Business Leaders Blast Mamdani Property Tax Changes as “Punitive”

A coalition of commercial landlords claims the proposal would shift billions onto corporate property owners, while progressive caucus members call it a long-overdue correction

A brewing confrontation between Mayor-elect Zohran Mamdani and New York City’s commercial real estate industry has intensified following details of his proposed property tax overhaul, which business groups characterize as punitive and economically destructive while progressive lawmakers celebrate as necessary reform to an inequitable system.

The Real Estate Board of New York and Partnership for New York City have assembled a coalition opposing Mamdani’s plan to recalibrate assessment formulas that currently favor commercial properties over residential ones. Industry representatives claim the changes could shift between $3 billion and $5 billion in annual tax burden onto office buildings, retail centers, and industrial properties.

“This proposal represents the most dramatic restructuring of New York City’s property tax system in generations,” said James Whelan, president of the Real Estate Board of New York. “At a time when commercial real estate is already struggling with post-pandemic challenges and remote work, adding billions in new taxes threatens to accelerate the urban doom loop we’ve been fighting to avoid.”

The commercial real estate sector has faced unprecedented challenges since 2020, with office vacancy rates hovering near record highs and property values declining significantly in many markets. Major buildings have sold at steep discounts to their pre-pandemic valuations, and several prominent landlords have defaulted on mortgages or surrendered properties to lenders.

However, progressive members of the City Council argue that New York’s property tax system has long subsidized commercial property owners at the expense of residential taxpayers, particularly homeowners and small rental building owners. They point to Lincoln Institute of Land Policy research documenting that effective tax rates on commercial properties in New York City are significantly lower than residential rates when measured as a percentage of market value.

“For decades, working families and small landlords have been subsidizing corporate property owners through a deliberately skewed assessment system,” said Council Member Tiffany Cabán, a key Mamdani ally. “This isn’t about punishment–it’s about basic fairness and asking those who can afford it most to pay their fair share.”

New York City’s property tax system relies on complex assessment formulas that classify properties into four categories, with dramatically different treatment for each class. Citizens Budget Commission analysis has repeatedly highlighted how these classifications create perverse incentives and significant inequities, with similar properties facing wildly different tax burdens based on technical classifications.

Class 2 properties–rental buildings with more than three units–face particularly high effective tax rates compared to commercial Class 4 properties, despite commercial properties often having significantly higher values and generating more income for their owners. Mamdani’s proposal would adjust assessment ratios to better align tax burdens with actual property values and income-generating capacity.

The commercial real estate industry warns that higher property taxes will inevitably flow through to tenants in the form of increased rents, potentially driving businesses to relocate outside city limits or leading to further vacancies in struggling commercial districts. They cite Urban Institute research showing that property tax incidence falls partially on tenants, particularly in commercial contexts where leases often include tax pass-through provisions.

“Every dollar in increased property taxes is a dollar that small businesses will have to pay through higher rents,” said Kathryn Wylde, president of Partnership for New York City. “At a time when we should be focused on economic recovery and bringing workers back to offices, this proposal moves in exactly the wrong direction.”

Supporters counter that the current system effectively forces residential property owners to subsidize commercial landlords, many of whom are billion-dollar institutional investors or real estate investment trusts. They argue that recalibrating the system would allow residential property tax relief while ensuring that corporate property owners pay rates commensurate with their holdings’ values.

The debate has drawn attention from urban policy experts nationwide, as cities across the country grapple with similar questions about property tax equity and the fiscal implications of changing commercial real estate markets. Brookings Institution scholars have noted that many cities are reconsidering property tax structures as remote work permanently reshapes urban economies.

Some moderate Council members have suggested phasing in any changes over multiple years to allow the commercial real estate market time to adjust, potentially coupling reforms with targeted relief for struggling sectors like office buildings in outer boroughs. Mamdani’s team has indicated openness to implementation timelines but remains committed to the core principle of assessment equity.

The outcome of this debate will significantly impact both city finances and the trajectory of New York’s commercial real estate recovery. With property taxes generating approximately $32 billion annually–nearly one-third of the city’s total revenue–even modest changes to assessment formulas carry enormous fiscal and economic consequences. As negotiations continue, both sides are mobilizing supporters and commissioning studies to bolster their positions in what promises to be one of the defining policy battles of Mamdani’s early tenure.