Tax bills show how much Covid devalued NYC real estate

City’s property tax revenue is expected to drop by nearly $2B

The commercial market was hit hard by the pandemic, and property tax revenue is expected to fall 5 percent. (iStock)
The commercial market was hit hard by the pandemic, and property tax revenue is expected to fall 5 percent. (iStock)

The pandemic hit the commercial real estate market hard. Property tax bills now reveal just how hard.

New York City expects property tax revenue to drop by $1.6 billion, or 5 percent, in the coming fiscal year, Bloomberg News reported. That’s the biggest drop in the city’s largest source of revenue since the early 1990s.

Office buildings’ market value — not their real-world worth, but the metric used by the city’s Department of Finance — dropped by 16 percent across the city, according to the agency. The value of some major skyscrapers was cut by more than $100 million, the publication reported.

Some properties got assessment cuts despite faring relatively well during the pandemic: Two Vornado Realty Trust properties received reductions of 14 percent and 23 percent despite leases from major tenants that surged in value, the publication reported.

The city generally relies on information from building owners to make assessments. But this year the Department of Finance considered other metrics because the submitted data was pre-pandemic. A spokesperson for the agency told Bloomberg News that it wanted to better reflect true market conditions.

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Overall, landlords saw big cuts even though many continued to collect rent from tenants. While lower assessments will save landlords money, remote work is likely to ultimately affect buildings’ income.

The value of hotels and retail property fell by more than 20 percent, the publication reported. The lodging industry is especially struggling. The St. Regis and the Four Seasons saw their taxable value cut by 36 percent, the publication reported. The New York Midtown had a cut of 13 percent on the final tax roll.

The lower values may weigh on city revenue for a while, as property taxes are usually based on the average value over the previous five years, Bloomberg News reported. Property tax revenue largely fuels the city’s social programs and services.

“The question for the city is really a long-term one,” Ana Champeny, director of city studies at the Citizens Budget Commission, told the publication. “Until we know what happens with remote work and office use and tourism, it’s not going to be entirely clear about how the commercial real estate market is going to recover.”

[Bloomberg News] — Cordilia James