With national and statewide victories, millions in Democratic-heavy New York City found November’s first week to be a jubilant one. But for leaders of the city’s real estate industry, two events were cause for wincing: Republicans in the State Senate, who long espoused policies friendly to landlords, lost control to Democrats; then, the next day, Mayor Michael Bloomberg announced he wanted to raise the industry’s taxes, seeking a 7 percent hike in the property tax rate.
“There’s always good days ahead,” Steven Spinola, president of the Real Estate Board of New York (REBNY), said facetiously.
While developers and landlords’ influence hardly risks disappearing, Albany’s historic leadership change presents a major challenge to the political might of the local real estate industry, as Democrats say the question is not whether new property regulations will be added, but how many and when.
“They probably don’t want us to touch it, but we are going to reform it, we promised we would, and we are going to do that,” Senator Tom Duane said of rent regulation specifically, though he added that landlords may side with Democrats on other real estate policy issues.
The real estate industry has long been one of the state’s and city’s most powerful interests, and for decades had a top ally in the Republican-led State Senate. Under the longtime majority leader, Joe Bruno, the chamber served as a brick wall against Democratic-led bills on issues from rent-regulation changes to tenant protections, issues where landlords felt their interests were threatened.
A glimpse at the value of that industry-Senate alliance can be seen in the campaign contributions for this past two-year electoral cycle. Led by the two main real estate advocacy groups, REBNY and the Rent Stabilization Association (RSA), landlords threw hundreds of thousands, if not millions, of dollars into campaign accounts in a bid to keep the Senate in Republican hands. A sampling of those individuals and firms that gave at least $50,000 to Senate Republicans, according to campaign filings: Steven Roth, chairman of Vornado Realty Trust; Urban Associates, a firm controlled by residential developer Daniel Brodsky; John Catsimatidis, a developer and owner of Gristedes supermarket chain; Donald Trump; and Glenwood Management, one of the city’s largest apartment owners.
“They recognized the importance of a strong real estate industry, and they were a buffer against legislation that was potentially irresponsible,” Gary Jacob, executive vice president of Glenwood Management, said of the Senate Republicans.
Much greater sums of money, of course, are at stake. The State Legislature has final say over a huge array of laws, incentives and regulations that have a significant impact on the real estate industry. Incentives such as the 421-a residential housing tax break, a separate commercial tax break, many tenant protection laws, and even changes to New York City property taxes go through Albany.
Perhaps the greatest fear of many in the industry is a change to the rent-stabilization laws, which allow landlords to charge market-rate rents for apartments if regulated units become vacant—vacancy decontrol—or if the tenant makes over $175,000 annually for two consecutive years in any size apartment of $2,000 or more monthly—known as high-income decontrol.
What exactly the Democrats will change or reverse is unclear.