New York City's structural dependence on property-tax revenue leaves it extremely vulnerable to swings in the real estate market. The new, explosive trend of remote working has resulted in cutbacks to Manhattan office space, along with an exodus of city dwellers to rural communities, both outline the pandemic's toll on city revenues.
According to Blomberg, citing a new report from the Real Estate Board of New York, sales of commercial and residential properties have plunged 49% this year through November, equating to a $1.2 billion loss in tax revenue for the city.
The real estate group said a plunge in sales this year has resulted in a 42% decline in city tax revenue compared to 2019. This means Mayor Bill de Blasio will soon have to tighten the city's fiscal belt as turbulence in commercial and residential markets will produce lower tax revenue through 2021.
The buckling of the real estate market could soon send a crippling blow to the city's government to reign in expenditures. Shockingly, the city relied on the real estate industry for 53% of its annual tax revenue last year.
James Whelan, the group's president, said New York City's economic crisis continues to worsen.
"From rental assistance and unemployment benefits to state and local aid, New York needs federal relief," Whelan said.
The city's overall budget is approximately $92 billion, and in the first four months of the year, property tax collections increased by 4% to $16.6 billion.
De Blasio has so far resisted any major cutbacks as tax revenue slumps.
As we've previously noted, the economic downturn ravaging the metro area will likely prevent the local economy from recovering quicker than the rest of the country.