The ecosystem of New York real estate is driven by key factors, including demand and costs. Demand for residential housing is at an all-time high nearly everywhere in the nation, especially in New York City. Although the demand is through the roof, costs are tempering the enthusiasm for new development.
A recent Forbes article notes how the loss of tax incentives, coupled with an economy under stress, are impacting New York real estate. Although the answer to the city's skyrocketing demand for housing is more development, developers are balking at the costs of these investments.
The End of Big Tax Incentives for New York Real Estate Developers
Under “Affordable New York,” aka property tax abatement 421-a, investment developers were able to pay taxes based on the pre-development value of the property assessed. Although this abatement has been in place since the 1970s, it's now come to an end. While 485-w, a successor program, was proposed, it wasn't approved by the state's legislature.
Proponents of these tax incentives argue the benefit to rental building owners balanced out the significant operating costs and fostered more affordable housing growth in the city.
Increasing Costs Might Drive Developers Out of State
Investors haven't just been hit with the loss of tax incentives in 2022. In addition, the cost of building materials and labor has gone up significantly. Inflation, interest rates, and supply chain issues have brewed the perfect storm. From an investment standpoint, it may make more sense to develop in a different state.
There are certainly still plenty of reasons for real estate developers to place their bets on NYC, and some will continue to do so. Still, others will take their plans elsewhere, resulting in a continued lack of residential real estate inventory.
Retain a New York Real Estate Attorney
There will always be significant real estate investment opportunities in New York City, but that doesn't mean the market isn't tumultuous. If you have legal questions concerning your real estate in NYC, call the office of Melvin Monachan, Attorney at Law, at (347) 389-1682, or contact us online today.