New York's Have and Have-Not Housing Market
New York City has added an estimated 488,478 housing units since 1991. For a city that has added 1.1 million jobs over that same period, that's not great, but it's not terrible, either. Where things get complicated -- and in some ways less encouraging -- is in exactly what kind of housing it has added.
These numbers are from the New York City Housing and Vacancy Survey conducted for the city every three years by the U.S. Census Bureau. Full data from the 2017 edition won't be out until this summer, but the city Department of Housing Preservation and Development has prepared a summary of the major findings that was presented at a recent City Council meeting. After being tipped off to its existence on Twitter by Daily News editorial board member Alyssa Katz, I start digging into past such reports. The charts in this column are the result, and they do much to put the city's strange housing market in perspective.
The first chart shows that 488,478-unit increase since 1991, but it also makes clear that different categories have been growing at much different rates. (The Census Bureau surveys just a sample of New York City housing units, so be aware that all the numbers used here are estimates subject to sampling error and other issues.) There were 8 percent more rental units in 2017 than 1991 but 21 percent more owner units (these include both currently occupied units and those available for rent or sale). Then there's that mysterious category of "vacant, not available for sale or rent," which is up 162 percent since 1991 and 44 percent just since 2008. Here's what's up with that: 1
The biggest reason these vacant housing units aren't for rent or sale is that they're being renovated for future rent or sale. That's not a bad thing! It does mean that most of these places will be more expensive when they go back on the market, but it also means they'll be nicer. In general, New York City's housing stock is in much better shape than it was a quarter-century ago.
More problematic is the other big and growing category -- "held for occasional, seasonal or recreational use." That includes those usually empty midtown high-rise condominiums owned by overseas billionaires, and it might also include houses and apartments rented out much of the time through Airbnb. Some of the units held vacant "for other reasons," a category that saw big gains over the past three years, could be Airbnb rentals as well. In a study released last month, researchers from the School of Urban Planning at Montreal's McGill University estimated that Airbnb, which opened for business in late 2008, "has removed between 7,000 and 13,500 units of housing from New York City's long-term rental market." 2
Meanwhile, as already noted, the city has been adding owner units much faster than it has been adding rentals. And among housing units that are occupied by renters or are available for rent, a shrinking number are subject to rent control, rent stabilization 3 and other government intervention or aid.
This has had some interesting consequences. The formal reason the city commissions the Census Bureau to survey its apartment market every three years is that:
A rental vacancy rate below five percent triggers the declaration of a “housing emergency,” which is necessary for the continuation of rent regulation protections for New York City residents.
The overall rental market in New York City was, with a 3.63 percent vacancy rate in 2017, 4 still in a "housing emergency," but it's not all that tight by historical standards or in comparison with the rest of the country (the city still has a much lower vacancy rate than the nation, but the gap has been bigger in the past):
New York City rental housing also isn't wildly expensive by national standards. That is, its median gross rent of $1,351 in 2016 was above the national median of $981, but puts it in only 145th place among American cities, according to the Census Bureau's American Community Survey, with California cities taking the first 18 spots on that list. (The city's median gross rent in the new housing survey was $1,450, but there's no 2017 data from other cities to compare that to yet.)
But the New York City apartment market is really two (or more) apartment markets. For unregulated apartments, the median rent was $1,830 and vacancy rate was 6.1 percent in 2017; for rent-stabilized units, those figures were $1,375 and 2.1 percent, and for the mostly subsidized "other rental units," $649 and 0.9 percent. 5 It shouldn't be surprising that apartments with below-market rents are harder to find than apartments with rents set by the market, but combined with the general upgrading of the city's housing stock, the result is that high-end apartments have become increasingly easy to find in New York City while low-end apartments have gotten harder to find.
Put all this together, and it looks like New York City's real estate industry is doing a creditable enough job of providing housing for those who can afford to buy a home or pay more than $2,500 a month in rent. In fact, it may have overdone it for the moment. Again, that's not all bad! The city has more high-paying jobs than it did in the early 1990s. It should have more high-end dwellings than it did then. Plus, the affluent owners and renters of these dwellings pay lots of the taxes that help keep the city going.
Still, most New Yorkers can't afford $2,500 rents. The median New York City household had an income of $57,500 in 2016, quite close to the national median of $57,617. City renters had a median household income in 2016 of just $47,200. In 2017, 32.4 percent of New York City households were spending more than half their income on rent.
I've never been a fan of rent controls, because they discourage investment in housing, single out landlords to finance a government program, and sometimes benefit quite-affluent renters. 6 But clearly, the 146,902-unit decline in the number of rent-controlled and rent-stabilized apartments in New York City since 1991, coupled with the 94,632-unit decline in other subsidized or regulated apartments, means that -- even as the overall supply of housing has grown -- there are now fewer apartments that an average New Yorker can afford.
Why aren't more new apartments being built that average New Yorkers can afford? Mainly because land is scarce, labor expensive and property taxes high. Zoning and other regulations, along with obstreperous neighbors who fight new development, drive up prices, too, although I don't think these (especially the last one) are quite as big a factor in New York City as in, say, coastal California.
The state of New York does have a program, renewed last year after a precursor was allowed to lapse, that gives big property tax breaks to developers who set aside 25 to 30 percent of new units for affordable housing -- although critics say it won't generate much bang for the buck. New York City has been contracting with developers to build affordable housing on vacant city-owned lots. There seems to be growing support, at least among housing wonks, for policies to encourage the construction of super-small apartments (160 square feet, say) that could conceivably be affordable without government support. But it's hard to see all these efforts together adding more than 3,000 or 4,000 units a year.
Meanwhile, the city has been adding tens of thousands of higher-end housing units a year. Yet again, this isn't all bad! It's actually the main way affordable housing has been created in the U.S. in the past -- by building expensive housing and waiting for it to decline and depreciate its way to affordability. It can take a quite while, though: That 8.7-percent vacancy rate for $2,500-plus apartments in 2017 is an indication that landlords are really, really reluctant to lower rents even as demand sags. Also, there are parts of New York City where, barring civilizational collapse, housing is just always going to be expensive. I kind of love the idea of that super-skinny new luxury condominium tower at 432 Park Avenue eventually being converted to cheap efficiency apartments, but I'm not holding my breath.
In the Week last fall, Jeff Spross proposed another remedy: building lots of new public housing. Unlike in much of the rest of the country, public housing in New York City remains intact and in demand. Just under 5 percent of the city's population lives in it, and that share would be higher but for a matching problem in which older residents whose kids have moved out still occupy lots of the largest apartments. Building more would be really expensive, for all the reasons outlined above, and there is currently no appetite for such spending in Washington, the big financier of public housing in the past. Also, just keeping the city's existing public housing from falling apart is going to cost billions of dollars.
So that's that. No, the news on New York City housing isn't all bad, and no, I don't have any brilliant plans for fixing the parts that are. But it's good to know the numbers.
Why did I use a line chart here and a stacked bar chart the first time around? Because I made a subjective determination that lines told the story better. Same goes for the rest of the charts. In each case I tried bars first, because I think they're less likely to mislead, and switched to lines if I thought the bars were too confusing.
If you're wondering about "dilapidation, legal dispute, owner's personal problems, etc.," that's a grab bag of different categories from the survey that I threw together to keep the chart from getting out of hand. Dilapidation has become much less of an issue over the years, while owners' personal problems (such as medical issues) have become much more of one. The number of units held vacant because of legal disputes has fluctuated a lot from survey to survey but has been declining since a spike during the financial crisis.
Rent control is New York's tightest form of rent regulation and applies only to apartments in buildings constructed before February 1947 where "the tenant (or their lawful successor such as a family member, spouse, or adult lifetime partner)" has been living continuously since before July 1, 1971. Rent stabilization covers formerly rent-controlled apartments where the tenants have moved in since July 1, 1971, and apartments in buildings built between Feb. 1, 1947, and Jan. 1, 1974. Apartments are removed from rent stabilization when the rent passes $2,500 and the tenant either moves out or has two consecutive years with a household income of $200,000 or more.
The vacancy rate is units available for rent divided by total rental units. Vacant-but-unavailable units aren't included in either side of the calculation.
The median rent of rent-controlled apartments was $1,039, and there are no vacancies because a vacant rent-controlled apartment ceases to be rent-controlled.
Disclosure: I'm a landlord, indirectly, of rent-regulated apartments in New York City. That is, the building cooperative in which my wife and I own shares (the co-op is an apartment ownership structure more common in New York City than condos) owns several regulated rental apartments in the building.
To contact the editor responsible for this story:
Brooke Sample at email@example.com