NYC's Ground Lease Crisis: How Soaring Rent Hikes Are Threatening Thousands of Homeowners in Manhattan
In New York's ever-evolving real estate market, many seemingly secure housing options are facing unprecedented risks due to shifts in ground lease terms. For co-op residents in buildings like Carnegie House, this evolving market landscape has exposed a ticking time bomb. The very arrangements designed to make housing affordable are now pushing long-time residents to the brink of financial collapse, even threatening their homes.
Carnegie House, a brick co-op building in Midtown Manhattan, was constructed in the 1960s and sits in what is now one of the most coveted real estate areas in the world. The neighborhood is famously known as "Billionaires' Row," home to soaring skyscrapers and luxury condos worth tens of millions.
For years, the residents of Carnegie House lived a modest but stable life, with many calling the area "Thousandaires' Row," a self-deprecating nod to their more humble status. However, the fun has come to an end for Richard Hirsch and his wife Jill Strauss, who purchased their two-bedroom co-op in the 1990s for around $400,000. Today, they are staring down an astonishing 450% rent hike, with their monthly costs potentially soaring from $5,000 to $13,000.
The root cause of this financial shock is the long-term ground lease structure that governs their building. In many parts of the United States, particularly in New York City, co-op buildings operate on leased land rather than owning both the land and the property.
The lease arrangement was initially designed to make housing more affordable in expensive areas by lowering the upfront cost for buyers, with the understanding that residents would pay annual ground rent over time. The leases are often set for decades, with rent renegotiated at regular intervals. If a lease expires, the landowner could reclaim the property, leaving the residents with no recourse.
While residents were aware of the ground lease when they bought their apartments, many were advised by legal counsel that rent hikes would be minimal. However, the area’s skyrocketing land values turned this assumption upside down. In 2014, the land beneath Carnegie House was sold for $261 million to a consortium of real estate tycoons, including Rubin Schron and David Werner.
With the land’s newfound value, the lease terms were set to expire in 2025, and residents had hoped for a modest increase. But in July 2025, after a breakdown in negotiations, an independent arbitration panel ruled that the ground rent would jump from $4.36 million annually to nearly $24 million—an increase of 450%.
For Hirsch, who also serves as the co-op board president, this ruling felt like “death.” He and the board are exploring their legal options, but the reality is grim. If the tenants—including those who rent the building's retail and garage spaces—cannot meet the new rent, the building could fall into default, and residents could lose all their equity. Those with mortgages could still be left owing the bank without the property to show for it.
The human cost is stark. Take Lou and Barb Grumet, both in their 80s and living on fixed pensions. They bought their Carnegie House apartment in 2011 for around $780,000, attracted by its accessibility to hospitals and proximity to other amenities. Now, their monthly rent is set to jump from $3,700 to $9,000. “We were going to live here until we die,” Lou Grumet told The Wall Street Journal. “No one dreamed of the craziness that’s happened here.” Their story is emblematic of the plight of many long-term residents now facing financial ruin.
Some residents believe the landowners’ ultimate goal is to force them out and make way for a new luxury tower. The spokesperson for the landowners has denied any such plans, stating that residents were aware of the risks when they purchased their units and that they received a discount for living under a ground lease. Nevertheless, the concern remains that the land's value is rising so rapidly that the owners might be incentivized to push out residents to capitalize on the land’s potential for redevelopment.
Carnegie House is far from the only co-op facing these challenges. According to the Ground Lease Coop Coalition, over 25,000 New Yorkers live in co-ops that are subject to similar land leases. Many of these leases are nearing expiration, which could soon result in rent hikes or even financial instability for thousands more residents. As attorney Geoffrey Mazel, who has worked on ground lease negotiations across the city, put it: “These co-ops are time bombs.”
What, if anything, can be done? In 2024, state lawmakers introduced a bill aimed at capping rent increases for ground lease renewals, among other protections. However, the bill failed to pass. A narrower version made it through some committees in 2025 but stalled out once more, partly due to opposition from the Real Estate Board of New York (REBNY).
REBNY argues that meddling with long-standing contracts would set a dangerous precedent and benefit only a small group of wealthy homeowners and speculators. They view the issue as more a case of “wealthy homeowners” overextending themselves, rather than a systemic problem requiring legislative intervention.
But supporters of the proposed legislation believe the laws must be updated to reflect current market realities. “It hasn’t been a problem until now,” said State Senator Liz Krueger. “So now we have to intervene.”
For potential buyers of co-ops in New York, this issue highlights the need for due diligence. If you're looking at a co-op, it’s crucial to ask whether the building operates on a ground lease, how long it has left, and what the terms are for rent resets.
A lease that expires in the next 20 years or contains clauses for significant rent hikes may be a red flag. It’s always best to consult with a real estate attorney to understand the full scope of the lease before purchasing.
For those who already own property in ground-lease buildings, staying informed is vital. Attend board meetings, follow arbitration updates, and stay connected with advocacy groups that are working to protect the interests of residents.
For residents of Carnegie House and similar buildings facing massive rent increases, it may be wise to consult with a financial planner to assess whether it's feasible to remain or whether selling is the best option. However, selling may not provide relief. With property values plummeting and banks hesitant to issue loans, owners may find themselves stuck in a market with little exit.
The bottom line is that ground leases are becoming increasingly unpredictable in New York City, and they represent a growing risk to both current and potential homeowners. These lease structures, once seen as a way to make homeownership accessible in an expensive market, are now exposing thousands of residents to financial instability and the real possibility of losing their homes. Whether through legislation or private negotiations, something must change to protect homeowners from the volatile realities of the city’s land lease arrangements.
As these issues continue to unfold, it’s clear that the ground lease crisis is far from a niche problem. It is a systemic issue that, unless addressed, could reshape the future of housing in New York City, making once affordable homes increasingly out of reach for many residents. The question now is whether lawmakers and the city’s real estate industry will act before it’s too late.