What the Experts Say

Budget watchdogs are calling out the false choice Mamdani is presenting.

"The best choice is to eliminate spending that does not improve New Yorkers' lives and make government more efficient and effective," said Andrew Rein, president of the Citizens Budget Commission. "The Mayor should ensure that every one of the people's $127 billion is used well, before asking them to dig into their pockets."

The amNewYork editorial board was similarly critical: "The city's budget is $118 billion; the $5.4 billion gap left to close represents just 4.6% of all city spending. Appropriate, not austere, cuts within the city's already massive budget are the right way forward."

George Sweeting, a fiscal policy expert at the New School's Center for New York City Affairs, questioned the entire premise of Mamdani's approach, suggesting the focus should be on structural reforms rather than simply finding new revenue sources.

The Missing Cuts

Notably absent from Mamdani's budget: significant spending reductions.

While the mayor mandated that every agency appoint a "Chief Savings Officer" and claims to have found $1.77 billion in "savings" over two years, critics point out that much of this comes from revenue adjustments and one-time windfalls rather than actual spending cuts.

The NYPD — an agency Mamdani frequently criticized as a state assemblyman — saw only a token $22 million decrease in its $6.4 billion budget, achieved by canceling former Mayor Adams' plan to hire 5,000 additional officers.

Missing entirely from the preliminary budget: funding for Mamdani's signature Department of Community Safety, which he says will appear in the executive budget due in April.

The Path Forward

The preliminary budget is just the first step in a months-long negotiation process. The City Council must approve a final budget by June 30, before the new fiscal year begins July 1.

But the damage may already be done.

"If he cannot pass this test without driving up costs for most New Yorkers, he can forget about his agenda ever becoming a reality," the amNewYork editorial board warned.

Mamdani insists he's simply being transparent about the city's dire fiscal situation — a situation he says was "hidden from New Yorkers for far too long."

But critics counter that he knew about the budget crisis during his campaign and chose to promise expensive new programs anyway. Now, faced with the math, he's presenting New Yorkers with what many see as a false choice: tax the rich, or tax everyone else.

"This is not a conversation on the basis of ideology," Mamdani told reporters. "This is a conversation about a fiscal crisis."

Perhaps. But it's also a conversation about promises made, fiscal realities ignored, and the bill that always eventually comes due — a bill that New York City property owners may soon be forced to pay.

What Happens Next: