News Summary
As the deadline for tax incentives approaches, New York City’s real estate groups are ramping up efforts to extend tax breaks for office rentals. With concerns over job creation and office vacancies, particularly from Mayor Eric Adams’ administration, the Real Estate Board of New York has launched an advertising campaign targeting state legislators. The proposed legislation includes extensions and new incentives aimed at attracting businesses to older office buildings, all while facing skepticism from some lawmakers about their effectiveness.
New York City real estate groups are intensifying their campaign to extend tax breaks for office rentals as the state legislature deadline approaches. The push comes as these tax incentives are set to expire at the end of June 2023, which has raised concerns among business groups and the administration of Mayor Eric Adams about potential negative impacts on job creation and office vacancies in the city.
At the forefront of this campaign is a recently launched advertising effort supported by the Real Estate Board of New York (REBNY), which began on June 2, 2023, targeting legislators, particularly state Senator Brian Kavanagh. These advertisements promote the job growth potential of the proposed bill and aim to persuade Kavanagh and other lawmakers to support what they describe as crucial tax relief for the city’s struggling office rental market.
The current tax programs incentivize office rentals in areas like Lower Manhattan and the outer boroughs. These include the longstanding Relocation and Employment Assistance Program (REAP), which has provided significant financial support to companies relocating to specified areas. The new legislative proposal seeks to expand these incentives by introducing the Relocation Assistance Credit Per Employee Program (RACE), which aims to attract businesses to older office buildings.
Supporters argue that these tax breaks are essential for fostering job growth and reducing office vacancies. Proponents claim that such initiatives have successfully revitalized industrial areas and are crucial in a time when over 100 million square feet of office space are vacant across all five boroughs. In contrast, critics are increasingly questioning the effectiveness of these tax incentives, highlighting concerns over return on investment and potential incentives for businesses to move out of Manhattan.
The current proposal must pass through the state legislature prior to the adjournment date of June 17, 2023. The legislation faced an unexpected setback in May 2023 when the relevant tax programs were excluded from the state budget. In response, a new bill has been drafted, which introduces these three programs with tighter timeframes and additional safeguards designed to address the concerns of skeptics.
The proposed REAP program could be extended for three years, until July 2028, rather than the requested five years. This would include annual reporting by the mayor on the entities receiving tax breaks and the employment they generate. Support for the bill has also emerged from Brooklyn state Senator Andrew Gounardes, who sponsors an Assembly version of the bill alongside Manhattan Assemblywoman Grace Lee.
The cost of extending REAP is projected to be approximately $27 million in 2024, down from $30 million the previous year, while the proposed RACE program is expected to cost $150 million over ten years but could yield around $400 million in tax revenue through increased business activity. Currently, about 60% of the jobs supported by REAP come from new businesses relocating to the city, with the remaining 40% stemming from internal shifts among boroughs.
Despite the pressure from the business sector and Mayor Adams’ administration, Kavanagh has expressed skepticism about the effectiveness of REAP in contemporary economic conditions. He has characterized the advertising campaign aimed at him as “silly” and emphasized that it will not influence his decisions regarding the proposed tax breaks.
The need for action is pressing as the state Senate is scheduled to adjourn on June 12, 2023, while the Assembly has extended its session until June 17, 2023. The coming weeks will be critical for the advancement of these tax incentives, which proponents argue are essential for bolstering New York City’s job market, while opponents remain cautious about their long-term viability and implications for local businesses.
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Additional Resources
- Crain’s New York
- Wikipedia: Tax Incentive
- New York Post
- Google Search: NYC tax breaks
- Nixon Peabody
- Google Scholar: NY real estate tax breaks
- News 10
- Encyclopedia Britannica: office tax incentives New York
- USA Today
- Google News: 2025 New York budget
