The short answer: Phase 1 taxes condos and co-ops from $1M of DOF value; Phase 2 (July 2028) taxes only homes over $5M of fair market value (comparable sales). Because DOF values run far below market, a large middle class of units — 11,972 of the 17,371 liable condos and co-ops on the roll — is liable now but plausibly free in 2028. A bona fide 12-month lease exempts the unit through Phase 1 while rent covers the carry; in Phase 2 the owner takes the home back with nothing to dodge.
The mismatch that creates the window
The two phases of the tax don't just change the threshold — they change the measuring stick. Phase 1 (now through June 30, 2028) tests condos and co-ops against $1 million of DOF market value, the income-derived figure on the NOPV. Phase 2 (July 1, 2028 onward) tests every property against $5 million of comparable-sales value. Those are different numbers for the same apartment — often dramatically different, because state law makes DOF value condos as if they were rental buildings.
That mismatch cuts both ways. A unit with a $3M DOF value may carry $6M of sales comps and stay liable in Phase 2. But far more common is the reverse: the unit with a $1.2M DOF value whose real market price is $3–4M. Liable today. Under every reading of the Phase-2 threshold — comfortably out in 2028.
How many owners this is — from the roll itself
| DOF market value (July 2026 roll) | Units | Phase-2 outlook at typical DOF-to-market ratios |
|---|---|---|
| $1.0M – $1.6M | 11,972 (69% of liable condos/co-ops) | The bridge cohort — fair market value plausibly under $5M; likely exits the tax entirely |
| $1.6M – $2.5M | 3,818 | Probably out, but closer to the line — unit-by-unit call |
| Over $2.5M | 1,581 | Likely stays liable in Phase 2 (comps will exceed $5M) |
The bridge cohort's combined Phase-1 exposure is roughly $588 million a year, and the median unit in it faces a surcharge near $48,000 a year. That is the price of simply waiting out Phase 1 with the apartment kept empty — and it is exactly the bill a qualifying lease erases.
The bridge, step by step
- ① Confirm you're in the cohort. Two numbers: your DOF market value (the free lookup, or the database) and an honest read of what the unit would sell for. DOF value over $1M + realistic fair market value under $5M = bridge candidate. Near $5M, treat Phase 2 as uncertain — the methodology isn't published yet.
- ② Put a qualifying lease in place. The exemption's requirements are specific: bona fide, arm's-length, 12 months or longer, to a natural person using the unit as their primary residence. Market rent to a real tenant — not a paper lease to a friend (that draws a 50%-of-surcharge penalty). The full exemption rules.
- ③ Mind the calendar. Each fiscal year's status is measured on the January 5 taxable status date preceding it. The year now billing (first payment January 1, 2027) turns on your January 5, 2026 status and the exemption you file by October 6, 2026. A lease signed now positions you for the January 5, 2027 date — covering the final Phase-1 year, which runs through June 30, 2028. Practical shape: lease from fall 2026 into spring 2028, one 18–24 month term or two 12-month terms.
- ④ Let the tenant pay the toll. The median bridge unit — DOF around $1.2M, market value $3–4M — rents for roughly $10,000–$14,000 a month in today's Manhattan market. Against that: common charges, regular property tax, and a surcharge bill of ~$48,000/yr that now never arrives. For most owners the two years run cash-flow positive.
- ⑤ Take it back in July 2028. Phase 2 begins; if the unit's fair market value sits under $5M, it owes nothing as a pure pied-à-terre — no lease, no occupancy requirement, no filing. The home is yours again, and the statute sunsets June 30, 2031 regardless.
What can go wrong — read before acting
- Phase-2 methodology is unpublished. The statute sets the comparable-sales basis; DOF has not written the rules for deriving those values. A unit near the $5M line can land on either side. Under ~$3.5M of realistic fair market value the risk is small; at $4.5M+ it is a genuine gamble.
- The lease must be real. Listed-but-vacant doesn't qualify; short-term and seasonal don't qualify; below-market to a relative doesn't qualify and risks penalties.
- Each year stands alone. A lease that lapses before a January 5 status date puts that year back on the roll. Two Phase-1 status dates matter — cover both.
- Albany can amend. This law passed in one legislative session; thresholds and phases can move again. The litigation tracker follows the court side.
Questions owners ask
Can renting my apartment for two years get me out of the pied-à-terre tax entirely?
For a large class of owners, plausibly yes. A bona fide 12-month arm's-length lease to a primary-resident tenant exempts the unit while it runs — that covers the Phase-1 years. From July 1, 2028, Phase 2 raises the threshold to $5 million of comparable-sales market value for every property type. A unit whose fair market value sits under $5 million then owes nothing even as a pure pied-à-terre — no lease needed. Roughly 11,972 of the 17,371 liable condo and co-op units on the July 2026 roll carry DOF values between $1M and $1.6M, the band where staying under $5M of fair market value is most plausible even after the jump from DOF's modeled number to real comparable-sales pricing. The caveat: DOF has not yet published its Phase-2 valuation methodology, so no unit's Phase-2 status is guaranteed today.
When exactly does the lease need to be in place?
Status for each fiscal year is measured on the taxable status date — January 5 preceding it. The fiscal year now billing (first payment January 1, 2027) turns on your January 5, 2026 status and the exemption you file by October 6, 2026. A lease signed now positions you for the January 5, 2027 status date, covering the fiscal year that runs through June 30, 2028 — the last Phase-1 year. Keep a qualifying lease running through early 2028 and the surcharge never lands; Phase 2 begins July 1, 2028.
Does the rent actually cover the cost of waiting out Phase 1?
Usually with room to spare. Take the median bridge-cohort unit: a DOF value around $1.2M means a surcharge near $48,000/year if left as a pied-à-terre — and a unit with that DOF value typically trades in the $3–4M range, which rents for roughly $10,000–$14,000 a month in Manhattan. Two years of rent covers taxes and common charges, replaces the surcharge with income, and hands the unit back at the door of Phase 2.
Are you in the bridge cohort?
Free emailed report: your unit's official DOF value, your Phase-1 exposure, and an honest read on your Phase-2 outlook — plus what your unit would rent for if you bridge. Usually within the hour.
Check My Unit — FreeDisclaimer. This page is educational information from Conquest, a licensed New York real estate brokerage. It is not legal, tax, or accounting advice, and no advisory relationship is created by reading it. Phase-2 statements reflect the statute as enacted; DOF's Phase-2 valuation rules were unpublished as of the "last updated" date above, and market-value and rent figures are estimates that vary by unit.