The Real Estate Board of New York to The Joint Legislative Hearing Committee on the FY 2026 NYS Executive Budget Proposal re: Taxes

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The Real Estate Board of New York (REBNY) is the City’s leading real estate trade association. Founded in 1896, REBNY represents commercial, residential, and institutional property owners, builders, managers, investors, brokers, salespeople and other organizations and individuals active in New York City real estate. REBNY appreciates the opportunity to provide testimony on the Executive Budget proposals regarding taxes and proposals to boost New York City’s economy. 

Individual Tax Provisions: 

The Executive Budget proposes to provide an “inflation refund” in the form of a tax credit to certain New York taxpayers (Revenue Part A) and a reduction in personal income taxes for middle-class taxpayers (Revenue Part B). REBNY appreciates the Governor’s efforts to find ways to help New Yorkers facing high costs of living and high tax burdens.  

Unfortunately, despite recognizing that New Yorkers face some of the highest tax burdens in the country, the Executive Budget would also prematurely extend the “temporary” surcharge on high income taxpayers for five additional years (Revenue Part B). This surcharge, enacted to help stabilize the State’s finances in 2021 at the height of the COVID-19 pandemic, does not expire until 2027. Given its temporary and emergency nature, a five-year extension of this surcharge is inappropriate and only reinforces New York’s status as the nation's leading taxer. Rather than hastily and prematurely extend this temporary surcharge, REBNY encourages the legislature to reject this premature tax increase this year and instead fully evaluate whether an extension is necessary closer to its present expiration.  

Business Tax Provisions: 

The Executive Budget proposes to extend and reform the Relocation and Employment Assistance Program, otherwise known as REAP (Revenue Part X). REBNY supports this provision and encourages modifications to strengthen the proposal. 

REAP has been instrumental in advancing New York City’s longstanding efforts to expand economic opportunity beyond core Manhattan and into every borough. This program, created in 1995, offers a $3,000 per employee tax credit to businesses that relocate from outside of New York City or south of 96th Street to the outer boroughs. By encouraging businesses to relocate and grow in areas that need them the most, REAP has strengthened New York City’s local economies and spurred job creation. The program has been particularly effective in fostering a broad spectrum of jobs, from high-paying office positions to critical manufacturing and industrial roles that drive success for long term economic growth.   

Lower Manhattan REAP (LM-REAP) 

Unfortunately, despite proposing to extend the REAP program, the Executive Budget did not include an extension of the LM-REAP program that provides a similar benefit to companies that locate in Lower Manhattan. The elimination of the LM-REAP program will hurt the city’s ability to attract new businesses to Lower Manhattan, eroding the vibrancy of a mixed-use neighborhood that needs continued support.  

Lower Manhattan’s business districts have been a cornerstone of the city’s economy for decades. However, the office market in the area has yet to recover from the pandemic. Today, there is over 20 million square feet of vacant office space in Lower Manhattan. The vacancy rate is higher than post-9/11 and the 2008 financial crisis and has doubled since 2019. This has had a significant spillover effect into other parts of the local economy. Since 2020, Lower Manhattan has lost 33% of its retail, food service, and hospitality jobs. 

The commercial troubles of Lower Manhattan will only worsen in the next five years. Over 7.5 million square feet of leases are set to expire over the next five years, and 21% of expiring leases are held by finance, insurance, and real estate (FIRE) sector tenants—industries with a demonstrated trend of relocating or exiting the New York City market. New York cannot afford to lose more businesses.  

Given these challenges, it makes little sense to eliminate the LM-REAP program. For a relatively small annual expense, the program has helped support businesses from Battery Park to Houston Street. Lower Manhattan needs more tools today, which is why LM-REAP should also be extended for five years. 

Lowering the Relocation Assistance Credit Per Employee (RACE) Program Threshold 

REBNY commends the Governor for proposing the RACE program in the Executive Budget. The RACE program provides $5,000 per employee tax credits to businesses that relocate from out-of-state and commit to at least a 20,000 square foot lease in a building completed prior to the year 2000. This forward thinking initiative will provide much needed support to commercial properties, ensuring that underutilized spaces can be transformed into thriving businesses and community assets. By addressing key challenges in the commercial real estate sector, RACE will help strengthen New York’s business landscape across the five boroughs. 

New York City’s commercial office market is facing a critical inflection point as the recovery from the pandemic remains incomplete. Today, many buildings, particularly older Class B and C properties, are struggling to retain tenants as demand shifts toward high-quality, amenity-rich office spaces. Without meaningful interventions, these trends risk deepening distress in the commercial market and eroding a critical source of revenue for the city. 

RACE addresses this challenge head-on by encouraging businesses entering New York for the first time to take space in these older buildings. Furthermore, the design of the program as a temporary measure that will last for no more than three years ensures that it will provide a targeted shot-in-the-arm to the city’s economy. 

To enhance the program’s effectiveness, we recommend reducing the eligibility threshold for leases from 20,000 to 10,000 square feet.   Doing so will better reflect current market conditions and support economic growth. Large out-of-state tenants occupying more than 20,000 square feet at their first location are increasingly rare, as many companies have shifted toward smaller, more flexible office spaces in the post-pandemic environment. Reducing the threshold to 10,000 square feet would align with contemporary leasing trends and make the program more accessible to businesses considering a relocation to New York. 

Companies leasing between 10,000 and 20,000 square feet still generate significant employment opportunities, contributing to the city’s workforce and economic vitality. The average office lease size is approximately 7,000 square feet, meaning a new-to-market tenant occupying more than 10,000 square feet would be a meaningful addition to the market. According to one leading commercial brokerage firm, since 2018, leasing activity from new-to-market tenants has averaged 730,000 square feet per year, with an average lease size of 9,680 square feet. These figures demonstrate that a 10,000-square-foot threshold is more in line with real estate market realities and would encourage greater participation in the RACE program, ultimately driving job creation and investment in New York City.  

Thank you for considering these comments.