Real estate interests and their supporters are making a final appeal to New York state legislators to extend the Relocation and Employment Assistance Program (REAP) before the assembly’s adjournment next week.
Founded over three decades ago, the REAP tax break is set to expire on June 30 unless renewed by the Senate and Assembly.
This program was notably absent from the budget deal resolved in late April, despite the approval of several other tax incentives, including a major improvement to the film tax credit worth $100 million a year.
Additionally, Mayor Eric Adams proposed a new incentive named RACE, which stands for Relocation Assistance Credit for Employees, intended to attract businesses to fill older office buildings in Manhattan.
Last week, a delegation from the Five Boro Jobs Campaign, which includes the Real Estate Board of New York and various borough chambers of commerce, made the trip to Albany to advocate for both REAP and RACE.
Support also came from borough presidents in Brooklyn, Queens, and the Bronx, who sent a letter to legislative leaders expressing backing for both tax breaks.
The Adams administration, along with Governor Kathy Hochul, who had included the incentives in her initial budget proposal, supports the renewal efforts.
Deputy Mayor Adolfo Carrión stated, ‘REAP and RACE are wins for our entire city. They will help turn empty offices into bustling businesses and create good-paying jobs for New Yorkers across the five boroughs.’
However, state senators from Manhattan have raised concerns about the potential relocation of businesses to other boroughs, arguing that Manhattan is still recovering from the pandemic and such incentives might undermine its economic standing.
Fiscal watchdogs have also frequently criticized both REAP and RACE.
A recent report from the Independent Budget Office highlighted a lack of access to necessary business tax filing data needed to assess the effectiveness of REAP.
The Citizens Budget Commission has expressed skepticism regarding its value as well, emphasizing the need for an evaluation before a long-term renewal.
‘It would be best to evaluate REAP before a long-term extension to determine whether it is worth the cost or should be tweaked,’ said CBC president Andrew Rein.
In comparison to other tax incentives, the cost of the REAP program is considered modest, totaling approximately $28 million annually.
Initially introduced in 1987 amid a mass corporate exodus to New Jersey, REAP offers a $3,000 annual tax credit for 12 years for every employee a company relocates to areas north of 96th Street in Manhattan or to other boroughs.
RACE, on the other hand, proposes a one-time $5,000 credit per full-time worker for firms moving to New York and leasing at least 10,000 square feet in buildings constructed prior to 2000.
Both programs are viewed as vital by business leaders outside Manhattan, as they attempt to rebound from the damage inflicted by the pandemic, particularly in office leasing.
In areas such as Brooklyn, while locations like DUMBO and Industry City are witnessing some leasing activity, the overall office vacancy rate in downtown Brooklyn stands at around 22%.
Regina Myer, president of the Downtown Brooklyn Partnership BID, emphasized, ‘We have a much smaller amount of desirable Class A office space. Every lease counts and REAP makes a huge difference.’
Myer further argued that REAP would not harm Manhattan’s economic health, stating, ‘We just want Brooklyn to get a share of office leases.’
Downtown Manhattan is also facing its own REAP challenges, with a similar benefit required for renewal.
Historically, this benefit has been available to firms relocating from out of state or those within the city that expand their payroll by 25% or add a minimum of 250 employees.
Last year, only 2.24 million square feet of office space were leased in lower Manhattan, a figure reflecting the ongoing struggles in the real estate market.
Jessica Lessin, head of the Downtown Alliance BID, remarked, ‘Unfortunately for us, 2024 was a terrible year in commercial leasing, worse than after 9/11 and the 2008 financial crisis.’
She pointed out that while some improvement has come from converting office buildings to residential use, roughly 20 million square feet of office space in lower Manhattan remains vacant.
Companies benefiting from REAP argue that the tax incentive is crucial for their operations and sustainability in the city.
The Downtown Brooklyn Partnership has recently experienced a surge in leases from architecture and design firms.
Notably, 80% of architects living in New York City are within a 30-minute commute of Downtown Brooklyn, with many residing in that borough.
The Architecture Research Office faced a decision between two potential locations as their lease in Hudson Square was nearing expiration.
They considered a financial district site and one in downtown Brooklyn, both of which had comparable costs.
Thanks to REAP, however, the firm is set to receive around $100,000 annually from the tax credit, allowing them to increase their staff to a total of 35 employees.
Stephen Cassell, the founding principal of ARO, highlighted the significance of this financial support, stating, ‘Having that cash is a big deal for now.’
image source from：https://www.thecity.nyc/2025/06/06/reap-race-tax-breaks-expiring/
