Among the many terms that come to mind when one considers the New York housing and rental panorama — frustrating, ineffective, expensive, perhaps lucrative if you’re a landlord — “simple” is never one of them. The system and its dynamics are the product of a staggering array of factors, including market forces, the regulatory environment, taxes, shifts in workforces, and assorted national and international phenomena, all interlocking in sometimes confusing ways to produce the market that most of us find so jarring. Epicenter’s Felipe De La Hoz explains:
It’s no secret that the system isn’t working for renters right now, with rents soaring not only to pre-pandemic levels (a period at which there was an extraordinarily rare dip in NYC rental prices) but higher, with rents around the city hitting continuous, record highs, and Manhattan surpassing the somewhat symbolic median rent of $4,000 a month earlier this summer. On social media, in barbershops and parks, on college campuses and churches, New Yorkers have been trying to figure out why that is, and what we can possibly do about it.
Matt Murphy, the executive director of the NYU Furman Center and a previous deputy commissioner for policy and strategy at the Department of Housing Preservation and Development, points out that conversations over dipping rents and soaring vacancies during the height of the Covid-19 pandemic are too broad in scope and miss some of the more granular realities, particularly the fact that the fluctuations happened primarily at the higher end of the rental cost spectrum. “Even during the Covid period, we didn’t see the vacancy rate budge for low-cost housing. You saw it really move for the market-rate side and the high-cost side,” he told me.
Stark differences in vacancy rates
Indeed, the HPD’s 2021 Housing and Vacancy Survey makes the distinctions pretty stark: in Manhattan, the vacancy estimate throughout the year exceeded 10 percent, while in the Bronx it was less than 1 percent. Similarly, vacancy rates for properties asking for $2,300 or more in rent was nearing 13 percent, while it was less than 1 percent for all properties under $1,500. So, the famed pandemic rent slump really only manifested in certain slices of the market.
Murphy theorized that part of the current crisis stems from a phenomenon he’s termed “shadow supply,” which describes the removal of units from the market entirely. So, they’re not vacant because the rents are too high, but because the landlords aren’t renting them at all, a practice he believes is ballooning and taken yet more vacant units off the market at a time when people are desperately looking for them. In his estimation, a big driver of it is the simple cost of bringing an apartment back up to baseline condition after it becomes vacant following a long tenancy.
Redoing floors, updating appliances, retiling and repainting, and all the other necessary updates to get a property ready for a new tenant can run into the tens of thousands of dollars, and particularly for rent-stabilized properties, the landlord might simply judge that they’re better off leaving it vacant and taking a modest tax write-off. “I would imagine, if we saw these units that are being kind of held offline, that they’re in very poor condition. I think that’s where you have the issue, the capital cost side,” he said.
Rent stabilization protections
To understand all of this, we have to understand the changes enacted in 2019 as part of the Housing Stability and Tenant Protection Act (HSTPA). Among new protections like locking in preferential rents that had been used to massively increase rent even for stabilized tenants, the law more or less made it unfeasible to raise rents on stabilized properties even after a tenant moved out, which somewhat changed the economic calculus for some property owners who had stabilized housing stock. After years of the Rent Guidelines Board also voting to allow stabilized rents by nominal amounts or not at all, the cost of refurbishing and upkeeping a property might exceed the amount at which a property owner felt it was practical to do so given how much rent they’d be able to charge.
That’s not to say the solution here is to simply strike down all stabilization laws and send the market into free-for-all, as some libertarian economists might think. Aside from the chaos and suffering this would instantly create, the main part of the problem is ultimately on the supply and construction site. We simply aren’t building enough housing, especially on the low end of the cost spectrum, and we haven’t for a long time, a situation driven by both cost and regulatory incentives.
High NYC construction costs
It is very expensive to build in New York. Various estimates point to costs generally hundreds of dollars above other cities, in large part due to the cost of materials, high cost of labor, and the general complexity of navigating the city’s rules and zoning procedures, which brings us to the second point. Trying to get anything built means running a gauntlet of anti-development neighborhoods who fear that any additional construction will either surge rents, change the neighborhood character, lower property values, or whatever else, and they often make this displeasure very clear to City Council members who have traditionally been given an effective veto over rezonings in their districts.
Environmental and land use reviews suck up time and funds, to the point that a recent review by the Citizens Budget Commission estimated that the average land use application took over two years to make its way fully through an approval process. It’s not that having rules and regulations in place to protect public health and public space is a bad idea, but the process itself has become an obstacle to the long-term sustainability of a city that desperately needs additional housing. There are no easy solutions here, but it’s clear at least that we need a review of how this process works, which has been an objective of new City Planning Commission Chair Dan Garodnick, a former Council member now leading a citywide review of rules that, for example prevent some buildings from having too many studio apartments.
Citizens play a role
In terms of the average New Yorker, the best advice is pretty straightforward: demand accountability from our leadership, but don’t be knee-jerk opposed to new development. Changing the structure of a neighborhood is always scary, and it’s undeniable that it hasn’t always worked out in favor of the local residents. But one thing is for sure: without additional construction, we’re only prolonging the crisis, and eventually it’s going to catch up to you no matter where in the city you live. We must increase the supply, both by building more and putting offline apartments back on the market.
New Yorkers can press our representatives to champion concrete proposals like streamlining zoning, providing tax incentives for renovating and updating vacant apartments and tax penalties for keeping apartments vacant, and immediate aid to those who are at risk of losing their housing, such as through an expansion of the Section 8 funding at the federal level, the Emergency Rental Assistance Program at the state, and CityFHEPS at the municipal level. New York, after all, isn’t made up of land and buildings; it’s made up of the millions of people who live here, and they need somewhere to keep living.
Trump golf tournament drama
In other news at the intersection of NYC and real estate, City Council members are appealing to Mayor Eric Adams to end the Trump Organization’s contract that allows it to run a city-owned golf course in the Bronx and to cancel an upcoming tournament, the New York Times reported. The tournament in question has ties to the government of Saudi Arabia and has generated widespread criticism, particularly from family members of victims of 9/11.