"A property that has a $1 million market value pays about $55,000 in property tax right now," property tax attorney Benjamin Williams of Rosenberg & Estis told Brick Underground in July. "The pied-à-terre tax for a $1 million market value apartment is 4 percent so that will add another $40,000, almost doubling the property tax."
The market value Williams means is not the price on the contract or the figure an appraiser gives a lender. It is a figure the Department of Finance builds by treating a co-op or condo as if it were a rental building. For Manhattan apartments, that figure is usually a small and uneven fraction of what the apartment would sell for. That fraction, more than the 4% rate, decides who owes the surcharge, how much they owe and which buyers it touches. It also changes completely in 2028.
The Rate Is Applied to a Rental Building's Value
New York's Real Property Tax Law §581 requires co-ops and condos to be assessed as though they were rental buildings. DOF matches each building to "comparable rentals" and works out a value from what those rentals earn, not from what apartments in the building sell for. For the 2026-27 and 2027-28 tax years, the surcharge uses that rental-based figure. The NYC Department of Finance says a co-op or condo with a DOF value of $1 million or more "is comparable to a single-family home valued at $5 million or more."
That gap isn't the same everywhere, and the direction it runs matters. In a June 2024 fiscal note, the NYC Comptroller compared DOF values with sales-based estimates. The median ratio was 20.6%, so DOF captured about a fifth of true market value. The ratio also fell as prices rose. At the median price per square foot, DOF's comparable rentals came to about 24% of the sales figure. In the top 10% it was about 15%, and in the top 1% about 11%. The Comptroller's most extreme example was 220 Central Park South. Units there had traded above $10,000 a square foot, while the building's FY2024 DOF value was $404 a square foot.
The same study found that more than a quarter of co-ops and condos were valued outside the range of their own comparable rentals. It also found that buildings around Central Park, which bring some of the city's highest prices, were on average not at the top of the DOF value range. These are FY2024 figures. They describe how the valuation system works, not what any particular unit carries today.
The Charge Applies to the Whole Value Once a Unit Crosses $1 Million
Where an apartment lands relative to $1 million in DOF value matters a great deal, because the surcharge is not a marginal tax. DOF's final rule, effective July 14, 2026, says that once a unit's valuation exceeds the threshold, "the entirety of the property's value is subject to the surcharge." Under Tax Law §1353, the phase-one brackets for a non-primary co-op or condo unit work out like this:
- A DOF value of $999,999 owes nothing on value grounds.
- A DOF value of exactly $1,000,000 owes 4% of the whole value, or $40,000.
- A DOF value just under $3,000,000 stays at 4%, close to $120,000.
- A DOF value just over $3,000,000 moves the entire value to 5.25%, about $157,500.
- Above $5,000,000, the entire value is charged at 6.5%.
The statute keeps exactly $3 million in the 4% bracket and exactly $5 million in the 5.25% bracket. DOF's own guidance table shows 5.25% beginning at $3 million and 6.5% at $5 million, so an owner whose value sits exactly on either line should confirm which reading DOF applies.
For co-ops, the statute does not value the apartment on its own. It takes the building's DOF market value and multiplies it by the unit's share of the corporation's total shares. Two apartments of similar size in the same building can end up on opposite sides of $1 million because of how shares were assigned at conversion. Sellers of high-floor or oversized units in older co-ops, where share allocations can be heavy, can expect buyers to ask about this.
So the $5 Million Threshold Changes From Building to Building
The "$5 million apartment" is a rule of thumb taken from the middle of a scattered distribution. The table below applies the Comptroller's FY2024 ratios to four hypothetical non-primary apartments. It shows how the same rule produces very different results. These are illustrations, not real bills.
| Hypothetical price | Illustrative DOF ratio | Phase one DOF value | Phase one surcharge | Share of price |
|---|---|---|---|---|
| $4.2 million | 24%, the study's median | about $1.008 million | about $40,300 | about 0.96% |
| $6 million | 15%, top 10% | $900,000 | none | 0% |
| $20 million | 11%, top 1% | $2.2 million | $88,000 | 0.44% |
| $40 million | about 4%, the 220 Central Park South ratio | $1.6 million | $64,000 | 0.16% |
The $4.2 million apartment in a building DOF values generously pays the surcharge, while the $6 million apartment in a building it values conservatively pays nothing. Through June 2028, among apartments that owe the surcharge at all, the tax takes the largest share of price from those just over the threshold and the smallest from the trophy units at the top.
A Manhattan broker made a similar point to The Real Deal on October 6. He said buyers around $5 million, who can afford the apartment but may not want a $40,000 annual bill on top of it, are the most likely to "pause or to look for a lower price, or to not buy." For a part-time buyer, this makes a building's DOF value as much a part of due diligence as its financials or its sublet policy. DOF publishes the supplemental market value roll on its Property Assessments page, though the agency says being listed on the roll does not by itself mean a unit owes the surcharge.
In 2028, the Order Reverses
The low rental-based values are temporary. For fiscal years beginning on or after July 1, 2028, Tax Law §1350 moves co-ops and condos to a "phase two market value" with a $5 million threshold. The rates fall to 0.8% up to $15 million, 1.05% up to $25 million and 1.3% above that. DOF must base that value on comparable co-op and condo sales, which is not necessarily the unit's own sale price. Phase two is already written into the statute. DOF's July rule package says it did not need to address the phase-two valuation method in that rulemaking, so the details are still to come.
The math is designed to roughly match at the threshold. A $5 million apartment owes $40,000 under either phase. Above that, the two phases diverge sharply. If DOF's sales-based value came in near the purchase price, the hypothetical $6 million apartment that owes nothing today would owe about $48,000. The $20 million apartment would go from $88,000 to about $210,000, and the $40 million apartment from $64,000 to about $520,000. Someone buying a pied-à-terre this fall at the top of the market is paying the phase-one bill for at most two tax years. Any longer holding-cost estimate has to use the phase-two figures.
How the Charge Reaches Owners: Condos, Co-ops and Leases
Condo owners will be billed directly. In co-ops, property tax is paid through maintenance, so the board receives the notice and has to collect from the shareholder. Attorney Parag Parekh of Moritt Hock & Hamroff told Brick Underground that if a shareholder doesn't pay, "the Department of Finance could place a lien on the entire co-op," which could make financing harder for buyers in that building. That gives a full-time resident shareholder a stake in whether a neighbor pays, and it gives boards a reason to look more closely at non-resident purchasers.
The exemption list includes a tenant or subtenant who lives in the unit as a primary residence. That has already changed how high-end leases are written. In August, brokers told The Real Deal that landlords were asking tenants to certify full-time residence or provide tax documents. One downtown landlord whose rent was above $50,000 a month said the surcharge would take about four months' rent and added a full-time-residency rider to an existing lease. The same report described a part-time client turned down for a $30,000-a-month rental because the landlord wanted a full-time resident. The ownership tax is now affecting who can rent part-time as well.
The sales data from the past quarter doesn't show a clear pullback. Douglas Elliman's Q3 2026 report, with data as of October 1, showed Manhattan signed contracts down 13.0% year over year to 2,126, while the average contract price rose 3.6% to $2.13 million. Crain's New York Business reported that Manhattan had its best third quarter for sales since 2022 despite the new tax. Most of those sales were well below the price range where the surcharge applies.
The Legal Calendar
The tax is in effect, but it faces two legal challenges. On September 29, Justice Wayne M. Ozzi of the Supreme Court in Richmond County ruled in O'Brien v. City of New York. He found that DOF's notices to about 17,000 homeowners were "arbitrary and capricious" and ordered the city to redo the notice process. The city appealed, and the order was stayed, so the rollout continues while the appeal is pending. The Appellate Division, Second Department's October 6 scheduling order set October 19 for the homeowners' brief and October 21 for the city's reply. A separate suit, Ross v. State of New York, challenges whether the surcharge is constitutional. Holland & Knight reported that oral arguments are scheduled for November 30.
DOF's exemption deadline for 2026-27 was October 13, and any surcharge will appear on the property tax bill due January 1, 2027.
Questions Buyers and Sellers Are Asking
Why did a full-time resident get a letter? DOF says letters went to owners whose records did not confirm primary residence. One example is a unit receiving the co-op or condo abatement without a matching tax filing on record. Getting a letter does not mean the surcharge is owed.
Can the DOF value itself be challenged? Yes. DOF directs owners who disagree with its valuation to the NYC Tax Commission, which can also consider primary residency, but only as part of a valuation challenge.
Does an LLC or trust change the analysis? Under DOF's rules, the exemption extends to majority-interest holders of an owning entity and to the sole beneficiaries of a trust who live in the unit as their primary residence, with supporting documents required.
This post is general information about how the surcharge is structured. It is not legal, tax or financial advice, and your own exposure should be confirmed with a tax attorney or accountant.
For any co-op or condo purchase near the threshold, the building's DOF value and the share allocation of the specific unit need to be priced in alongside the asking price, as do the 2028 phase-two figures. If you're weighing a pied-à-terre purchase or preparing to sell a unit a part-time buyer might want, Jeffrey Goodman can go through a building's valuation and share allocation with you before you make an offer. Let's Connect.
