Uncertainties around the future of New York City have spooked the commercial real estate sector over the past year. Now — they've been thrown another curveball.
New Mayor Zohran Mamdani is entertaining raising property taxes by 9.5 percent in an effort to deal with the city's $5.4 billion shortfall. The budget gap, over the next two fiscal years, is one that the Democratic socialist claimed "eclipses that of the Great Recession."
Keep in mind that raising property taxes can be done without Albany, unlike raising taxes by two percent on the wealthiest New Yorkers, which was a major campaign promise of his. That's if Mamdani can get the City Council on board with the first option.
Needless to say, raising property taxes would have a massive impact on CRE in the city, from retail, office, to residential. However, Mamdani is looking at this option as a last resort and is likely using it to put more pressure on Albany and Governor Kathy Hochul to reconsider raising taxes on the city's wealthiest residents. Specifically, those earning more than $1 million each year.
"If we do not go down the first path, the City will be forced to go down a second, more harmful path of property taxes and raiding our reserves — weakening our long-term fiscal footing and placing the onus for resolving this crisis on the backs of working and middle-class New Yorkers," the 34-year-old warned in a statement.
"We do not want to have to turn to such drastic measures to balance our budget. But, faced with no other choice, we will be forced to."
This comes from the Mamdani Administration's $127 billion Fiscal Year 2027 Preliminary Budget. The 9.5 percent increase would generate $3.7 billion for the Fiscal Year. To help deal with the budget gap, Hochul funneled $1.5 billion to the city.
Some other major campaign promises from Mamdani that impact building owners includes implementing a rent freeze on all stabilized apartment units and bolstering tenant protections. The Mayor has already taken action on the second one, recently pressuring hundreds of building owners in the city to make repairs that violate housing codes.
Now, Mamdani will turn up the pressure on the state level. And if he gets his way, it might be a better alternative for CRE than a 9.5 percent tax hike.
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