How Is NYC's Pied a Terre Tax Changing Who Landlords Rent To?

According to Bisnow, New York City's new pied a terre tax is changing how owners of high value homes choose tenants. A rented home only stays exempt if the tenant uses it as their primary residence, so a tenant who treats it as a second home can leave the owner with a new annual tax bill.

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What is NYC's pied a terre tax and which homes does it cover?

It is an annual surcharge on high value New York City homes that are not anyone's primary residence. According to Bisnow, it applies to 1, 2 and 3 family homes valued over $5M and to condo and co op units valued by the city at $1M or more. Homes used as a primary residence by the owner, an immediate family member or a legal tenant are not subject to it.

Can a landlord owe the pied a terre tax even when the home is rented out?

Yes. Renting the home out only keeps it exempt if the tenant uses it as their primary residence. If the tenant uses it as a second home, the owner can still owe the surcharge, even though rent is coming in every month.

What are NYC landlords changing in their leases because of the tax?

Brokers told Bisnow that landlords are adding lease riders that require tenants to use the home as their primary residence. Some owners have gone further and asked building managers for delivery and visitor logs to show someone actually lives there. Owners see this as protecting themselves from a tax they did not cause, while tenants may see it as a privacy issue.

Do tenants have to help prove the home is their primary residence?

A property tax attorney told Bisnow that tenants do not have to cooperate in proving it. That leaves owners carrying the burden. Because the tax looks back to the start of the year, proof gets harder when a tenant recently moved in or out, and the rules on documentation may still be clarified.

How much could rents go up to cover the pied a terre tax?

An analysis by The Roebling Index found the median rent increase needed to cover the tax on qualifying listings is about 17%. Some owners are already building it into renewals. That figure is a median across qualifying listings, so the real number varies by home, and whether tenants in a given building will accept a higher rent is a separate question.

Does the pied a terre tax affect Staten Island and Brooklyn rentals?

Mostly not. The tax mainly reaches high end Manhattan and Brooklyn condos. Most Staten Island rentals and typical Brooklyn rentals fall well below the $5M and $1M thresholds. Brooklyn owners of higher end condo or co op units should check how the city values their unit, since that city value, not the asking rent, decides whether the tax applies. This is general information, not tax or legal advice.

Questions about how this affects your home in Staten Island or Brooklyn? Work with Joseph Ranola, or text or call (917) 905-2541. New episodes of Daily Tesla News break down the NYC real estate stories that move the market.