COVID cleared out New York City’s business district, and now the city is grappling with a struggling commercial real estate market and plunging property tax revenues.
City officials are increasingly viewing this summer as a “recovery moment”. More from Bloomberg:
A pandemic plunge in Manhattan’s real estate tax revenue threatens New York City’s ability to finance everything from schools and hospitals to firefighters and police unless office workers return in force starting this summer, officials are warning.
“We have to bring back the city this year,” Mayor Bill de Blasio said at a briefing late last month to unveil his $98.6 billion budget aimed at creating 400,000 jobs, spending millions on investments, and bringing back tourists. “It’s not optional. This is the recovery moment.”
Workers fled cities last year at the height of the pandemic, triggering a plummet in commercial real estate and rental markets not seen in four decades as office supply soared to record levels. Short-term federal aid has helped, but a sustained sluggish commercial market, which accounts for more than half of the city’s revenue, could create lasting fiscal harm if unreversed quickly.
There’s little room for error with New York City projecting a $12 billion deficit over the next three years with losses across the city’s tax sources, including commercial real estate revenue. Real property tax is the city’s single largest source of tax revenue making up more than half of the city’s revenue.
Stronger-than-expected tax revenue from personal income and sales tax paired with one-time stimulus aid from the Biden administration have helped to stave off immediate short-term budget challenges, but a fiscal crisis still looms.
“New York’s major industry is commercial real estate and its office buildings, and if that industry is significantly impaired, then New York’s economy is in deep trouble,” said Ruth Colp-Haber, president and CEO of Wharton Property Advisors, a real estate consultancy.