In The Battle For The Soul Of New York, Real Estate Is The Front Line
With less than three months before New York City’s decisive mayoral and City Council primary, nearly everyone in New York City real estate, from small landlords to corporate titans, is arming themselves for battle over the direction of the city’s future.
The stakes are so high for the real estate industry in New York City’s local elections this year that many of the 25,000 or so agents and landlords that make up the membership of the Rent Stabilization Association — between them responsible for maintaining more than 1 million apartments — have started to get involved in the city’s political races for the first time this year.
“It’s been a wake-up call for a lot of people who've sat on the sidelines for a number of years that maybe it's time to get involved,” said Frank Ricci, an executive vice president for RSA who has been a New Yorker for more than 40 years. “Property owners are trying to figure out if they should continue to try and do business here, or maybe it's easier and more profitable to do business somewhere else.”
The next mayor will be charged with shepherding New York City out of a crisis that has killed more than 30,000 residents, wiped out more than 600,000 jobs and essentially shut down the city’s normal course of business. Many in the real estate industry are fearful that the increasingly influential far-left wing of city politics will successfully elect a leader who will introduce greater regulations and higher taxes — making the city less appealing to the wealthy and their property less valuable, leading to long-term disinvestment.
“I think it’s probably one of the most important elections in New York City history,” said Joy Construction principal Eli Weiss, whose company owns multifamily properties in Manhattan, Brooklyn, Queens and the Bronx. “We stand at a precipice … We all have to look at each other in the mirror, and we need to think about who we are.”
The real disagreement is not so much who New York is, but who New York should become — and how best to get there. Across roughly a dozen interviews, real estate players in the city aired fears that if progressives win big in the local primaries in June, the industry’s way of life and doing business will be fundamentally altered.
More and more, they are anxious that a “socialist insurgency,” with the aim of the redistribution of wealth, will shape policies that will target their businesses in particular. If that were to happen, it would reduce the city’s tax base and hurt its economic prospects, they say.
“The fear is that the taxes will go up, the revenue will continue to erode, we will impose more misguided, cartoonish legislation,” Meridian Investment Sales Senior Executive Managing Director David Schechtman said. “The greatest irony of ironies, it's going to hurt the very constituents who the liberal left commies are trying to help.”
Real estate groups and leaders, who already railed against proposed tax increases in the state budget, have in recent months sharpened their focus on the mayoral candidates and the city council election, both of which are likely to be determined by the Democratic primary in June.
One of New York real estate’s biggest names, Related Cos. Chairman Stephen Ross, plans to launch a super PAC for the race, looking to drum up millions in support from his peers, telling them that the “winner of the Democratic primary for mayor in June will decide if New York City will rebound or languish," The New York Times reported last month. He also donated $1M to a political group that spent some $200K to help Jim Gennaro win a City Council special election in Queens, per the Times, beating opponents that included progressive Moumita Ahmed.
Lisa Blau, the wife of Related CEO Jeff Blau, formed an organization aimed at encouraging Republicans and independent voters to register as Democrats so they can have their say in the mayoral primary. She reportedly donated at least $1.5M to the effort, while her husband wrote directly to employees, telling them to register, joining the likes of Goldman Sachs CEO David Solomon, who took a similar move. Through a representative, Blau declined to be interviewed for this story.
“People feel like it’s a make-or-break election,” Weiss said.
Yang and Eric Adams, currently Brooklyn borough president, have significant name recognition, as does Scott Stringer, now city comptroller. Ray Maguire is leaving his job as vice chairman at Citigroup to enter the race. Mayor Bill de Blasio’s sanitation chief, Kathryn Garcia; civil rights lawyer and de Blasio adviser Maya Wiley; former federal housing secretary Shaun Donovan; and nonprofit executive Dianne Morales are all in the running.
While the mayor’s race has captured headlines, the City Council primary is also emerging as an area where the progressive left wing is looking to exert power. Thirty-one seats out of 51 are now open because of term limits or retirements, and around 300 people are running.
“We really have an opportunity to make this a city for all New Yorkers,” Chi Anunwa, co-chair of NYC Democratic Socialists of America, told Bloomberg.
Last week, U.S. Rep. Alexandria Ocasio-Cortez weighed into the city’s comptroller’s race, endorsing Brooklyn Council Member Brad Lander’s candidacy. Ocasio-Cortez’s blessing carries weight, and many in the industry still chafe at the mention of her name.
She represents the eastern part of the Bronx and parts of north-central Queens, and successfully helped rally politicians and community activists against Amazon’s proposal to build an 8M SF, 25,000-job headquarters in Long Island City. Industry members often speak of that stunning outcome, more than two years later, in the same breath as the blockade against the rezoning of Industry City driven by local City Council Member Carlos Menchaca, who was running for mayor but dropped out last week.
“We’ve seen a socialist insurgency in the Assembly and the Senate, and the impact it has had on the psyche of the average institutional politician has changed things,” said Jay Martin, the executive director of Community Housing Improvement Program, a landlord lobby group. “You now have candidates that would be moderates that are now playing to this small group of voters.”
Martin described Stringer as a “textbook institutional politician” who has spent the last few years as comptroller rebranding himself to run with an anti-real estate platform.
“He has said wants to seize private property and make it public,” Martin said. “He’s touting radical Marxist positions to get elected.”
Stringer, who has been endorsed by the Building and Construction Trades Council, has called for all new developments to include affordable housing and wants to do away with the popular-with-developers tax break Affordable New York (formerly known as 421a).
But Stringer is just a name jumping in on a trend that has been gathering strength for some time, Martin said. He points to the Democratic Socialists of America’s calls for the “democratization” and “decommodification” of housing, and the #CancelRent movement as typifying a run of “socialist, Marxist” ideologies.
Last year, housing advocate Cea Weaver told Bisnow that the crisis was a perfect time to question why housing is a commodity and run for profit. “We think housing should be a right that is guaranteed to folks," she said last summer. "I think the cancel rent movement is really about questioning: 'Why do you think landlords have a right to profit? Why should you be profiting off something people deeply need?' That’s the ideology that we are drawing on here.”
Weaver led a successful legislative campaign to overhaul New York State’s rent regulation, which landlords have called a disaster and say will lead to a deterioration in the city's housing stock, in 2019. She was nominated to the city planning commission by Public Advocate Jumaane Williams this year, though he subsequently withdrew her bid.
The shift left at the state level has presented challenges for real estate lobbyists like Martin — he spent time trying to bat down advocacy groups' talk of a ban on no-cause evictions and to a halt on rent increases for five years after property owners are given back rent — but he is more concerned what could happen at the city level this year.
“[Leftist state legislators] are very astute at using social media, the press, they have been able to give the impression of a larger impression than they have,” he said. “City Council is a much smaller body. If you elect a handful of socialist candidates, their impact is disproportionately large, dictating socialist/Marxist policies in New York City … It will be a pretty noticeable shift in policy changes.”
People have worried for years that policies are driving businesses from the city, but business leaders say the situation is now at a crisis point. At the start of the coronavirus pandemic, residents fled en masse; 3.57 million people left the city from Jan. 1 through Dec. 7, Reuters reported last year, citing data from Unacast. And while around 3.5 million people moved in during that time, they had on average lower incomes than those who left.
In all, the net loss for the city was 70,000 people — and $34B in lost income, the report showed. With more punitive taxes and regulations of the corporate class, real estate players worry New York City will hemorrhage people and businesses.
“The city relies on this revenue," Schechtman said. "I'm on the phone 30 times a day on a good day. And I am speaking to people from all walks of life who, if they have the means to not be present in New York City, are electing to do that."
The Partnership for New York CEO Kathy Wylde said she knows of at least 12 companies that are weighing leaving the city. She described recent attempts to raise taxes on those earning over $1M as driven by far-left advocates whose sole interest is to disrupt wealth structures.
“Their purpose is to tax the rich and redistribute their wealth to the less rich,” she told Bisnow late last month, as the state’s final budget bill was being negotiated.
Brokers speak of constant conversations with major real estate investors who are looking beyond the city. Ofer Cohen, the CEO of TerraCRG, has previously said five out of the 10 conversations he has each day involve New York developers starting projects in places like Miami and Nashville.
Compass Vice Chair Adelaide Polsinelli has said people who want to do business in New York are “getting the door shut in their faces,” while places like Miami will now embrace them.
These challenges aren’t new. In New York City before the pandemic, more than 40% of households were rent-burdened, meaning they are spending at least 30% of their income on housing. Then, between February and August last year, 17% of rental households in the city lost their income, according to the Urban Institute.
Though development and smart growth advocates, including many progressives, argue a major way to solve the problem is to build more housing, many communities have seethed at the idea after decades of watching a development boom happening around them while their cost of living has gone up.
"We need to be doing it in an equitable and inclusive way, but we need to find a way to agree that growth and development activity is a positive thing for the city and it is a positive [for] neighborhoods and a positive thing for the people," Rafael Cestero, the CEO of nonprofit affordable housing and community revitalization finance company Community Preservation Corp. said on a recent Bisnow webinar. "If we can’t do that, we are in for a very long period of challenge in New York City.”
Bill Rudin, the CEO of Rudin Management and the third generation to run the large family property business, agrees that real estate is facing something of a public relations crisis.
“Unfortunately, we do have a bad perception at the moment,” he said. “And it is incumbent upon us to change that perception and work harder to show the city and its citizens that we do care and we do give back.”
Rudin, who recently finished a term as chair of the Real Estate Board of New York, told Bisnow he wants to see a mayor who makes hard decisions and enforces policies that will be painful in the short term but will pay off in the long run. He wants to see inclusive, sustainable growth — because while banks, tech firms and other companies can leave the city for more welcoming environs, the fortunes of property owners like Rudin, Weiss, Schechtman and thousands more are tied to the city and its successes and misfortunes.
Even if a progressive win at the local election does come to pass, and with it, the wealthy exodus doomsday scenario, the city’s property owners’ only choice is to stay and fight for New York’s growth and reinvention.
“It's gonna be tough,” Rudin said. “But it's important that we stand together to show that we do want to invest in our neighborhoods and want to help create jobs.”
Beatrice Sibblies, the managing partner of BOS Development, describes her dream mayor as someone “fundamentally unintimidated” by change and transformation — and she has faith and optimism for what may lie ahead.
“America is in a time of change, New York City is in a time of change, living in an urban environment is in a time of change and there are people who can look at change and say, ‘Oh My God, the world is ending,’" she said.
“Or you could look at change and go, ‘OK, what can we do to use this energy to create?’ I think it's time to sit back and to rethink how we get to consensus,” she added. “Because I firmly believe that consensus is there to be had, and that consensus that supports innovation is there to be had, because that is who New York is.”
Kelsey Neubauer contributed reporting to this article.