In 1963 New York City was cash-strapped, so government leaders enacted the Commercial Rent Tax (CRT), which required businesses to pay a surcharge that was calculated on their annual rent to help fill city coffers. As the city’s fiscal condition improved over the years the tax was eliminated for businesses throughout the outer boroughs and in northern Manhattan.
After the terrorist attacks of September 11, 2001, businesses in the World Trade Center vicinity were exempted from paying the tax to aid in the area’s recovery. Then in 2017 lawmakers again exempted more small businesses from paying CRT as commercial rents and operating expenses increased, resulting in more struggling shops and restaurants and vacant storefronts spanning from the southern tip of the island to Manhattan’s 96th Street, which is the only remaining CRT zone.
Today, thousands of storefront businesses located in Manhattan’s commercial districts and surrounding neighborhoods face unique pandemic recovery challenges such as debt, remote work, fewer visitors, and less foot traffic, yet they are still forced to pay the CRT, which is effectively a 3.9% surcharge levied on their annual rent when it exceeds a given threshold.
It is time to permanently eliminate the CRT on all restaurants and retail shops to support their recovery and long-term sustainability.
The CRT is a Manhattan-centric tax burden, but the issue is felt across the city and state because many businesses subject to this unjust tax are owned by people who live outside the CRT district, as are the people they employ. New Yorkers lose their businesses and jobs if these businesses struggle and close. The resulting shuttered storefronts make these commercial districts even less attractive for workers to return and for tri-state, domestic, and international travelers to visit. This results in less tax revenue to fund essential citywide services. These vacancies create emptier streets and unsafe conditions when public safety is a significant concern for people. When added to the CRT burden, this is a recipe for fewer new businesses to open, despite building owners’ needs to fill these vacant retail, restaurant, and commercial spaces (and many of these building owners are already facing potential financial issues related to non-renewal of leases and work-from-home office space reductions).
According to a recent study, New York City was the loss-leader among the cities around the country with an estimated yearly per-person reduction in spending of $4,661 due to remote and hybrid work, equaling at least $12.4 billion of less spending in the area – a truly frightening amount. Local businesses subject to paying the CRT are in areas now with low office occupancy rates and high street level commercial vacancy rates, while those in other areas that pay CRT are still struggling to recover. Fewer people spending less money hurts street level retail shops, restaurants, and bars extraordinarily hard, and continuing to force these businesses to pay the CRT adds a burden to financially injured businesses, especially when policymakers are seeking ways to revive this local and global economic center.
There is no doubt that the borough of Manhattan retains countless unique strengths and is an economic and social powerhouse compared to global cities, but New York lawmakers who ignore our serious liabilities brought on by the pandemic do so at its peril. That’s why we urge New York’s elected representatives to eliminate the CRT for all retail shops and restaurants, which will only reduce the city’s total CRT collection by less than 1/5, while allowing the savings to be pumped back into the economy, creating additional economic activity, and helping local businesses stay open, employ people, and attract people back to the Big Apple’s economic core and visitor destination.
Andrew Rigie is the Executive Director of New York City Hospitality Alliance. Lori Raphael is the Executive Director of BOMA New York. Jessica Walker is President and CEO of the Manhattan Chamber of Commerce.