A market has emerged in Manhattan that until recently would have seemed exceptionally niche. Apartments and penthouses commanding $50,000, $100,000 and even $175,000 a month are finding tenants who could easily afford to buy properties worth tens of millions of dollars. A shortage of exceptional homes, greater caution over resale values and New York’s new 2026 tax on high-value second homes are making ownership a less obvious choice for some of the city’s wealthiest residents.
Only a few years ago, renting an apartment was generally associated with the period before buying a home. At the very top of Manhattan’s property market, that relationship is beginning to change. Renting does not necessarily signal a lack of capital or a reluctance to invest. For someone wealthy enough to buy a penthouse overlooking Central Park or a residence in Tribeca, it can be a deliberate financial decision: access to one of the city’s finest properties without committing tens of millions of dollars or taking on all the costs and obligations that come with ownership.
Figures from the summer of 2026 suggest this is no longer simply an eccentric corner of New York real estate.
Manhattan rents reach all-time highs
In July, Manhattan’s median rent reached a record $5,000 a month. The average rose to $6,306, up 15 per cent from a year earlier. The sharpest increase, however, came at the very top of the market. Among the most expensive 10 per cent of rental properties, the average monthly rent reached $17,464, an annual increase of 35 per cent.
More revealing still is the growth in transactions at price levels that, until recently, scarcely existed as a distinct market segment. During the first eight months of 2026, the number of apartments rented for more than $50,000 a month more than doubled compared with 2025. For properties commanding more than $100,000 a month, the number of transactions increased sevenfold.
Laura Klein of Bespoke Real Estate, who specialises in some of New York’s most expensive properties, recently brokered the rental of a Chelsea penthouse for $177,000 a month. In late August, she was also privately offering a Tribeca residence at $175,000 a month and an Upper East Side apartment for $95,000.
According to Klein, a monthly rent of $100,000 is becoming almost normal at this level of the market.
What makes this significant is that these are not properties being rented out of necessity. Their owners often have no particular need for rental income, while prospective tenants may have sufficient wealth to buy a $20 million or $50 million residence outright.
What is changing, therefore, is not their purchasing power but the way they choose to deploy capital.
Why would someone who can afford a $50 million apartment choose to rent it?
One reason is the extremely limited supply of truly exceptional properties.
In the mainstream housing market, buyers may be willing to compromise on the floor, the view or elements of the specification. When the budget runs into tens of millions of dollars, expectations are different. Location, terrace size, ceiling height, exposure, private lifts, security, architecture and the standard of the interiors can all become non-negotiable.
If the right property is not available, renting another home for a year or two while waiting for the right opportunity may make more sense.
Bespoke Real Estate describes precisely this type of client: people prepared to spend tens of millions of dollars on a property, but unwilling to buy simply because something happens to be available. The unusually limited supply of top-tier homes for sale is therefore supporting rental transactions that would have been difficult to imagine only a few years ago.
There is another consideration: the outlook for capital appreciation.
Prices for some Manhattan resale apartments have recently been flat or declining. In those circumstances, property may cease to be the obvious destination for tens of millions of dollars, particularly when a buyer is considering a change of residence or does not yet know how long New York will remain part of their plans.
At this level of wealth, even an exceptionally high rent can be regarded as the price of flexibility.
A monthly rent of $175,000 amounts to $2.1 million a year. In absolute terms, that is a vast sum. Yet it still represents only a fraction of the purchase price of a property worth $30 million, $40 million or $50 million. A buyer must also take into account transaction costs, taxes, maintenance, building charges and the risks associated with eventually selling the property.
In 2026, another factor entered that calculation.
The pied-à-terre tax has changed the economics of owning a second home in New York
On 15 April, New York City Mayor Zohran Mamdani and New York Governor Kathy Hochul announced plans for a new charge on high-value properties that are not used as their owners’ primary residences. The measure quickly became one of the most contentious elements in the political debate over who should bear the cost of running New York.
The dispute became unusually personal when Mamdani presented the proposal outside 220 Central Park South, the building where Citadel founder Ken Griffin bought a penthouse for $238 million in 2019. At the time, it was the most expensive residential property transaction in US history. Griffin responded sharply to the mayor’s intervention, while representatives of Citadel even suggested that the company could scale back its planned development at 350 Park Avenue.
The political confrontation did not alter the course of the legislation. On 28 May, Governor Hochul signed the state budget authorising the new tax. The rules apply to the tax year beginning on 1 July 2026.
The structure is more complicated than its popular description as a pied-à-terre tax might suggest.
During the first phase, covering the 2026–2027 and 2027–2028 tax years, one-, two- and three-family homes valued by New York City’s Department of Finance at at least $5 million face an additional charge ranging from 0.8 to 1.3 per cent of their value.
Different thresholds apply to condominium and cooperative apartments because of the peculiarities of New York’s property tax system. Where the Department of Finance value is between $1 million and $3 million, the surcharge is 4 per cent. Between $3 million and $5 million, it rises to 5.25 per cent, and above $5 million it reaches 6.5 per cent.
These assessed values should not be confused with the price a property might achieve on the open market. Particularly in the case of condos and co-ops, New York’s valuation system has long produced substantial differences between official tax assessments and market values. The reforms also require that system to be revised in the coming years.
This is where the consequences for the rental market become particularly interesting.
A rented apartment may no longer qualify as a taxable pied-à-terre
The legislation does not apply indiscriminately to every luxury property whose owner lives elsewhere.
A home may be exempt from the additional charge if it is the primary residence of the owner, a member of the owner’s immediate family or a tenant. Certain ownership structures involving companies, trusts and other entities may also qualify for exemptions.
For the owner of an apartment that stands empty for most of the year, this matters.
Previously, such a property could simply be treated as a New York residence used for a few weeks or months at a time. The new surcharge can significantly increase the cost of maintaining that arrangement. If, however, the property is genuinely rented to someone who uses it as their primary residence, its tax treatment may be different.
This does not mean that owners are suddenly placing their apartments on the rental market purely to avoid the tax. The situation is more complex, and eligibility for an exemption depends on how the property is actually used. What the new rules do, however, is improve the economics of renting out assets that might previously have remained unused.
Pam Liebman, president of The Corcoran Group, has suggested that the sharp increase in luxury rentals following the announcement of the tax may indicate that some prospective buyers are now placing a greater value on flexibility than on ownership.
The word “may” matters. The upper end of the property market was already changing before the tax was announced, while constrained supply and the direction of prices are also influencing buyers’ decisions. At the beginning of September, it is still too early to attribute the entire surge in luxury rentals to a single tax measure.
The direction of travel, however, is becoming clear.
The new tax did not immediately halt luxury property purchases
During the spring, some brokers and members of New York’s business community warned that the surcharge could push wealthy residents towards Miami, Palm Beach, Greenwich and other lower-tax destinations.
Early sales figures did not support such a dramatic scenario.
Between 14 April and 10 May, after the tax had been proposed but before it was finally approved, 133 contracts were signed for Manhattan properties priced at $4 million or more. During the equivalent period a year earlier, the figure was 130. Their combined value rose by 10 per cent to $1.12 billion.
Activity at the very top of the market was even more striking. The number of contracts for properties priced at $10 million or more increased by 80 per cent to 34.
These figures do not show the effects of the tax itself, because they pre-date its introduction. They do demonstrate, however, that the prospect of a new charge was not enough to stop buyers.
The most plausible outcome is therefore more complicated than a simple choice between New York and Florida.
Some clients are still buying. Some are waiting. Others are renting. Certain owners are changing how they use the properties they already own. Others may move their official residence outside the city without abandoning life in Manhattan.
For the luxury market, the result is a wider range of ways in which high-value property can be owned and used.
The $100,000-a-month market operates largely beyond the property portals
The most exclusive part of New York’s rental market has another defining feature: many of its properties never appear on public listing platforms.
Apartments commanding $100,000 or $150,000 a month are often neither formally offered for sale nor widely marketed for rent. Instead, their availability circulates among a small group of brokers working with ultra-high-net-worth clients.
The owner does not necessarily need to find a tenant. Nor is the property being managed as a conventional buy-to-let investment designed to maximise annual yield.
Instead, an owner might tell an agent that if the right client appears at the right price, the residence can be made available for a period of time.
This is how Laura Klein describes part of the market. Properties that could be worth tens of millions of dollars if sold privately circulate quietly as temporary residences for a very small pool of potential tenants.
It also helps explain the level of the rents.
A tenant in this segment is not comparing the property with an ordinary luxury apartment. The search may be for a particular address, view, amount of space or level of quality. The residence is expected to be ready for immediate occupation, without months of refurbishment, furnishing or arranging household services.
For an entrepreneur conducting business across several countries, a fund manager, someone selling a company or a family dividing its time between London, New York and Miami, the ability to move into a fully prepared residence almost immediately has tangible value.
Renting can also provide an opportunity to experience a particular neighbourhood or building before committing to a purchase.
Owners also buy time
The shift is not only about tenants.
Consider the owner of a penthouse worth $30 million. There is no urgent need for cash, and selling during a period perceived as unfavourable may be unattractive. At the same time, maintenance, taxes and building charges remain substantial.
Until recently, the owner might simply have left the apartment empty and waited.
Now there is another option: rent it for one or two million dollars a year while retaining the ability to sell when market conditions improve or the right buyer appears.
Rental income does not have to be the primary objective. It can simply reduce the cost of waiting.
This creates a type of supply that previously barely existed. On one side are owners who do not need to sell. On the other are tenants who do not need to buy.
It is an unusual balance, and one capable of supporting rental transactions at $100,000 to $175,000 a month.
The battle over valuations is only beginning
The pied-à-terre surcharge has another vulnerability: New York’s system for assessing property values.
The problem was evident before the new rules were approved. Experts warned that existing methods could lead to disputes over the taxable value of condos, co-ops and exceptional residences for which genuinely comparable transactions are difficult to find.
Those concerns quickly became practical.
In July, the Department of Finance published an additional list of properties connected with the new surcharge. It later stressed that a property’s inclusion on the list did not automatically mean that tax was due. Owners can submit documentation demonstrating that a residence qualifies as a primary home or challenge its assessed value. The deadline for exemption applications was extended to 6 October 2026.
By late August, the implementation of the tax had already become the subject of litigation. A problem anticipated by valuation experts in April was no longer theoretical.
For the luxury property market, this adds another layer of uncertainty. Someone buying an apartment for tens of millions of dollars is not concerned only with its purchase price, but with the predictability of ownership costs over the next five or ten years.
Renting allows part of that uncertainty to remain with the owner.
Will New York really raise $500 million?
City officials had projected roughly $500 million in additional annual revenue. The figure matters in the context of New York’s broader fiscal pressures. In May, the Mamdani administration said that a budget deficit initially exceeding $12 billion had been reduced to $5.4 billion.
The difficulty is that taxes can change behaviour.
Before the measure was approved, the New York City Comptroller’s office estimated theoretical revenues of about $510 million. After taking into account properties rented to tenants who use them as their primary residences, as well as possible changes in owners’ behaviour, the estimate fell to approximately $340 million to $380 million.
In this respect, the boom in luxury rentals produces an ambiguous outcome for the city.
On the one hand, the tax may encourage more intensive use of apartments that previously stood empty for much of the year. On the other, the more properties that find tenants who satisfy the conditions for an exemption, the lower the direct tax revenue may be.
The success of the policy therefore cannot necessarily be judged simply by the amount of tax collected.
For international buyers, ownership is no longer the only way to have a home in New York
The changes are particularly significant for international families and entrepreneurs.
New York apartments have traditionally served several purposes at once. They have provided a place to stay during visits to the United States, formed part of an international property portfolio, served as a store of capital and, in some cases, played a role in family wealth planning.
Under that model, a residence could remain empty for much of the year and still fulfil its purpose.
Rising ownership costs are altering the calculation.
For a family spending three or four months a year in New York, buying a $20 million or $30 million apartment may no longer be the most efficient choice. If a comparable property can be rented when required, capital remains available for other investments while the client avoids some of the tax and price risks associated with the local market.
This does not mean that Manhattan property is ceasing to function as an investment asset. On the contrary, record activity in parts of the sales market shows that the best addresses continue to attract buyers.
What is changing is the assumption that participation in this market necessarily requires ownership.
Manhattan still attracts capital. What is changing is how the city is used
The most important consequence of the events of 2026 may therefore prove to be neither the predicted exodus of millionaires nor a dramatic collapse in luxury sales.
So far, the more visible response has been adaptation.
The wealthiest clients still want to live near Central Park, on Park Avenue, in Tribeca, Chelsea and the Upper East Side. What they do not necessarily want is to buy immediately, regardless of price and conditions.
Owners of exceptional properties no longer have to choose only between an immediate sale and leaving an apartment empty. Increasingly, there is a third option: renting it for a sum that only a few years ago would have appeared anomalous.
The market is therefore beginning to serve a group of clients for whom $100,000 a month in rent isn’t a substitute for ownership due to financial constraints. It’s the cost of freedom. And perhaps this best explains why a Tribeca residence can find a tenant for $175,000 a month. At the top end of the New York market, the question is increasingly no longer: “Can I afford to buy?” but: “Is it worth owning right now?”
Photo: Mark Boss, unsplash.com
Written with the support of AI