Real Estate Steps Up The Heat Against Higher Taxes In Budget Negotiations
With a little over a week left before the state budget deadline, the real estate industry is ramping up the pressure on lawmakers in the hope they won’t raise taxes or put more regulations on landlords.
The Democrats’ supermajority in the state legislature, and the political firestorm engulfing Gov. Andrew Cuomo, is causing major anxiety about what kinds of tax hikes will make the final bill — which members of the real estate community argue would push away investors and hasten wealthy residents' exodus from the city.
“They're raising taxes to show that they can,” GFP Real Estate Chairman Jeffrey Gural said in an interview from what he described as an empty office building. "They recognize that the governor is in a weakened position. They're trying to take advantage. That's crazy. [Cuomo] is the one we count on to push back against foolish ideas like raising taxes in the middle of a pandemic.”
Gural was one of 250 New York City business leaders who signed a letter to Cuomo and Democratic leaders of the state legislature from the business group The Partnership for New York City this week to raise the alarm over tax hikes proposed for the budget by the Senate and Assembly.
“This is not about companies threatening to leave the state; this is simply about our people voting with their feet,” the letter stated.
Signatories from the real estate world included Related Cos. CEO Jeff Blau, Silverstein Properties CEO Martin Burger, Red Apple CEO John Catsimatidis, Brookfield Asset Management CEO Brian Kingston and TerraCRG CEO Ofer Cohen.
“Five out of the 10 conversations I am having every day are people telling me, ‘I’m starting a big project in Miami and in Nashville,'” Cohen told Bisnow. “It’s been a challenging time to convince people to make big capital commitments in a place that has the state legislators and, now potentially even the city, showing a strong anti-business sentiment.”
Cohen's brokerage focuses on Brooklyn.
Legislators in the state Assembly and Senate have proposed $7B in taxes, including raising the rate paid by millionaires, the New York Post reports, as well as a new capital gains tax of 1% on those earning more than $1M annually.
State Budget Director Robert Mujica told reporters this week that billions in federal aid meant $3.7B in planned spending reductions were no longer necessary, but he didn’t specify if those funds would have an impact on taxes, The Wall Street Journal reported.
“We are asking those who have a little more to do a little more so that we’re not looking at the same inequities year after year,” Senate Majority Leader Andrea Stewart-Cousins said, per the WSJ, adding she respected the views of business leaders but funds were needed to help the state recover.
She has called on Cuomo to resign from office as the Judiciary Committee of the State Assembly is looking at whether he should be impeached over multiple sexual harassment accusations and his handling of nursing home deaths during the coronavirus pandemic. Attorney General Letitia James is also running an investigation. The governor denies touching anyone inappropriately.
President and CEO of the Partnership for New York City Kathryn Wylde said raising taxes would have the opposite effect of what Stewart-Cousins intends.
“If this tax package goes through at the state, and Biden's proposed tax package goes through at the federal level, the combination is that the highest earners will be paying 60% of their income or more to the government,” she said. "And if they move to Florida, it's more like 40%."
“This budget will set back New York’s recovery and make it very difficult for the employers to bring office workers back to the city," Wylde continued. "The tax proposals come from far-left advocates who are interested in redistribution of wealth, and so their point is not filling a budget deficit, which now does not exist, their purpose is to tax the rich.”
The partnership’s letter was sent a week after the Real Estate Board of New York wrote to Cuomo, Stewart-Cousins and Assembly Speaker Carl Heastie to warn the proposed taxes increase in the one-House bill risks “destabilizing” the economy.
“We have been down this road before. In the 1960s and 1970s, such policies ultimately discouraged investment in New York City and led to a diminished tax base and fewer resources for the delivery of government services,” REBNY President James Whelan wrote in the letter. “The results were devastating — two decades of fiscal problems along with rising crime and unacceptable quality of life. We will surely struggle to overcome the crisis of today if we have not at least learned the lessons of the past.”
Patrick Orecki, senior research associate at the nonpartisan fiscal watchdog Citizens Budget Commission, described a personal income tax increase as “risky and unnecessary."
"The risk doesn't just come from the outmigration issue, but it's also that you're building a lot of volatility into your tax base in general," he said, pointing to the federal aid and that state tax receipts came in higher than expected.
President Joe Biden’s $1.9 trillion American Rescue Plan provided nearly $24B in state and federal aid for New York, and it allocated some $50B for rental and mortgage assistance.
Thousands of landlords across the country aren't taking the aid, The Wall Street Journal reported this week, claiming some of the requirements of the aid — like preventing some evictions — are too onerous.
In New York, the budget proposals in the Assembly and Senate include $400M, alongside the federal funds, for rental assistance. However, Community Housing Improvement Program Executive Director Jay Martin said he is concerned about “new language” that is now circulating around what will be required of landlords.
Advocacy groups Housing Justice for All and the Right to Counsel NYC Coalition released a memo this week pushing for the budget to ban no-cause evictions and to stop rent increase hikes for five years after property owners are given back rent, The Real Deal reported.
“That's just not going to be workable from an owner's perspective,” Martin said. “They're working on very tight margins to provide housing throughout the crisis. And, frankly, you know, the government's job here is to keep people housed, then they need to work with us to keep doing that.”