Hold on tight: How NYC and state must prepare for the possible implosion of commercial real-estate values

Daily News Editorial Board, New York Daily News
·2 min read
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As those who got used to working from home refuse to return five days a week — and businesses shed the expensive Manhattan footprints giving every employee a desk — the value of America’s costliest real estate is likely to crater. That means that commercial property tax collections, which account for a fifth of all municipal revenue, may soon crater, too.

New York has two choices: Wait for massive fiscal growing pains, or adapt now, minimizing the agony.

Adapting now means rethinking zoning. There’s no good reason that in a modern city, buildings are so rigidly categorized into classes, with minimal flexibility between light industrial, commercial, residential, medical and other. A nimbler New York would end unnecessary distinctions to let people find the best uses for space with minimal regulatory hurdles.

Second, adapting now means budgeting smartly. Profligate spending that piles ever more recurring spending into the city’s $101 billion-and-growing fiscal plan risks throwing New York off a cliff if and when property receipts revenue plunges (personal income and related tax revenue is already expected to fall sharply this year). State Comptroller Tom DiNapoli projects a potential city budget gap of nearly $10 billion in 2026. Building up reserves and responsibly dialing back bureaucracy are the wisest insurance policies against sudden downward shifts — especially if those coincide with a recession.

Third, adapting now means rethinking property tax collections, which have become unfair and incomprehensible over generations. Not only must New York rationalize levies on rentals, condos, coops and single-family homes; it must accept that golden-goose employers whose taxes have defrayed those from residences might not lay eggs forever.

Fourth, adapting now means more sensitively implementing statutes that inflict huge costs on commercial real estate, like the law that will soon start punishing noncompliant buildings with big fines. That’s likely to accelerate a commercial exodus.

None of this precludes Mayor Adams and Gov. Hochul jawboning to bring more people back to the office. Let them try, but understand that an ounce of preparation is worth many pounds of hot air.