Net effective rent vs gross rent: what you will really pay

Net effective rent is the average monthly rent after a landlord’s concession, usually free months, is spread over the whole lease. Gross rent is the rent actually written in your lease, and it is the number your deposit, your renewal and often your monthly payments are based on.

So a listing that says “$3,575 net effective” on a $3,900 apartment with one month free is not lying, but you will probably pay $3,900 most months and see that number again when it is time to renew. This guide shows the formula, works through real-looking offers and lists the questions to ask before you sign.

The formula

Net effective rent is just total rent owed divided by the number of months you live there:

1. Multiply the gross monthly rent by the number of months in the lease. That is the full value of the lease.
2. Subtract the value of the concession (for example, one month of gross rent).
3. Divide by the number of months in the lease.

With free months, that simplifies to gross rent × (lease months − free months) ÷ lease months. A $4,200 apartment with two months free on a 24-month lease works out to $4,200 × 22 ÷ 24 = $3,850 a month on average.

Some concessions are a dollar credit instead of free months (say, a $2,000 move-in credit). The same idea applies: subtract the credit from the total lease value and divide by the months. A $2,000 credit on a 12-month, $3,500 lease gives ($42,000 − $2,000) ÷ 12 = $3,333.33.

Comparing four offers

Here is how four hypothetical listings compare. The lowest net effective rent is not always the cheapest choice once you look at the total cash you hand over, the lease length and what happens at renewal.

Offer D has the lowest net effective rent, but it also has the highest gross rent and the longest lease, so you commit to the most money overall. Offer B looks almost the same as Offer A on a net basis, but its gross rent is $300 higher. That gap matters a lot in year two.

Why the gross rent comes back at renewal

A concession is a one-time discount. When the lease ends, a market-rate landlord is free to offer a renewal based on the gross rent in your lease, and many do. Unless your lease says the concession continues, assume it disappears.

Continuing the example with an illustrative 5% renewal increase on each gross rent:

Offer B saves $300 in the first year and costs $3,480 more over two years. If you plan to stay, compare offers on the gross rent and ask the landlord in writing whether the renewal will be based on the gross or the net effective rent.

If your landlord does raise the rent at renewal, the market-rate renewal negotiation guide covers how to push back. In buildings covered by New York’s Good Cause Eviction law, an increase above the local rent standard (inflation plus 5%, capped at 10%) can be challenged. Check with the Good Cause rent increase checker.

How the free month is actually delivered

The concession clause decides when you get the discount. The three common versions are:

• Free month at the start. You pay nothing for the first month (or pay first month and get the second free). This lowers your move-in cash but means you pay full gross rent for the rest of the lease.
• Free month at the end. You pay the gross rent every month and skip the last payment. If you break the lease early, you may never see the discount.
• Spread across the lease. The landlord credits part of the rent each month, so you really do pay the net effective amount monthly. This is the easiest to budget for, but it is the least common.

What else is based on gross rent

Security deposit

New York caps a security deposit at one month’s rent and requires the landlord to return it, with an itemized statement of any deductions, within 14 days after you move out (General Obligations Law § 7-108). Expect the deposit to be based on the rent written in the lease, which is the gross figure. The security deposit calculator checks the math.

Income requirements

Many NYC landlords want annual income of about 40 times the monthly rent (see the 40x rent rule guide). Ask whether they apply it to the gross or the net effective rent. On a $3,900 gross rent, 40x is $156,000; on $3,575 net, it is $143,000. That difference can decide whether you need a guarantor.

Fees in the listing

Since June 11, 2025, the FARE Act has required every NYC rental listing to disclose all fees a tenant would have to pay, and landlords and their agents must give you a written, itemized list of fees before you sign. A landlord’s broker cannot charge you a fee. If a listing shows only a net effective rent and no fee breakdown, ask for both in writing. See the FARE Act guide.

Rent-stabilized apartments

If the apartment is rent stabilized, renewal increases are set by the Rent Guidelines Board and are applied to the rent in your lease (the legal rent, or a lower preferential rent if you have one). For leases starting October 1, 2026 through September 30, 2027, the guideline is 0% for both one- and two-year renewals (Order #58). Concessions on stabilized units can raise questions about what rent the owner registered with the state, so if your unit is stabilized, request your rent history from HCR and compare it with your lease.

Before you sign: five checks

1. 1

   Get the gross rent in writing

   The lease should show the full monthly rent and the concession as a separate clause.
2. 2

   Find out when you get the free month

   Start, end or spread out? This changes your move-in cash and your risk if you leave early.
3. 3

   Ask how the renewal will be priced

   Get an email or lease rider saying whether a renewal will start from the gross or net effective rent.
4. 4

   Run the total cost

   Use the net effective rent calculator and the move-in cost calculator to compare offers on total dollars.
5. 5

   Check the building

   Concessions are sometimes used to fill hard-to-rent buildings. Look up the address on Roofy for violations and complaints first.