NYC Housing Becoming More Affordable Amid Growing Vacancies And Flood Of New Inventory

On Tuesday we noted that Manhattan apartment sales have plummeted to a 6-year low amid a 20.1% drop in co-op and condo sales. 

Today, the Wall St. Journal reports that housing in New York City is becoming more affordable in general – pointing to an increase in inventory and rising incomes. 

A new U.S. Census Bureau survey shows a record amount of new housing, while the rental-vacancy rate is at its third highest level since the bureau began its survey in 1965. 

Driving the changes is a surge of construction in the last few years and a strong economy in which the growth of jobs has outpaced the increase in rents. The economic gains are beginning to benefit lower-income groups, economists said.-WSJ

 “A nearly decade-long rising economic tide really is starting to lift all boats,” said James Parrott, an economist at the Center for New York City Affairs at The New School. “The trends are all positive and encouraging and bode well for improved rental housing affordability.”

The survey reports 3.47 million housing units in New York – an increase of 117,000 in seven years. Over 35,000 rental apartments and 15,000 condominiums are also due to open in 2018 and 2019 according to Nancy Packers Data Services. 

Vacancy rates are also high right now: 

The vacancy rate was 3.63% across the city, the report found. The two higher vacancy rates recorded since 1965 included a peak rate of 4.01% in 1996, as the city was recovering from a steep local recession. By contrast, the current figure comes amid a sustained period of economic growth.

In Manhattan, the vacancy rate was 4.73%, the highest it has been in at least a decade. For all private rental housing, it was 6.07% and 8.74% for apartments renting for $2,500 or more. These were also at their highest rates in years. -WSJ

“Rising vacancy rates citywide are a sign that, overall, the housing supply is starting to catch up with demand, helping to relieve the upward pressure on housing costs,” said Mark Willis, a NYU Furman Center senior policy fellow.

That said – NYC vacancy rates vary by borough, with the Bronx at just 2.71%. 

Meanwhile, household income among NY Renters rose 11% over three years, while rents rose just 8.2%. According to the census report, the median household income among renters was $47,200 and $57,500 for all households in 2016. 

In rent-controlled areas, incomes rose an average of 7% while rents were up just 2.6%. 

Still unaffordable at the bottom

Despite higher vacancies, NYC housing commissioner Maria Torres-Springer said that “the city is still facing a dire affordability crisis” despite rising incomes, and that the administration will continue to strengthen rent laws while increasing inventory of affordable homes. 

Oksana Mironova, a housing-policy analyst with the Community Service Society, which often advocates for lower-income tenants, said there were “definitely some positive things in the report” but she wondered whether the higher income figures reflect higher-income tenants moving into newer luxury buildings that under city rules are covered by rent regulation. -WSJ

Landlord groups, meanwhile, are arguing that the Census data shows such a robust housing market that the City Council should remove certain categories of housing from rent control – in particular, Manhattan apartments renting for $2,000 or more. Current law requires localities to abandon rent regulation if vacancy rates exceed 5%. 

The city council is set to adopt legislation on March 21 to extend current regulations for three more years. 

Jack Freund, executive vice president of the Rent Stabilization Association, which represents 25,000 owners and managers of rent regulated housing, noted that the 5% standard is within the survey margin of error of the 4.73% vacancy rate Manhattan. The vacancy rate for apartments renting for $2,000 to just under $5,000 is 5.2%. WSJ

That said, with Manhattan apartment sales at a six-year low, vacancies at recent highs, and interest rates on a steady course higher – one has to wonder if New York real estate is about to become much more affordable.