The pandemic has changed the way people work, as scores of employees are keeping their work-from-home arrangements (at least part time). This could pose a risk to city budgets due to lost tax revenues derived from commercial real estate, according to a study released by the Institute on Taxation and Economic Policy.
Citing ITEP’s research, Forbes highlighted:
“ITEP studied eight cities, focusing on how much they depend on property tax revenues, especially from commercial property. They estimate “that demand for space, and prices for commercial real estate, will fall by between 12% and 25%.” New York and San Francisco “are the most vulnerable of the 8 cities, with predicted commercial price drops ranging from 25% to 43%.” Such a decline will eventually cause “proportional declines in assessed values and ultimately the amount of property taxes.” They find that all of the eight cities they study “face significant fiscal risks.”
So ITEP’s well-documented warning is just one more piece of troubling news for American cities. Cities rely on higher-income office jobs for tax revenue, restaurant meals and jobs, mass transit fares, and tax valuations of commercial property. If working from home causes a more permanent negative shift in cities’ employment base, especially among higher-income workers, it will seriously strain city budgets.”