As apartment vacancies climb, sale prices and rents are falling, but nowhere near the magnitude needed to compensate for scarce affordable housing options.
And while the flight of affluent residents to the suburbs appears to be overstated, major companies are downsizing and fewer people are commuting, setting the stage for a new reckoning over personal and business priorities.
Real estate is everyone’s business in New York City. The industry generated nearly US$32 billion (S$43 billion) in taxes last year, 53 per cent of the city’s tax revenue, and it employed more than 275,000 people.
The outlook is daunting. The hotel occupancy rate is 39 per cent, down from 95 per cent this time last year. Roughly one-third of the city’s 240,000 small businesses may never reopen, and iconic retailers like Neiman Marcus are closing.
Residential real estate sales plummeted 40 per cent in July, and 57 per cent in August, compared with last year. Commercial sales were down 28 per cent and 43 per cent in July and August.
Still, many experts predict that New York will eventually bounce back – as it always does, citing the eventual rebounds after the Great Recession, 9/11 and the fiscal crisis of the 1970s.
What will happen to the market?
Rents and sale prices will continue to drop in the next year, significantly so in some areas, but likely not for the people who need relief most.
Rents in the New York Metro area – including parts of New Jersey and White Plains – are projected to drop 7.7 per cent to 11.3 per cent by the middle of next year, from the first quarter of this year, property consultants say.
The median rental price in Manhattan, including concessions, was US$3,036 a month in September. That is an 11 per cent drop from the same period a year ago, but still far beyond the means of most New Yorkers.
Rents will continue to drop citywide, in the absence of a vaccine, but that trend masks affordability problems in several neighbourhoods hit hard by the coronavirus.
In sales, the boroughs beyond Manhattan are expected to recover sooner, because they are relatively less expensive, and proximity to midtown is no longer a top priority. In August, Brooklyn exceeded the pace of sales recorded the same time last year, and Queens is on a similar but slower trajectory, according to StreetEasy.
What happens to affordable housing?
The US Department of Housing Preservation and Development, which funds and maintains much of the city’s affordable housing stock, suffered a deep cut this summer, when the city agreed to decrease its capital funding by 40 per cent over two years.
Ms Rachel Fee, executive director of the New York Housing Conference, a policy and advocacy non-profit, estimated that could translate into 21,000 fewer new and preserved affordable housing units and 34,000 fewer jobs, mostly in construction and related industries.
In Far Rockaway, Queens, a complex of 11 buildings called Edgemere Commons with more than 2,000 units, all of which would be offered below market rate, was scheduled to receive city financing next month, but a backlog of stalled closings this summer means the project will likely be pushed back further.
Millions of dollars in pre-development costs like architectural plans, legal fees and engineers can overwhelm developers awaiting funding, said Mr Ron Moelis, a co-founder of L+M Development Partners. His firm expected to close city financing in June on the first phase of Bronx Point, a mixed-use project in the South Bronx with 542 below-market-rate units expected to be completed by 2023. Now financing has been pushed back until at least next month.
In a September survey representing about 85,000 apartments in New York, nearly 20 per cent of tenants paid no rent, according to CHIP, a group that represents 4,000 landlords and managers of primarily rent-stabilised buildings.
Ms Barika Williams, executive director of the Association for Neighbourhood and Housing Development, a coalition of housing organisations, pointed out that unemployment figures do not show the full scope of struggling renters because many who are out of work or are underemployed were paid in cash, and therefore not recorded by official counts.
“We’re on the brink of an eviction tsunami,” she said.