New York City Mayor Zohran Mamdani challenged city and state officials to support his idea to raise income taxes on wealthy residents, warning that the alternative may be a hefty property tax increase that would affect owners across the city.
As he unveiled his draft budget proposal for the fiscal year that starts in July, Mamdani cited a $5.4 billion hole that needs to be filled with additional revenue. He favors raising taxes on corporations and increasing the personal income tax by 2% for residents earning more than $1 million a year. Still, if New York state leaders won’t allow that, the other option he put forward is a 9.5% property tax increase and dipping into the city’s reserve funds.
“The onus for solving this crisis should not be placed on working and middle-class New Yorkers,” he said, calling the property tax rise “the option of last resort.”
The tax would affect more than 3 million residential units and 100,000 commercial properties, Mamdani said. The 9.5% increase is likely the opening salvo in budget negotiations with the City Council and state legislators. Still, public officials and real estate agents reacted with varying degrees of concern.
“I feel like everyone likes to sensationalize,” said Michelle Griffith of Douglas Elliman Real Estate. “Do people think there’s going to be an increase of 9.5%? No. But will there be some increase? Probably. I don’t think we’re thrilled, but we understand there’s a deficit and he needs to balance the budget, and this might be one of the tools he uses.”
While experts said people with substantial wealth will be able to weather any tax increase, the same isn’t necessarily true for renters and the owners of more modest homes.
“Who’s going to get hit the hardest?” Griffith said. “The first-time homebuyers who are already dealing with affordability issues. They’re much more sensitive to this.”
Commercial real estate industry on alert
The commercial real estate industry is also closely watching Mamdani’s threat. On Empire State Realty Trust’s fourth‑quarter earnings call Wednesday, two of the four analysts on the line asked about the potential property tax increase and whether the real estate investment trust — parent of the iconic Empire State Building — would be able to pass the cost onto tenants.
“The proof is always in the pudding,” said Tony Malkin, ESRT’s chief executive, adding that the REIT has not seen any impact on leasing talks amid strong tenant demand. “I don’t think anything’s even, ingredient‑wise, in the kitchen yet. We’ll see how things go. … The market is what the market is. … If we have a higher base year on real estate taxes for new leases, well, that will be a higher base year for real estate taxes on new leases.”
Ryan Kass, the REIT’s executive vice president, co‑head of real estate and chief revenue officer, argued that any property tax increase “would be passed through on a tax escalation to the tenant.”
“The revenue needs of Mayor Zohran Mamdani’s socialist agenda are showing why raising taxes is not a free lunch, as it has consequences for New York City’s economy,” Piper Sandler analyst Alexander Goldfarb wrote in a note Tuesday. “Raising taxes by 2% on millionaires meets the reality that these people can simply move to the suburbs, while the proposal to raise property taxes increases the affordability issue plaguing New York City.”
Mamdani’s proposal to increase residential taxes would put additional pressure on landlords, Goldfarb wrote, adding that commercial taxes, meanwhile, are typically passed through to tenants, “raising the cost of doing business in New York City.” Whether through income or property taxes, he added, “the consequences could well be the opposite” of what the administration intends.
The concern is especially acute for rent‑regulated apartment owners, who “already face rent pressure which any tax increase would exacerbate,” Goldfarb said. And while “Fortune 500 companies and large private professional firms could theoretically stomach higher tax pass‑throughs,” he added, such costs could slow their New York expansion plans. “Smaller businesses that are the mainstay of NYC,” he said, “would likely not be so lucky.”
Many of the city’s business groups echoed those concerns.
"'Property tax reform’ sounds reasonable until you understand how commercial leases actually work,” Jessica Walker, president and CEO of the Manhattan Chamber of Commerce, said in a statement Tuesday. The vast majority of commercial leases in the city, she noted, include triple‑net or tax‑escalation clauses, meaning “any increase in commercial property taxes flows directly to tenants.”
“This is not a burden on wealthy developers,” Walker said. “It is a surcharge on the small-business owner who signed a lease in good faith and has no ability to renegotiate it. That is not reform. That is cost‑shifting. … New York does not have a revenue problem. It has a spending velocity problem.”
Skepticism from residential real estate agents and City Council
The average owner of a single-family home in one of the city’s outer boroughs — the Bronx, Queens, Brooklyn and Staten Island — would face a one-year property tax hike ranging from $616 to $771 if Mamdani’s plan of last resort were implemented, according to Ana Champeny, vice president for research for the New York-based Citizens Budget Commission. In Manhattan, the average increase would be $6,693, though Champeny cautioned that the island has a limited number of high-dollar single-family houses.
The average annual tax bill for a single-family residence contemplated in Mamdani’s budget ranges from $6,483 in the Bronx to $70,448 in Manhattan, according to the commission.
“I hope people aren’t too frightened, but maybe some are disappointed because they hoped things wouldn’t become more expensive,” said Mable Ivory, an agent for Real Brokerage.
Paul Johansen, who sells real estate in the city for The Corcoran Group, described Mamdani’s property tax proposal as a “bomb” thrown into budget negotiations as they kick off with the state Legislature and City Council.
“One of the real benefits of New York City real estate is the fact that taxes have been, I wouldn’t say low, but they’ve not been a detriment to getting deals done. If you increase them 9.5%, we could be getting close to that tipping point,” Johansen said.
Danny Fishman, chief executive officer of Gaia Real Estate, which operates apartment properties in Manhattan and elsewhere in the city, said the property tax proposal is “insane” in a city that is already hard to operate or build in.
“The people who still want to invest see an opportunity, and they say, ‘Never bet against New York,’” Fishman said. “But I think this [would] put a lot of apartment buildings underwater, or we’ll see them give their tenants a 9.5% rent increase.”
In a statement, Julie Menin, speaker of the New York City Council, said the governing body will release its own budget projections before starting hearings on Mamdani’s proposal.
“At a time when New Yorkers are already grappling with an affordability crisis, dipping into rainy-day reserves and proposing significant property tax increases should not be on the table whatsoever,” Menin said.