NYC Politicians Not Impressed by Real Estate Tax Revenue

2 April 2025

An odd contradiction: Council members forecast as much revenue as possible yet discourage the real estate deals that produce it.

The Invisible Engine is a sadly apt name for REBNY’s annual report on real estate tax revenue.

The money is indeed invisible to elected officials because, to them, it materializes out of thin air.

The Real Estate Board of New York has been issuing this report for years, yet politicians don’t see real estate taxes as a credit to the industry. At best, their attitude is: “Paying those taxes is the least that real estate could do, given how much money it makes.”

There are so many things wrong with that thinking.

To start, a lot of real estate tax revenue is from property tax, transfer tax and mortgage recording tax — not income.

Deals that represent a loss for the seller or a future loss for the buyer pay the same transaction taxes that a profitable deal does. These taxes are just a cost of doing business.

Similarly, owners losing money from operating a building might be able to avoid income taxes — but not property taxes. They can argue for a lower assessment, but, except for nonprofits, property taxes must be paid. (Assembly member Zohran Mamdani and state Sen. John Liu even want two particular nonprofits to pay taxes on their property, simply because they own a lot. Great reasoning!)

Many elected officials like to talk about property owners’ myriad tax breaks. Remember all their criticisms of 421a? But you never hear a peep about the taxes that developers do pay or would pay if their projects were approved.

Real estate-related taxes account for half of locally collected tax revenue and one-third of the city budget. But the City Council treats this as money that magically appears on a revenue forecast.

Every year, the Council complains that the mayor is forecasting less tax revenue than will actually come in. Usually, the Council is right — because the mayor deliberately makes a conservative estimate, knowing the Council always asks for more.

Council members inevitably negotiate for an increase and tout the programs they fund with it. The mayor’s budget office tries to accommodate these additions while keeping the Council from bankrupting the city.

It’s especially odd that Council members forecast as much revenue as possible yet discourage the real estate deals that produce it. They shrink proposed developments, require money-losing uses, steer deals to nonprofits that pay no taxes and effectively ban hotel projects. Most recently, they want to halt new distribution center development.

Never mind that when nonprofit developers build apartments, they not only get tax breaks but spend more per unit than for-profit ones do. But that’s a story for another day.