Does Manhattan real estate not appreciate anymore?

Krolik,
It's an ad valorem tax so the only factor which comes into play is the market value not the absolute dollars the piece is paying. Should WTC, Rock Center, etc get breaks just because they pay a lot? It's not a question of "fair share". That's the problem with our very screwed up system in NYC - the law says according to value, but then the regulations don't allow you to get there. But AFAIK all Real Estate taxes in the US are ad valorem. How would you codify "fairness" for expensive property? I mean I can understand the opposition to extremely progressive tax rates like when the top tier was 90% marginal income tax rate . But how do you explain the Uber rich paying a substantially lower percentage of value of their properties on an ad valorem tax?

Dept of Finance Tax Assessor's Office reassesses every single property every year. And for much larger and more unique properties like the GM building. (Side note: Assessor's districts are geographic. But the city took something like the 10 most expensive office buildings and formed a special non-geographic district with them and gave it to my dad). And certainly the first year when Griffin bought the unit it wouldn't be that hard to assign a value. The tough one's are like ConEd power plants where there really are no similar sales in a long time, plus even the one's previously sold are totally unique

@GeorgeP if price appreciation over 10 yrs is a/the deciding factor why not rent? The only good reason to own is knowing you won't have to move every few years - that can be tough as you get older. Price appreciation in RE is just too unpredictable.

MTH,
Religious organizations as well. Which is one thing for houses of worship, charity work, whatever. But Trinity Church $6 billion commercial real estate portfolio?
https://www.nytimes.com/2019/02/08/nyregion/trinity-church-manhattan-real-estate.html

@30yrs That's just nuts. I gather it's all over the US, not only NY but that's esp egregious. Re religious organizations and rights: OK, fine, don't make my wedding cake but do I have to subsidize your cult?

>>That's the problem with our very screwed up system in NYC - the law says according to value, but then the regulations don't allow you to get there. But AFAIK all Real Estate taxes in the US are ad valorem. How would you codify "fairness" for expensive property?

NYC has a different way of estimating value for apartments, and I already defined what I think is fair above. I think he is not only covering expenses, but also subsidizing lots of others in the city, so in my opinion what Griffin pays now is "fair". Gov't could ask him to pay more, but in my view that would be just more progressive, not more fair. Given he is paying a lot into the system, I just don't think he is where I would focus first if I were to fix the system. I would look at BK houses that are paying a lot less into the system and clearly less than the services consumed. And all of the non-profit exeptions.

>>Religious organizations as well. Which is one thing for houses of worship, charity work, whatever. But Trinity Church $6 billion commercial real estate portfolio?

I have got to start my own church like Kris Jenner to save on taxes:
https://www.cheatsheet.com/entertainment/what-religion-is-kris-jenner-and-does-she-own-a-church.html/

>>Didn't know Columbia and NYC had property tax breaks. Shows a galling 'Progressive for thee, libertarian for me' ethos. Aren't they rolling in it?

Especially since they run themselves like clubs for education and prestige conveyance to children of alumni and staff members. If they get rid of legacies, I would think their public mission would justify giving some (maybe not full) tax break on RE used directly as part of the mission. But blanket exemption from RE taxes, forcing city residents to cover those expenses, are really unfair in my view.

Truth/Krolik, Here is a townhouse with low taxes which are almost comparable to high priced townhouses in BK. 5491 square footage as per DOF.
https://streeteasy.com/sale/1658102

Not so low but much lower than comparable condo as 0.6% of say $18mm market value (2k per stated sq ft).
https://streeteasy.com/sale/1554534

In the fair range, I would say at more than 1% of MV (call it $8.5mm).
https://streeteasy.com/sale/1602680

My gut feel is Manhattan Prime Townhouses built pre-war annual RE taxes are anywhere from 0.4% to just above 1% of MV. Lower priced ones higher percentage of MV typically - suggesting empirically the tax are more in line with square footage than MV. BK of that vintage can be as low as 0.2% but I have rarely seen even 0.5% except in Brooklyn Heights.

BTW LAVAMAP is pretty good. I used to use Oasis but it is not working right now. Thank you Truth.

This BK example of low taxes just popped up in my inbox. 0.2% of MV.
https://streeteasy.com/sale/1671149?&utm_medium=email&utm_source=triggered&utm_campaign=Agent_Update_Saved_Folder&utm_source=Iterable&utm_medium=email&utm_campaign=Agent_Update_Saved_Folder

@300 - those taxes are CRAZY
2bedBK condo at 1/5 that price and 1/5 the sq footage has same or higher taxes than this .. near mansion.

And this condo very high. Whether you look from a square footage or MV point of view. It likely has to do with how the sponsor allocated the percentage of building to this unit.

https://streeteasy.com/building/carl-fischer-building/ph62

Steve, Yes. New conods in BK aren't low. It is 1-3 family due to grand-fathering tax increase cap.

So most egregious underpayment vs services used is by BK primes townhouses. I understand Krolik's point that that there has to be some (only some) relationship to the services used rather than just market value. Guessing City Income taxes do act as some equalizer.

Of course, we have plenty of subsidized and public housing in the city who instead of paying into the pot, take away from the pot. Suburbs have much less of that as they shift the burden to the cities.

So a less well articulated fact is that large cities serve disproportionate amount of poor (poverty has high correlation to crime resulting in increased policing cost; educating is more costly) who are not necessarily from those cities.

Then we all talk about why NYC is so expensive and where the money goes.

@300 - city income tax on high end?
Eh I’m not convinced many at the top end sleeps in the 5 boroughs 183 days a year. Especially now.
hybrid remote. Dual HQ jetting to Miami. Houses in 5 states. Estate in Westchester/CT/NJ/Nassau. Etc.

Given that taxes are not based on MV, and that taxes affect MV, it’s incongruous (IMO) to discuss levels of unfairness in terms of MV.

If we tax two otherwise equal houses at $10K vs $20K, that’s a 2:1 unfairness. That unfairness may create MVs of (say) $2M vs $1M. So the more-accurate 2:1 measure becomes 4:1 using MV in the denominator, which exaggerates the effect.

Rent is probably a better denominator, because it is a more accurate reflection of housing quality. The rent that renters will bear, and the rent owners will demand, doesn’t give a rat’s ass about taxes, financing rates, capital structure, etc. of underlying housing. All it cares about is housing quality.

By county chart of Medicaid enrollment. How many would guess Bronx as the highest enrollment? Followed by Queens and BK not far behind the rest of the state. A good estimate of poverty with some illegal gaming of the system by people with cash income.

https://uhfnyc.org/our-work/initiatives/medicaid-institute/dashboards/mi-current-enrollment/

Nada,
I agree with you on MV impact created by disparity in RE taxes as a percentage of MV. However, MV is far easier to calculate by the city from the transaction records vs rental records. Even if using MV, it is pretty hard to adjust for reno and interior quality which in my view probably shouldn't be adjusted anyway. If the same percentage tax is applied on MV, RE tax disparity impact on MV will disappear as well. Rental data is just not as rich for condos or single family homes. The issue with NYC RE tax system is due to politics and related non-sensical RE Tax calc rules rather than city's inability to calculate MV and have a cleaner % of MV or % of rent as a system.

300>> However, MV is far easier to calculate by the city from the transaction records vs rental records.

I wasn’t talking about the city, I was talking about you. I have full confidence in your ability to calculate rents (or another quality measure not impacted by tax policy) in the examples you provided.

Steve123>> Eh I’m not convinced many at the top end sleeps in the 5 boroughs 183 days a year. Especially now. hybrid remote. Dual HQ jetting to Miami. Houses in 5 states. Estate in Westchester/CT/NJ/Nassau. Etc.

Our comptroller has studied the very question:

https://comptroller.nyc.gov/reports/raising-revenues/

Some things I thought were interesting:

- Raising income tax on the top 1% would only raise $500-900M across the options contemplated (Table 1). Seems like a drop in the bucket of a $107B budget. The do account for outflow of people.

- NYC tax rates are atypically flat (Table A4), as far as these things go. They effectively top out at $14K for single income. (This is not a judgement, just an observation.)

- The number of $1M+ and $10M+ filers was at record levels in 2021, despite outmigration. (Tables A1 & A2.) Possibly this more represents a surge in incomes rather than the underlying population.

I understand now. It would have been indeed a much cleaner comparison.

>>I wasn’t talking about the city, I was talking about you. I have full confidence in your ability to calculate rents (or another quality measure not impacted by tax policy) in the examples you provided.

@300 -- Thanks for the medicaid map by county. Very interesting to run the calendar back to a pre-covid and look at the shift (across the whole state as well).

Maybe an argument for 100% socialized medicine?

@30yrs
"What tax abatement did 220 Central Park South get? Answer: none. And what percentage of market value is Ken Griffin 's $238 million penthouse?
https://therealdeal.com/new-york/2019/02/28/the-city-values-ken-griffins-record-setting-238m-penthouse-at-9m-heres-the-math-behind-that/"

I tried looking for a block and lot number to lookup the purchase and its current tax bill but I have no luck.

But did you read the last sentence of the article??

"The tax rate on Griffin’s penthouse was determined before the purchase closed, and one expert told the Journal that the rate could increase come 2020. [WSJ]"

Im not here to defend multi billionaires but come on dude, that article was designed to stir the pot.

@300

Been using lavamap for several years.
And been keeping it to myself so it doesnt get ruined liked Streeteasy, Waze, and so many others did.

Whoops.....lol

My go to was Oasis but it down. Zola not as good as Lavamap. Thanks.

http://www.oasisnyc.net/

>>Im not here to defend multi billionaires but come on dude, that article was designed to stir the pot.

Completely agree. Or a distraction mechanism. Somehow everyone in NYC has read this article and a similar in NYT or Bloomberg few years ago and is convinced that the biggest RE tax unfairness in the city is too low taxes on luxury condos in Manhattan (which are paying a really really high absolute amount), when in reality it is too low taxes on BK single family homes (which are paying less than even an small apartment in the same borough).

>>Maybe an argument for 100% socialized medicine?

Why not? we are already paying for it.

The taxes on units at 220 Central Park South have gone up about 76% since the original. Another penthouse there which sold for $188 million (so it's in the ballpark) went from about $107k originally to about $186k today. That's not some crazy increase which changes everything.
In Trump Tower about 50%. So if you think you found some smoking gun and the taxes quoted were way below what they actually are now, that they have increased insanely more than the market, etc I think you are barking up the wrong tree.

@30yrs

">>Maybe an argument for 100% socialized medicine?

Why not? we are already paying for it."

Excellent point, we are indeed already paying for it in every shape, way , and form.

There's been tremendous effort to get everyone covered and zero effort to tackle the cost of healthcare.

When someone can explain why it costs more than 5x in the US to get a hip replacement than in Germany, then maybe we can know where the adjustments are needed and have a system that is sane.

https://worldpopulationreview.com/country-rankings/hip-replacement-cost-by-country

***George hope you're still enjoying your thread's deviation from topic :)

@turthskr10
Interesting cost comparison, though I think this needs to be looked at in terms of purchasing power parity, and I am not sure why they chose to to focus on the price that you would be quoted without insurance as almost nobody in the US pays that.
Most people that get this procedure have Medicare (as avg age is 67 for the procedure), and total cost with Medicare (including copays but not including insurance premiums) is about 14k: https://www.medicare.gov/procedure-price-lookup/cost/27130/

Cannot believe I am defending the US procedure cost in this instance :-)
I think the reason this procedure is also expensive in low income countries is that part of the cost is the the implant itself, the cost of which probably varies a lot less with location and local labor cost.

@truth - Germany seems like a cherry-pick for high income / low medical cost compare.
Australia and Poland pretty good too.

The link you sent would seem like its more labor cost driven than anything else, to me.
Israel is basically same cost.

Most of the countries I'd argue the situation is worse than US as their hip replacement cost is ~1/3 to 1/2 the US cost, but they have incomes below that ratio.
Chile/Turkey/Thailand/Mexico/Kazakhstan/Vietnam/India/Malaysia/etc you don't want to be the average working needing the average procedure if these prices hold...

The link is also missing most of Western Europe so who knows what the UK/France/Spain/Nordics pricing looks like.

So I'm the only one here who bought with a 421a 25 year tax abatement during the crash? Apartment would fetch ~85% more than what I paid for it in the current market. Currently renting at the highest we've asked. I must admit the market value has has fallen 15% today vs pre-Covid.
Now don't ask me about 2035 when the abatement has completely ended. That will be my kids problems.
Also retired doc here in favor of fully socialized medicine.
Son has a 6 figure salary and lives in Brooklyn where all the young professionals choose to live.

I think there were others like you on the board back in the day, but I don’t think anyone posting these days is in the same category.

It sounds like this is now an investment unit. What is / was your cap rate pre-COVID vs now, both with and without the abatement? From your statement that come 2035, it “will be my kids problem”, it sorta sounds like there are no prices / conditions under which you see yourself selling. Why not?

BTW if there ever is a rebalancing of NYC property taxes to bring the properties which are underpaying based on current market value, I think there are some borderline neighborhoods in Brooklyn where the reasonably/relatively dramatic increases have a real chance to disrupt those markets. What happens to properties like this one:
https://streeteasy.com/sale/1661236
If taxes go from $200/month to $2,000/month what happens to prices.

It obviously takes a hit. At a cap rate of 3-4%, the difference would be several hundred thousand on that property between “taxes never adjust” and “taxes adjust tomorrow”.

The big question is whether the market is currently pricing based on “taxes never adjust” versus some more nuanced view of the form “in expectation acknowledging large uncertainty, taxes will adjust and phase in over X years starting Y years from now”.

From what I’ve learned on this board and elsewhere, market prices tend to be driven by “never adjust”. You saw this on rates, where people were buying in late 2021 at cap rates justified by 2% ARMs without thinking through what would happen once ARMs reset to overnight rates + 2.75%. Never mind raging inflation and the possibility that we won’t have ZIRP forever, even thinking through the consequences of 0% + 2.75% resets.

You also saw a lesser form of this with people taking out fixed 30yr mortgages at 3%, thinking that’ll protect them against 3% cap rates because if rates go up, they are hedged. Except many never intended to keep the home for 30yrs, much less 10yrs, and this will increasingly form a burdensome . And I think few understood that they themselves are essentially being forced to shift their money into the place of earning 3% over time, via principal payments, rather than the opportunities of the day.

@Krolik

Apologies, I thought your post on healthcare was from 30yrs.
Thats what I get for reading and posting from my small screen iphone instead of my desktop.
I should have know better when it started with "completely agree" lol.

Also good point on medicare, if i get a chance, ill dig for a "younger" procedure.
I do recall once reading that non medicare insurance companies are billed on average 140% above what medicare gets billed . If I find that source i will post.

XXXXXXXXXXXX

@Steve123

I was disappointed that France, UK , etc were missing (you missed Spain, it is listed),they must not have access to the data.
New Zealand, Australia, Singapore, and Switzerland are apropos though.

Anecdotally, my policy has been increased more than double the inflation rate over the last ten years.

XXXXXXXXX

@25 year 421a abatement

Way different than the 10 year. I think this screws the city.

When the 421a was introduced NYC was trying to sell city owned lots for $1 to developers but couldn't. 421a was actually necessary to make deals pencil solely due to construction costs. Now (since money is fungible) all tax abatements on new construction does is increase the price developers pay to speculators for buildable square footage. You can even see this with "impossible" projects moving forward even though 421a wasn't renewed (remember the claim that these projects were impossible to build without 421A). The new narrative is that if the developers bought the land "cheap enough" then the numbers still work. In other words, deal jockeys who pay anything for land and then insist the taxpayers bail them out can't pull that shit anymore, but old school developers who buy land far in advance of building projects are fine

Also, the entire concept is a bit anti-capitalist because if you really believe in the free market then you have to admit that land prices would adjust pretty quickly without the support of 421a pushing on prices up.

https://therealdeal.com/new-york/2023/06/12/these-rental-projects-plow-ahead-without-421a/

>>BTW if there ever is a rebalancing of NYC property taxes to bring the properties which are underpaying based on current market value, I think there are some borderline neighborhoods in Brooklyn where the reasonably/relatively dramatic increases have a real chance to disrupt those markets. What happens to properties like this one:
https://streeteasy.com/sale/1661236
If taxes go from $200/month to $2,000/month what happens to prices.

By the way, this is also why I did not consider purchase in BK. I was not willing to place a bet on NY lawmakers being unable to pass tax rebalancing. Not because of my view on likelihood of it actually being rebalanced, but because of how sad taking that side of the bet would make me feel.

Plus, agree with inonada that market seems to bake in "never adjust", therefore if there is some chance of adjustment, those buying today might be overpaying.

@truthskr10
>>I should have know better when it started with "completely agree" lol.

LOL!!!

I can see a phased-in tax increase over at least 10 years if not 15 years and/or change of cap from 6% to 8% and/or some increase in assessed value (say 25%) on sale but the lawmakers will never agree to make sudden changes. In addition, the Bushwich property Market Value as per city is only $1.1mm. So if they started to charge on that immediately, it would be appx $12k in taxes.

$200 per month in taxes for a 6 bedroom, 2-family house? Insane!!! Maybe I should reconsider my feelings and move to Bushwick after all. Why should I be subsidizing people living there when I can have all the suckers in Manhattan and Staten Island subsidize me instead?

Hope it is a good school district.

Hi, re: "all tax abatements on new construction does is increase the price developers pay to speculators for buildable square footage. "

Any rules of thumb for this value-wise?
How does it trickle down to the ultimate apartment buyer?

Based on behaviors exhibited over the past 15 years here, I think buyers overpay for tax abatement. As silly as it sounds, they tend to value it as “never adjusts” despite the definitive adjustment schedule. Many a justification circa 10-15 years ago spun a 5% cap rate based on abated taxes. Q: What about as abatements phase out? A: It’ll be made up with rapid rent growth over the next few years. Q: How about in 10 years when it goes away completely? A: No one knows what’s gonna happen in 10 years, at which point it won’t be my problem anyways because I will have already sold!

The cynic in me wants to suggest the following. Instead of issuing bonds, NYC should issue tax prepayment rights to developers. “Developers can prepay expected taxes for the next 10 years at face value.” Advantage to NYC: zero-rate borrowing. Advantage to developer: buyers will pay more than the prepaid tax amount because of aforementioned tendency to consider it a “never adjusts” rather than the prepayment it really represents.

"What happens to [...the bushwick multi-family...] If taxes go from $200/month to $2,000/month what happens to prices."

And what happens when everything in a neighborhood is revalued and those who can afford to live there because the taxes are $200/mo no longer can when they become $2000/mo? This might be partly solved by phasing in increases at the time of sale / renovation, but isn't going to make NYC and environs any easier to live in.

>> what happens when everything in a neighborhood is revalued and those who can afford to live there because the taxes are $200/mo no longer can when they become $2000/mo?

Why do we care about people in houses not being able to afford taxes, but not people in apartments that are experiencing double digit annual increases right bow? Like the recent poster that was trying to figure out how to stay in NYC. Most people at risk of large increases in taxes are sitting on large capital gains, so it really is a first world problem. And if they have to move because they cannot afford their huge house without subsidies? Well, tough. I live in a 2br apartment, and so can they. Why should I continue to subsidize their lifestyle?

Krolik, The tax cap for coop condos is 8% per year, 30% over 5 years. Page 9 of below. As a minium the govt needs to make the tax cap for 1-3 family the same vs 6%/20% and charge for all property improvements.
https://www.nyc.gov/assets/finance/downloads/pdf/brochures/class_2_guide.pdf

By the way, you are subsidizing lifestyle of lot of people with your income level. Manhattan below 96E/110th W street does and will even if property taxes are generally correct as a percentage of real MV. There is no escape from that.

Fine, but I think apartments start from a higher base also. My apartment is cheaper than bushwick house, but pays 7-8x taxes. If owners in BK have to cash in their equity and move because taxes go up, I have zero sympathy.

You are 100% correct. Everyone is well aware of low taxes in Bk. In fact, DOF tax bill shows much higher market value but assessment are low due to the cap.

However, there is no political incentive to act in this "soak the rich" blue city.

How do they define rich? Those BK home owners are the rich. They have assets worth many times all the equity in my home and the cash in my bank account.

You are talking logic. Politics in NYC works by groups. Soak the Manhattan rich. Those Billionaires. While we are at it, wrap all the Manhattan dwellers along with them.

There is a legitimate concern for people on fixed incomes who have owned homes since way before these neighborhoods even started to gentrify. Take a look at the predation against some of them through deed theft, etc.

However I think the solution for people like this is to means test and then treat excess Real Estate taxes like a reverse mortgage. If the value has increased so much but their fixed income can't cover the higher taxes let them pay it in a lump sum when the property gets liquidated.

@30 that is a pretty good suggestion.

Thought the most curious statistic was the aging of Manhattan population since 2006:
https://furmancenter.org/neighborhoods/view/manhattan

One thing contributing is probably that old folks have rent controlled apartments...

@Krolik Wow - quite a change. Rent ontrol or maybe also families getting priced out. I indulge my inner geek looking at census blocks and tracts at NYC's population fact-finder:

https://popfactfinder.planning.nyc.gov/#11.67/40.7198/-73.9515

@MTH / Krolik - its interesting because the above stats reflect the same across boroughs.
I was ready to make a post about how BK & QNS are getting younger as they are the relief valve for priced out young Manhattan buyers.. but the stats don't show that!

Would be hard to find some actual data on this, but my impression is that Millenials are staying in the city to start families at a lower rate than GenX did, within a given income cohort. This is just my personal impression with my bubble of my industry/career. The % of 40ish coworkers married with kid(s) that were in the city in 2006 "feels" higher than it does right now, and COVID only accelerated that trend.

Very interesting link, @MTH. Never seen such detailed statistics on unoccupied units. Double digit percentage of the total in manhattan in all areas that i checked.

@Krolik Surprising they're not either rented out or sold

Probably at coops that disallow renting.
Also, these are 2020 data. Wondering if this is from january or december and how much COVID is a factor. Manhattan was deserted by anyone with a place to go

Right so maybe some are pieds a terre/second homes being counted as unoccupied. And the COVID peak would explain a lot of it too, you're right

I wonder what % is unoccupied in 2023 and if any different. Also, how do they figure out if it is unoccupied or not? And how does this compare to nationwide statistics, as well as other big cities (SF/Boston/Seattle/Chicago).

That would be interesting to know - how do they determine that they pay RE taxes regardless. Maybe income tax returns? and yes, how it compared to other cities. I would not be surprised if NYC and maybe Miami were outliers but who knows

Since this thread was started by a "George", I feel compelled to point out that the Georgist Single Tax is a fairer and more economically efficient way to address all of the issues raised above -- air rights, vacant investor units, hoarding by large nonprofits, neighborhood rate disparities, & much more -- than trying to target them individually.

Agreed, and usually any of those single issue narrowly targeted taxes just creates a new arbitrage.

@inonada:
Not considering selling for multiple reasons: 2 children live in the city and we may want to move back if there are grandkids. Surprisingly rents in Manhattan hit another record high this month. Not an expert in tax law and depreciation but I pay almost no taxes on my rental income. As apartment is not a primary residence I would owe substantial capital gains taxes if sold. My tenants are great and thus far being a landlord has been tension free.

Thanks for sharing the reasons.

I am not a tax expert either, but I believe you get to depreciate the building (but not land) value at 3.6%/yr for 27.5 years, offsetting rental income. So if the cap rate it low enough — less than 3.6% of building value and something lower than that on overall price at time of purchase — then you pay no taxes on the income.

That said, any amounts depreciated reduce the basis on the property, and you’ll pay a 25% federal depreciation recapture rate on the sale. Plus 3.8% NII and state/local if applicable. So depreciation doesn’t make the tax obligation go away, rather it only defers it.

Deferred taxes are good because they mean compounding is tax-free. The same thing happens with stocks — you don’t pay taxes until a sale. Stock buybacks have a similar effect as depreciation, except you don’t get any cash along the way — just appreciated value. That might be better if you want to tax-deferred reinvest of proceeds for compounding but worse if you want tax-deferred income.

The real kicker for both is to never sell and either donate without ever paying cap gains, or die with a <$10M estate and do the same. Heirs get a step up in basis, meaning the cap gain basis is the value at your death. If you sell the day before you die, a cap gains bill is due. If your heirs sell the day after you die, none is due. Weird, but there it is.

All that said, people can get overly enamored with tax benefits and subject themselves to low rates of returns and/or uncompensated risk. IMO, one should really consider the tax benefits in the context of expectation of the overall investment’s risk and return outlook. But more often, people focus on the immediate certain benefit (“I saved $10K on taxes this year!”) rather than try to quantify the uncertain long-term outlook (“… by locking $1M into a risk-bearing illiquid investment whose expected RoR is 3%???”).

30 year fixed is over 7%. Rents are increasing. Clearly the market has shifted.

@nada - isn't there a game around "never sell" and "just defers your taxes" using 1031 exchanges?

So RE investors keep rolling their gains/capital into newer properties at higher values?

I'd imagine a few of them could get even more clever, live off HELOCs, and put the assets into the correct structure so that their heirs get "step up basis" at death.

>> @nada - isn't there a game around "never sell" and "just defers your taxes" using 1031 exchanges?

Yes, I forgot to mention that. That is special to RE.

I recall speaking to one NYC RE professional circa 2007 saying sophisticated RE investors understood they were paying too much buying in 2007 but didn’t want to pay taxes on all the 1031 exchanges they had piled up over the years. So they were exchanging yet again in 2007, despite the obvious, and rushing to close *something* before the 1031 clock ran out. That didn’t work out so well. The issue with the “1031 forever” strategy is that it can lead you over cliffs or into lost decades.

>> I'd imagine a few of them could get even more clever, live off HELOCs, and put the assets into the correct structure so that their heirs get "step up basis" at death.

Yes, I think so. Works for the first $10M, at least, before estate tax kicks in. But trading a (say) 3% after-tax cash flow via depreciation w/o recapture with an 8% HELOC doesn’t seem like a great trade to me.

My first co-op , it took about 8 years before prices went up !986-1994 , but from 1995-2007 I doubled my investment ..... 1BR in midtown east

My second co-op , was flat for 4 years, 2008-2012 , then rose 50% 2013-2019 , but flat last 3 years... 2BR UES

I am noticing the same thing as the Original Poster when I look at Manhattan (1BR) listings in most neighborhoods: Most sellers who bought their unit anywhere between 2017-2019 seem to be selling for a price almost identical to where they bought it -- barring units that have seen a notable renovation. I do believe one of the biggest drivers is higher maintenance costs.

Many coops in Manhattan are big on the buyers being primary residents. How much does shutting out the investor class (buy to rent, flippers, etc.) moderate the prices?

@suswang8 - I think you hit the nail on the head. Scary charts here:
https://millersamuel.com/?charts=manhattan-co-op-condo-monthly-costs-2

what happened in 2015 for Coop and 2019 for condo ,which show a big decreasing of monthlie ---- which I am not aware it happened. In my memory, the monthlie has being increasing endless every year, never dropped , and never dropped big as the chart shows

The only thing I can think of its the interest rate, that maybe the building mortgage probably refinanced into lower rate, however, the interest expense usually is only 5% of the total monthlie.

Yes, the trajectory of increase of monthlie is the biggest driver that scares buyer away, considering the tax, operational cost, fixing up, and interest all will going up

It would really help if there was some sort of explanation as to what those numbers represent

Taken at face value, the numbers imply that monthlies have increased at 3x the rate of inflation since 2007. That rapid rise in costs is unlikely to change any time soon, and it will be a big factor limiting future price appreciation.

I wouldn’t take the data face value. The condo data is probably very screwed up by changes in the inventory mix. It probably also includes 421a’s that have rolled off and expired, underfunded monthlies to make a building look cheaper, etc.

The coop number is probably less unreliable. That ran at 0.8%/yr above inflation. Seems like a non-event to me with respect to lack of “price appreciation” (aka housing inflation). Maybe the future doesn’t bode well for “price appreciation”, I dunno, but monthlies are not really a primary reason in my head.

I use the condo numbers bc that's all I would buy (or a TH). Certainly the average condo today is better than the average condo in 2007. It's not cheap to maintain all those pools, basketball courts, and golf simulators. But the expiration of 421a, union wages, higher insurance, higher energy costs -- all add up and have been growing well above inflation. And the 1980s condos turning 40 mean many are at the end of their useful lives (see Surfside) and need costly structural work that wasn't budgeted for.

The biggest reason to be bullish on NYC real estate is that the Trump tax cuts expire in 2025 and then we'll be able to deduct all state/local taxes and mortgage interest up to $1m. That practically cuts the property tax portion in half.

I just looked up a condo building where I had a 1BR in the mid-2000’s. Monthlies there went up from $1.63/sqft in 2010 to $2.42/sqft on the most recent sale. That’s 42%, or 0.3%/yr above inflation. The prior decade was probably much more due to 421a roll-off, but does that really count? I feel the same way about chronic underfunding of infrastructure. It’s an unexpected cost to the willfully blind, I suppose, but my sympathies are limited to the willfully blind.

I have a question for people here. What is your ideal level of staffing in a building?

I’ve recently moved into a building that has the most ridiculous level of staffing I’ve ever seen. We have 1 staff for every ~4300 sq ft of apartment, with corresponding monthlies at $5.81/sqft. This is not because it’s a small building, but rather that the staffing is just plain high.

My last condo building had 1 staff for every ~15,000 sq ft with much lower montlies at $3.12/sqft. While functional, I found it antithetical to an ultra-luxury building. Front door staff had zero time to be friendly, as they were constantly sending people to their floors from the computer. Mail was in mailboxes rather than hand-delivered, which is a whatever. But food deliveries were odd. They basically put your food on the elevator floor and sent it up, calling you to be prepared to fetch it lest the elevator get away, rather than have staff deliver it. Very uncivilized, and I consider myself a pretty uncivilized person. Also, having someone come up for 5 minutes to help you move furniture was outside of services they could provide (not because they were annoying, but rather because they were understaffed).

My building prior to that had 1 staff for every 8000 sq ft, with monthlies at $4.23/sq ft. To me, that was just right.

@nada - staff per sq ft is an interesting measure, I suppose its better than "per apartment" since you have a varying mix of studio/1/2/3bed. Possibly "per resident" would be an easier measure to estimate? Do you have an easy online reference for overall building sq ft?

I've never lived in a building fancy enough to hand delivery my mail or bring my food up to me. We had mailboxes and food delivery got buzzed up in the service elevator.

I've lived in a couple doorman buildings on opposite ends of the spectrum

200unit/~500 residents with 16+ staff
7am-11pm - concierge, doorman, porter / 11pm-7am - concierge only +24/7 super

50unit/~150 resident with 5 staff
7am-3pm - doorman, porter / 3pm-11pm - doorman / 11pm-7am - no staff / weekends - no porter +24/7 super

I was very happy with the bigger building, and the size of the building allows for scaling staff in a cost efficient manner.

My smaller building is paying a higher percent of cost in staffing, but getting much less. Having the building unstaffed 1/3 of the day, and lightly staffed for another 1/3 allows for all sorts of weird stuff. Raging 4am parties, people sleeping in the lobby, package theft, break ins, etc.

I wouldn't live in a part-time-staffed building again. It's the uncanny valley of building staffing.

@nada that is pretty unbelievable that they were putting the food on the floor and sending the elevator up ?. I'm pretty sure they could have afforded to hire one or two more staff! You must have been scratching your head when'd you first witnessed that system, lol

I would have assumed that the food delivery guys are supposed to go up or at least the building will have room service type of trolley where the food delivery will be kept.

>> Possibly "per resident" would be an easier measure to estimate? Do you have an easy online reference for overall building sq ft?

Offering plans have all the sq ft and totals listed. The Maps entries on ACRIS may have it to. A sloppy estimate would be to look at average ppsf and average price of past listings, summarized by SE on the building page, and divide. Of course, that skews the measure to listed inventory, but probably close enough.

My current building has 0.75 staff per apt. The smallest apts carry 0.40 staff each, the two largest ones 2.5 staff each. I’m guessing it averages 1.75 residents per apt, but probably only 1.0 actually present currently. I can’t wait for the summer, when staff will substantially outnumber present residents.

Staff per square feet seems odd, as staff are available to all tenants, regardless of the space the tenant is consuming. We're a fully staffed building: 234 units, mix of studios, 1,2,3 BRs. 15 full time staff, down from 16 in earlier years:
'behind the scenes':
1 resident manager
2 handymen
4 porters
1 plasterer
'front of house':
4 ‘doormen’
2 ‘doorman/concierge’
1 ‘concierge’

7 days/week: 24-hour doorman, & doorman + concierge from around 7am to fairly late in the evening (11? I'm usually in bed by then). Guests are announced (though they've gotten a bit lax in the last few years). Mail and packages are handed to you at the front desk (and I hand my outgoing mail to them - there's a drop box behind the front desk). Delivery people are not allowed upstairs -- the concierge will bring it up, or, if you’re ordering late, the doorman will let you know you need to come down to pick it up in the lobby. Doormen will help load people and their goods in/out of cars & taxis, and fetch a trolley for your stuff and wheel it inside to the elevator. Everybody in a building uniform (blue or brown work uniform or blue & gold livery), though no gloves on the doormen.

I think at least one of the handymen is on duty on the weekends. There may be some union rules about naming the positions -- I don't know why some are a ‘doorman’ or ‘concierge’ or the hybrid, but all the ‘front’ staff wear the doorman uniform, and will open the door (though I never see the concierge doing it when there's a doorman around -- clearly there's some seniority/title thing going on).

'Payroll & Related' iss about 20% of the coop's expenses (taxes: 60%).

>> @nada that is pretty unbelievable that they were putting the food on the floor and sending the elevator up ?. I'm pretty sure they could have afforded to hire one or two more staff! You must have been scratching your head when'd you first witnessed that system, lol

Definitely. Why the hell are they putting my pizza box on the elevator floor, whose next logical location would be the kitchen counter? Nasty. I took to putting it on the range and then disinfecting with liquid and fire afterwards.

You saw the apartment, and the building is host to a large number of super-expensive apts. Even the cheapest ones, of which there were few, cost a pretty penny. Definitely incongruous. I guess the board wanted to keep costs down, but it was absolute nonsense IMO relative to the cost of 4 staff across $1B+ of apts whose average price runs $3000-3500 ppsf. 4 additional staff would have amounted to perhaps $200/mo on apts averaging in the high single-digit millions.

The apt was great, but the mentality of people there just didn’t make sense to me.

> But food deliveries were odd. They basically put your food on the elevator floor and sent it up, calling you to be prepared to fetch it lest the elevator get away, rather than have staff deliver it.

What??!

>> I would have assumed that the food delivery guys are supposed to go up or at least the building will have room service type of trolley where the food delivery will be kept.

Higher-end buildings tend not to send up food delivery staff for security. The worst was the one building where the staff would accompany the delivery person to your door, back in the days you’d tip with cash. The staff couldn’t shuttle your tip, lest they be accused of stealing, hence the accompaniment.

I have never been big on delivered food, but having not ONE but TWO people show up at your door to give your lazy ass your supper embarrassed me into ordering delivery even less.

>> Do you have an easy online reference for overall building sq ft?

Actually, the easiest way is the following for buildings that allocated common elements by sq ft. Look up sales record for any apt, determine %-age of common elements, divide against sq ft of said apt.

>Why the hell are they putting my pizza box on the elevator floor, whose next logical location would be the kitchen counter? Nasty. I took to putting it on the range and then disinfecting with liquid and fire afterwards.

All that for pizza.

>> Doormen will help load people and their goods in/out of cars & taxis, and fetch a trolley for your stuff and wheel it inside to the elevator.

Right, that was the other bizarre thing about the building. The doormen would not open car / taxi doors, assist with bags, etc. Not because they were lazy, but rather because the door was not on an automatic open (with indoor concierge acting as additional security). The doorman couldn’t step away for even 10 seconds because, if they did, residents would be left wrestling with the door themselves.

Your building seems to provide a pretty good level of service with the staff they got, balancing the service. My old building seemed to pretend having a certain level of service by providing it highly on half the things, but at the cost of completely letting the rest go. I can open the door myself every now and then when the doorman is otherwise occupyied, but for the love of god, don’t put my dinner on the goddamn elevator floor.

>The doormen would not open car / taxi doors, assist with bags, etc. Not because they were lazy, but rather because the door was not on an automatic open

Odd

"Higher-end buildings tend not to send up food delivery staff for security."

It used to be that, after dropping off the food, delivery people would shove takeout menus under the doors of all the other apartments on the floor (and some would walk down to the next floor and do the same on each succeeding lower floor). A much hated practice that keeping them to the lobby solved.

As I said previously, all services are available to all tenants, and my share of all this service runs me about $400/mo. A 'bargain'? Maybe or maybe not, but when some of less obvious things are taken into account, it's not unreasonable (there are exterior plantings to be kept up, snow to be shoveled, lobby floors to mop, hallways to vacuum, etc.). To nada's original question: I think it's reasonable. Do I need an elevator operator? No. A front desk switchboard operator? No. My pizza unboxed, put on a plate, and placed before me on the table? Well, that might be nice. But no, because if I want that, I eat out. (And that's partly why I don't order in: somebody else does the cleanup and dishes as well).

>> As I said previously, all services are available to all tenants, and my share of all this service runs me about $400/mo. A 'bargain'?

Seems like a bargain to me at $400/mo. I have always felt owners of larger apts are subsidizing residents of smaller apts. Staff utilization tends to scale with resident count, and larger apts tend to have fewer residents per sq ft. With common elements, it’s even more the case — simply because the desire to use a common element decreases as your personal space becomes nicer.

>> But no, because if I want that, I eat out. (And that's partly why I don't order in: somebody else does the cleanup and dishes as well).

I don’t order in because delivered food is antithetical to how I prefer to eat. Most of the things I want to eat should be consumed immediately. Stews, curries, etc. are the exception in that they travel well, but restaurants tend to make them too salty for my tastes / needs. Pizza was common for a period (once every couple of weeks) because of COVID, a pizza stone that could reestablish the crust, and the 20-min walk to the nearest “acceptable” pizza establishment. But IMO, a good pizza’s dough should go from fluffy / fresh to rubber in 60 minutes tops. The best example I’ve had — Una Pizza Napoletana — goes rubber in 10 minutes.

@Aaron/nada

My share of staff costs is also about $550/mo, but unfortunately being a smaller building it doesn't get very much (part time doorman, etc as mentioned above).

You hit the nail on the head with larger units consuming less staff/common elements resources per sq ft. When I was on the board, the amount of noise from smaller units re: lounge/roof deck BS was astronomical. Buy a bigger unit or go to the park and touch grass guys (always guys).

People who care just enough about it to demand it's perfect but not enough to actually take care of stuff. The biggest whiners were also caught on camera / by neighbors being the people making a mess too. Of course. Always the same 5%.

I'd be happy to live in a fully staffed but amenities-light building now.

Good discussion about the services. Large units indeed use less services per sq ft.

On food, I indeed order only Indian food on take out as many other cuisines including Chinese don't travel so well (that wok super-heat keeps food cooking). For pizza I pick up from one of the two places which are less than 3 minutes walk for me and we are lucky to have them so close. Easy for me not to worry about services when I do't have a doorman (virtual door opening does exist) and pay $0.5 in non-tax portion maintenance of my coop.

$0.5 per month per sq ft.

$400/mo, $550/mo, $0.50/mo/sq ft all sound so reasonable. I’m beginning to wonder whether there is any apt out there that pays more CCs than mine.