NY real estate market crumbles as tenants fail to pay rent, companies violate lease agreements amid lockdown
The results have been major losses in tax revenues for the city which in turn, would hit maintenance of daily services
The city of New York has been hit terribly by the outbreak of the Covid-19 pandemic. More than 16,000 people have died in the city alone (New York state has seen a death toll of 28,000 plus) and economically, too, its life has been thrown out of gear. New York City’s real estate market has plummeted because of the lockdown in the times of the pandemic and there is no hope that things will turn around quickly.
According to a report in the New York Times, one major commercial landlord said a whopping 80 percent of their retail tenants missed paying rents in the months of April and May. Even companies that are doing well financially have opted not to meet their lease agreements as uncertainty is on the rise over the idea of working from office in the post-pandemic times. In residential places, too, people are exiting expensive apartments by either violating their leases or not renewing them. While the rich are rushing to spacious homes in the Hamptons and upstate, the young are going to their parents’ homes in the suburbs. The NYT recently reported that around 420,000 people, mostly rich, have fled NYC between March 1 and May 1 because of the pandemic. Now, more people have decided to leave, some even permanently.
Fall in tax revenues to hit civic services in NY city, state
The adverse effects in the real estate market could see wide implications as the fall in rental incomes would see less number of landlords being able to pay tax bills on July 1. The city and the state will see devastating losses in terms of tax revenues as a result. Last month, NYC and New York state got only $78.5 million in tax revenue on the sale of commercial and residential properties, down from $217.5 million the month before, the NYT report added. The sharp fall in tax services will see civic services like road repairs, sewage systems, police, and fire-fighting services getting hit.
Since the "real estate sector is the city’s economic engine", the loss in tax revenues presents a dismal picture, James Whelan, president of the Real Estate Board of New York, said in a statement on Wednesday, May 20, the NYT report added. The real estate establishments too are facing a bleak future. Jay Martin, executive director for the Community Housing Improvement Project, told Real Estate Weekly: “If officials do not immediately target relief to lower-income renters and small owners who have mounting monthly expenses, they will not be able to reverse the damage this crisis will have on our city.”
Rent prices were also being driven down in the residential market. Between April and May, 70 percent of listings on StreetEasy, for example, saw a reduction. StreetEasy is the most used website for house searching. Brooklyn saw the steepest fall in the rent -- by as much as three percent. The cheaper apartments were witnessing the biggest fall. What makes the future more uncertain is that when the search resumes for rent again, prospective tenants will be running after low rents and that would drive prices down across the market.
Currently, the rule is that those who are not being able to pay now would have to do it later. But with more and more people thinking of giving up their residence in NYC giving in mind the uncertain future, it is looking more likely that the landlords’ income from rents will head further south.