NEW YORK CITY-It’s not always clear to those who watch the President’s State of the Union address every February how the many policies and ideas put forth in the speech will impact them.
GlobeSt.com Editorial Director John Salustri made the connection for members of the Real Estate Networking and Transactions Group of New York (or R.E.N.T) in a talk Tuesday during the group’s monthly meeting at the Union League Club.
He spoke of the potential impact on CRE in New York of immigration reform, changes to the minimum wage and-the elephant in the room-the sequestration that could go into effect this Friday. Salustri’s talk set off a heated discussion about minimum wage and on how the city can, and should, progress.
But of course, the potential changes based on President Obama‘s policies are contingent on Congress and the White House actually accomplishing all, or even some, of what the President outlined in his speech. And Salustri doesn’t have much faith in that happening. “I’m without hope,” he says. “I don’t trust any of them—on either side of the aisle. Not as long as they’re more interested in their vacations than our economy, and their jobs rather than our jobs.”
Immigration reform is tough to determine as it’s transpiring now, notes Salustri. But it could go several ways. “Some small businesses need immigrant labor to grow. If this pool of workers is deported, it may be difficult to replace them. If they are replaced by higher earning workers, it could stifle business. The answer here is really that the impact is dependent upon how reform is done. The devil here completely lies in the legislative details.”
On the minimum wage front, Salustri laid out arguments for and against raising the rate. As to whether it will actually rise near-term, and what the fallout might be, he says, “I think it’s a timing issue; it has to be timed to the economic recovery. Everyone should have a living wage but if you’re going to increase cost, you have to increase volume and so, revenues. The clear advantage here is to the workers, especially while the economy is still getting off the ropes.”
Most everyone in the industry stands to be at a disadvantage if the sequestration happens, Salustri says. “It threatens to cancel an estimated $4 billion worth of publicly-funded construction projects this year, according to the Associated General Contractors Association. Affordable housing will take a hit as well, due to cuts scheduled for the Department of Housing & Urban Development.”
However, he notes, Congress and the President likely won’t let the sequestration happen. “My bet is that they will come up with another eleventh hour, kick-it-down-the-road Band-Aid.”
Attendees were quick to support, or dispute, Salustri’s arguments. “If you increase the minimum wage, it would definitely hurt the job market,” says Greg Slotnick, vice president of Helmsley-Spear. But Marco Botarelli, managing partner at Landstar Title Agency Inc., had a very different view. “I disagree totally,” he says. “Even if the minimum wage were raised to $10 an hour in NYC this amounts to a $1,600 income pre tax, with rents sky high into NYC a worker would need to commute from great distance in order to survive.”
A further discussion of trends lead to the issue of air rights arising. Botarelli expressed concerns about continued vertical building in Manhattan. “We have to be careful because if you go up 40 miles high, we’re going to be in a city of darkness. I’m concerned that we don’t lose the integrity of what we have.”
But S. David Behin, partner and president of MNS countered, “If people are going to keep coming here, the city has to grow. It’s not going to happen this way,” he says while gesturing horizontally, “New York builds by going up.”
Salustri came down in the middle of the two sides. “You can still create new product and respect the city,” he says.
R.E.N.T. is a network of real estate firms and affiliated professionals, such as attorneys and bankers.