The consensus within the real estate industry regarding de Blasio seems to be overwhelmingly a feeling of apprehension. For one, he is an unapologetic progressive-liberal who basically campaigned on wealth redistribution. Second, he is following Bloomberg, who couldn’t have been a better partner for the industry. I predict that the real estate industry will do fine under the de Blasio regime, but possibly in spite of his agenda not helped by it.
My argument is based on some fairly simplistic observations and assumptions. I would welcome feedback from anyone who would like to take the other side of the debate. First, I am of the impression that the cost of developing in Manhattan is so high, and there are so few sites worth developing, that the economics may not be so attractive. Also, there was an apparent rush to get projects submitted before Bloomberg left office so projects may have been front-loaded. I also think de Blasio will make it a point not to give sweetheart tax breaks to luxury condo developments particularly like to one given to One57 which is breaking all kinds of records for sales prices and prices per sqft. So by that logic, developers may have already started to look to the other boroughs (if not farther) for better opportunities. This could take two forms: 1) you focus on developed areas like Williamsburg or LIC, where you still face some stiff competition for development sites but the cost of the site is more palatable. You still probably won’t get tax incentives however. 2) You focus on affordable housing, either something targeted to middle class buyers or specifically low-income housing which offers substantial tax breaks and incentives and should have the political support of City Hall. And there are many more sites to choose from.
I’m also going to assume that de Blasio is not hell bent on undermining the real estate industry which is feeding into the city’s tax base to fund his personal initiatives. The big question is, how exactly will he execute on that vision? Higher personal taxes? Higher real estate taxes? Higher taxes on investment properties which already happened last year?
Bloomberg saw value in public/private partnerships, that government could lay the infrastructure for development. Sometimes this meant clearing the way for highly visible projects like the Barclays Center. It seems doubtful that de Blasio would have taken the same position, and he has already sent some signals that he intends to be more combative. However, I think most New Yorkers do hope that he will focus on and make progress on improving the school system. Home values have risen in neighborhoods that continue to have underwhelming school performance. Just imagine if we experienced a substantial improvement in schools, what impact that might have on home values.
So I see one path where de Blasio and the real estate industry align interests to build middle to low income housing, and de Blasio continues to improve quality of life for New Yorkers particularly in classrooms. And whatever he does in conflict with the industry is de minimus. Of course its also possible that he is horrible for the industry but in spite of it all, the fundamentals of the industry and positive economic momentum override any of his actions. Regardless, I think like all New Yorkers, we will hope for the best.