In New York, last week the state Department of Labor announced more than 80,500 people applied for unemployment benefits. An estimated 130,000 restaurant workers have already lost their jobs. Today, April 1st is the first day that landlords have begun to feel the effects of COVID-19.
What does this mean for the real estate market as a whole?
In short, landlords will undoubtedly experience a loss of income, especially in the retail and office sectors, but what could make matters worse is a moratorium on rent.
Debbie Riegel, a real estate lawyer at Rosenberg & Estis, says shifting a tenant’s inability to pay to landlords will create a situation of landlords unable to pay their lenders or contribute to the city and state tax rolls.
“Many places in the state base property tax off rent rolls,” Riegel said. “When the tax revenue isn’t coming from commercial or multiple-family properties, it means the other classes of taxpayers need to pick it up. It means shifting the burden to other taxpayers and municipalities.”
This sequence of events could topple the entire market, and the government needs to be careful not to paint a broad stroke with all tenants.