For some New York City renters, five figures a month is just the cost of having a place to crash.
But as the top tier of the market reaches new heights, a looming pied-à-terre tax risks bringing some landlords back down to earth — or sending prices further into orbit.
“Two tenants can offer the same rent and leave the owner with different income,” said Corey Cohen, principal of the Roebling team at Compass. “That just fundamentally changes the economics of who an owner of one of these expensive apartments is renting to.”
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The surcharge — the rate of which depends on the Department of Finance’s appraisal — applies to one-, two- and three-family homes valued at more than $5M and condo and co-op units valued at $1M or more. Properties used as a primary residence by the owner, an immediate family member or legal tenants aren't subject to the charge.
The median rent increase needed to cover the tax is 17%, or roughly two months of rent, according to an analysis by Cohen, the publisher of The Roebling Index. The cost would add more than $4,400 per month in rent, which already stands at a median of $26K per month for the dataset.
The Roebling Index’s analysis, provided first to Bisnow, examines 286 broker-reported rental listings for qualifying apartments, based on DOF valuations. It doesn't include every affected property.
Signed into law in May as part of the state budget, the tax helps address the city’s fiscal deficit — and is marketed as part of Mayor Zohran Mamdani’s “tax the rich” agenda.
After accounting for exemptions, it is expected to apply to roughly 9,000 homes.
Those left staring down the bill have fought back in three legal challenges. On Wednesday, the city won one of those battles, in which homeowners claimed that the tax was improperly rolled out by sending notices to 17,000 households and publishing a property assessment database with more than 900,000 names.
Among the units that landed on the city’s list of secondary homes were an array of units occupied full-time — just not by the owner.
New York City is the most popular metropolitan area for millionaire renters in the country, totaling 7,300 households, according to a report last month from Rent Cafe. The California cities that claim the next three spots — San Francisco, Los Angeles and San Jose — boast 4,300 combined.
Manhattan rentals in the top 10% of the market averaged more than $17,400 a month in July, up 35% year-over-year, according to a report from StreetMatrix’s Jonathan Miller and The Real Deal. The number of apartments leasing for more than $50K a month has more than doubled since 2025, and those going for more than $100K are up sevenfold.
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But moving forward, whether a tenant can cough up the cash will no longer be the only consideration for homeowners. Under the rules, a qualifying primary-residence tenancy can dodge the pied-à-terre tax, while a second-home tenancy can't.
Homeowners' deadline to file for an exemption was Oct. 13, but some landlords have run into issues in their application attempts.
Ben Williams, who leads Rosenberg & Estis’ property tax department, said tenants don’t have to cooperate with requests to prove that they use the unit as a primary residence.
“Some of our clients were having to get creative in trying to prove that it's their tenant's primary residence by going to the property manager and saying, ‘Hey, do you keep logs of every time apartment 50A gets food delivery, visitors or Ubers arrive outside?’” Williams said.
Since the tax is retroactive, basing primary residence status on activities dating back to the beginning of the year, showing proof may be even more complicated if a tenant has moved out of the apartment or recently moved in.
“Let's say you're relocating from Illinois or Florida and you have a license that isn't New York City-based, you have to then prove that you're going to take residency for the landlord not to be qualified for the tax,” Real New York principal and co-founder Louis Adler said.
Mamdani has maintained that the tax will generate $500M in revenue, but that projection has come under scrutiny after the DOF granted more than 8,800 of the roughly 11,000 exemption applications it received.
Comptroller Mark Levine previously estimated the tax would bring in a more modest $340M to $380M, after accounting for the number of units that are currently rented out and potential behavioral changes by owners once the tax takes effect.
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Caroline Bass, a broker with Corcoran, said landlords have begun introducing riders in their leases to ensure that the home is used as a primary residence.
“The people who own these types of homes are very smart, they're very savvy, and they have people who are there to protect them and try to keep their money as intact as possible,” Bass said. “I don't think New York City is the place where people roll over and just say ‘OK, I'm going to give you my money.’”
Such riders, and more tenant selectivity generally, are likely to become common as leases expire.
“We'll start to see a change in behavior. The owners will either sell the apartments, use them for themselves, or rent them for primary residences,” Williams said. “So we should see a drop-off in the amount of pied-à-terre tax revenue driven by these types of units.”
Keller Williams broker Nicole Gary said she has already had clients — many of whom are foreign investors — incorporate the tax into their rents, including in a lease renewal this week.
And tenants are more willing to eat it in today’s market, in which inventory is low and owners hold the leverage. Younger generations are primarily growing their wealth through the artificial intelligence boom and stock market success, instead of the housing market, causing the influx of renters.
“At the highest end of the market, luxury is all about flexibility,” Gary said. “So if somebody is looking to spend a year in Manhattan, they're leasing something that offers a lifestyle with significantly less commitment.”
“With low supply, high demand and now the pied-à-terre tax, the luxury market is just going to get increasingly more expensive if you want to be a renter here,” she added.
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