Tariffs and property taxes on Long Island - by Brad and Sean Cronin

 

 

Tariffs have far-reaching implications beyond international trade. On Long Island, the imposition of tariffs on imported materials has begun to ripple through the commercial real estate sector, influencing costs, property values, and, consequently, property taxes.

At its most basic level, when expenses rise and revenues remain flat, property taxes should decrease to reflect the resulting decline in the property’s value. Unfortunately, the long-term impact of tariffs is even more disruptive and far-reaching, affecting not just immediate cash flow but also future investment decisions, market stability, and the overall viability of commercial real estate. For these reasons, property taxes must be carefully examined and adjusted to account for the financial strain tariffs impose — both in the short term through reduced Net Operating Income (NOI) and in the long term through broader market disruptions and increased risk to property owners.

Rising Costs and Their Consequences
The recent tariffs on essential building materials such as steel, aluminum, and lumber have led to significant increases in construction costs. According to the Long Island Builders Institute, these tariffs have resulted in price hikes as high as 30% for key materials. This surge in costs has made new commercial developments more expensive and less financially viable.

In an area like Long Island, where construction is already costly due to limited land and strict zoning laws, the rise in material prices exacerbates affordability issues. The need for affordable housing has been publicly acknowledged by the governor and local municipalities, yet escalating construction costs create yet another hurdle that hinders progress.

For commercial properties, the impact is even more severe, often forcing developers to postpone or scale back planned projects. But tariffs affect far more than just new construction — they also impose a significant strain on routine operations and maintenance. Materials subject to tariffs, such as steel, aluminum, and lumber, are critical not only for development but also for everyday repairs, system upgrades, and general upkeep. As a result, even standard maintenance becomes markedly more expensive. This drives up operating costs, compresses margins, and can lead to deferred maintenance, accelerated property deterioration, and declining tenant satisfaction. In this way, tariffs hinder both the ability to pursue future development and the capacity to properly maintain existing assets.

Impact on Property Values and Assessments
The surge in construction and maintenance costs, combined with a slowdown in development activity, is having a direct and immediate impact on property values. As the feasibility of new projects declines, the financial risk associated with moving forward grows, deterring both developers and investors. At the same time, elevated costs make even routine improvements increasingly unaffordable — particularly for commercial property owners already operating on tight margins. In many cases, postponing or abandoning necessary upgrades is not a matter of strategy but of financial survival. This lack of reinvestment drives down property values, erodes curb appeal, weakens local economic activity, and hampers efforts to modernize aging infrastructure.

For owners who are compelled to proceed with maintenance and renovations despite these challenges, the financial consequences are immediate. Rising material and labor costs translate into significantly higher expenditures, while rent levels often remain flat. The result is a compressed NOI, reducing both current property valuations and long-term investment potential. In a market where profitability hinges on already thin margins, this imbalance creates considerable risk and long-term instability.

These economic pressures inevitably affect property tax assessments. As reinvestment slows and property values decline, assessments should be adjusted downward to reflect these changing market realities.

Potential Long-Term Implications
If tariffs remain in place or increase, the long-term implications for the commercial real estate market will be substantial. Continued high costs will deter investment and reinvestment in aging properties. As operating budgets and corresponding tax bills continue to rise each year, property owners will be left grappling with high taxes while managing a reduced NOI. This growing financial strain results in increased vacancy rates, diminished reinvestment activity, and an overall decline in the region’s economic vitality.

Addressing these challenges is essential to maintaining the region’s long-term economic health, and one important step is for property owners to bring these issues to the attention of the Assessor. Doing so creates an opportunity to adjust the property tax burden in light of the evolving economic pressures and ensures that assessments more accurately reflect current market realities.

Since property taxes are often one of the highest expenses, it is critical that assessments reflect both the quantifiable and non-quantifiable impacts of tariffs. These new circumstances not only reduce the value of the asset but also increase the financial risk associated with owning and operating the property — now and into the future. A failure to account for these realities results in an inequitable tax burden that undermines the property’s viability and the owner’s ability to operate the property.

Brad Cronin, Esq., and Sean Cronin, Esq., are partners at Cronin & Cronin Law Firm, PLLC, Mineola, N.Y.