The New Mexico Supreme Court has declined to reconsider a lower court’s decision allowing Santa Fe’s “mansion tax” on high-end home sales to remain in effect, ending a key legal challenge and clearing the way for the city to continue collecting the levy. The ruling on Thursday upheld a prior appellate decision that the tax can be applied as approved by voters, though opponents may still pursue additional appeals.
The ruling brings a long-running legal battle to a pivotal moment for Santa Fe’s housing policy. The tax is designed to generate revenue for affordable housing programs at a time when rising home prices and limited supply have strained living costs in the city. Supporters say the levy will fund housing assistance, while critics argue it could dampen the luxury real estate market.
Santa Fe voters approved the excise tax in a 2023 ballot measure, backing a 3 percent charge on the portion of a home sale that exceeds $1 million within city limits. The additional revenue is earmarked for the city’s Affordable Housing Trust Fund, which supports rental aid, down-payment assistance, and other housing initiatives. The amount collected can vary with market conditions, but has been projected to be several million dollars a year.
Key facts about the ‘mansion tax’ and the court decision
- Tax structure: A 3 percent excise tax on the portion of residential property sales above $1 million within Santa Fe city limits.
- Intended funding: Proceeds go to Santa Fe’s Affordable Housing Trust Fund to support housing affordability programs.
- Voter approval: The tax was approved by a wide margin in the November 2023 municipal election.
- Legal path: A district judge previously struck down the ordinance, but the New Mexico Court of Appeals reversed that decision and allowed the tax to proceed. The Supreme Court’s refusal to reconsider means the appellate ruling stands.
- Ongoing challenge: Opponents, including the Santa Fe Association of Realtors and individual property owners, have indicated they may continue to appeal the matter.
Supporters of the tax argue it reflects voters’ will and provides a dedicated revenue stream to address one of Santa Fe’s most pressing challenges: housing affordability amid rising real estate values. Sales of higher-priced homes have increased in recent years, widening the gap between housing supply and demand, particularly for middle-income residents and workforce households.
Critics, primarily in the real estate industry, contend that imposing additional costs on luxury home transactions could suppress activity at the top end of the market or complicate negotiations between buyers and sellers. They also argue that the city lacks the legal authority to impose such a tax and that alternative strategies may better support housing goals.
The Supreme Court’s decision to let the appellate ruling stand effectively affirms that the city can continue collecting the levy unless a future legal challenge overturns the law on other grounds. For Santa Fe officials and affordable housing advocates, that outcome allows ongoing planning for how tax revenues will be deployed. For sellers and buyers in the luxury segment, it introduces a new cost consideration for transactions above the $1 million threshold.
As the city implements the tax, analysts and market participants will be watching how it affects sales patterns, pricing behavior, and housing affordability in one of New Mexico’s most expensive residential markets.