Mayor Bill de Blasio and the City Council support rent moratoriums for tenants impacted by Covid, and stores and restaurants with no income have already stopped paying rent. Yet the city is silent on a looming issue: Come July, does Gotham expect to collect taxes from landlords whose income is plummeting?
The city’s $93.5 billion budget is based on trickle-up economics. People make money and spend it on apartment rent, as well as at stores, restaurants, hair salons. Property owners benefit, as activity pushes up the value of their investments; in turn, they pay taxes.
Many owners won’t be able to meet the July 1 due date. Even if the city starts to open mid-May, retail and restaurant owners will face huge challenges: Will customers sit close to strangers? Will commuters be back to support retail? When will borders open, bringing tourists?
Meanwhile, the city charges loan-shark interest to late payers: 7 to 18 percent, compounded daily.
Jan Lee, whose family has owned tenement property in Chinatown for generations, rents to rent-stabilized residential and market-rate commercial tenants. His 22 residential tenants paid the April rent, but “May is going to be a very tough month.”
And commercial tenants aren’t paying. Lee rents to two restaurants, including one world-famous Chinese restaurant, in operation for five decades. “April came,” Lee said. “He told me. ‘I am not able to pay.’ ”
Neither restaurant is paying. Attempts at delivery-only have failed, as workers have a hard time getting into Manhattan, and commercial food-supply chains are breaking down. “It doesn’t behoove me to chase a restaurant out,” Lee says. “No one is going to fill a 2,000-foot space.”
But small owners are expected to come up with cash, well over $50,000, even for modest properties. “Owners should not, when they roll up the gate, be met with bills,” says Lee. “The number one cost is going to be property taxes, 25 to 35 percent of gross rent roll,” says another owner, Joanna Wong.
If the city is draconian, smaller owners will bounce, as they did in the 1970s. Especially owners with modest, rent-stabilized portfolios, who need the commercial income to subsidize apartments.
City Hall should set up a deferral program for owners who demonstrate hardship, as downtown Councilwoman Margaret Chin suggested Friday. Tax payments would be delayed, not canceled, with owners resuming payments next year, in installments, with no interest. If things aren’t better next year, the city and owners will have to revisit the process, and property bills must start to come down, anyway, as the city revises values downward.
“The city doesn’t have any money,” one city official said of this idea last week. With state approval for this aid, though, the city could borrow against next year’s resumption of revenues, through a new Federal Reserve program.
Again, if next year isn’t better, everyone will have to deal — but it won’t help recovery to squeeze cash owners don’t have.
Officials should also stop implying that residents don’t have to pay rent. State Sens. Michael Gianaris and Julia Salazar are pushing such a movement. “I sympathize with our tenants,” says Joyce Holland, who manages small properties in Manhattan and Brooklyn. But “income … is needed to run the property.”
She’s willing to be flexible with one tenant who may need to break her lease and with those who have lost income. But the rhetoric doesn’t help. The point of Congress approving extraordinary unemployment benefits is so most people can pay most bills, avoiding broader economic collapse.
Longer-term, the city faces grave uncertainty: At $30.1 billion annually, the property tax is its biggest tax. A botched recovery will harm the value of that property, as would-be New Yorkers shun badly managed density.
Even after six weeks, the mayor still can’t figure out ways for New Yorkers to exercise on open streets, or how to help the homeless who have taken over subways — not good signs for future revenues.
This piece originally appeared at the New York Post
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Nicole Gelinas is a senior fellow at the Manhattan Institute and contributing editor at City Journal. Follow her on Twitter here.
This piece originally appeared in New York Post
