In 2019, NYC real estate taxes generated $31.9 billion, accounting for 53% of the city's total tax revenue. Then the pandemic hit, and everything changed. By November 2020, 8 months into the COVID-19 epidemic, real estate sales were down 49%, and the city reported a $1.2 billion loss in revenue.
Tax revenue from NYC real estate sales funds essential services like salaries for first responders, transit repairs, maintenance for public parks, and other social programs. So the repercussions from the revenue losses in 2020 will continue to reshape NYC for years to come. Despite these setbacks, there is no doubt that NYC will bounce back.
Reasons for the Drop In Real Estate Revenue
One of the biggest reasons for the decline in real estate tax revenue was the exodus of high wage-earners and the influx of people with lower incomes. About 3.57 million people left NYC in 2020. At the same time, about 3.5 million people moved in, bring the net loss in residents to 70,000.
Despite this relatively small net loss, the income differential between the two groups was much larger. Residents who left NYC in 2020 earned an average income of $140,000, while the average income of a person moving in was $82,000. These residents typically were not real estate buyers. Instead, they moved into the city to take advantage of lower rent prices. Therefore, the taxes NYC would normally collect from new residents purchasing homes simply wasn't there.
What This Means For NYC Real Estate Investors and Buyers
Although things seem bleak right now, the COVID-19 vaccine rollout is poised to give the NYC real estate market the boost it needs going forward. As more and more people are vaccinated, businesses will reopen, and employees will return to working from their offices. This will encourage people to buy places to live in NYC and invest in retail businesses and restaurants that no longer have to deal with severe COVID restrictions. No matter what happens, the fundamentals of the NYC real estate market will remain unchanged. New York City still is one of the most desirable places on earth to live and work, and it will hold that title long after the pandemic is over.
Get Quality Real Estate Advice
If you need sound real estate advice in New York or New Jersey from a law office with its finger firmly on the pulse of the market, Melvin Monachan, PLLC is for you. Call us now at (347) 389-1682 or go online to schedule an appointment so that we can help you make the best real estate decisions for 2021 and beyond.