On Friday, we discussed some reasons New York’s condo market seems bust-proof.
As rates fall across the nation, New York new residential construction remains strong — and prices are higher than ever.
But high-end market condo prices aren’t the only rising costs. Just ask any Manhattan renter.
The Wealthy New Yorker Tradition
In a city in which low vacancies and a high number of residents mean rent can easily push past the $2,000 mark, purchasing a place — even an expensive one — may not seem like quite such a stretch.
Buying a really expensive apartment instead of renting one may not seem like a logical choice for everyone. It’s one made easier for high-income earners.
And one thing is clear: New York is home to some serious cash. Bill Fuhs, president of the New York Private Bank and Trust, estimated that in 2001, about 27,000 families in the U.S. had a net worth of more than $30 million; the New York Times estimated up to 10 percent of them lived in New York.
Even New York’s non-wealthy are doing better than the rest of the country (which is a good thing, considering the cost of living is higher). The average salary for a New Yorker worker was $48,980 in 2006. The median U.S. salary in 2006 was $33,634.
Many, Many New Neighbors
Lots of new condo real estate and lots of money to spend on it: Sounds like the perfect situation. However, even a strong sales market can pose problems.
New York is growing. It’s estimated to have nearly another million people by 2030.
Remember those uber wealthy New Yorkers? According to the New York Times, the top 1 percent of New York earners supports about 153,000 service jobs in the city. As the wealthy flock to the city, more service industry workers will, too — more high-earning New York citizens means more jobs for them.
But concern that New York’s lower-income workers and any new residents who aren’t wealthy — or even pulling in that $48,000+ average — will be priced out of the city is a real threat.
As rents rapidly rise, New York may become an unmanageable place to live for many. The New York Times reported last year that affordable rents for moderate income households (including New York police and firefighters, both of which typically make under $40,000 a year when starting out) dropped 17 percent between 2002 and 2005, according to a report by researchers at New York University.
The Times also reported that two out of every five New York City households earn $32,000 or less. (Which makes the Mayor’s office estimations that a third of NYC renters pay 50 percent or more of their salary to rent seem suddenly understandable.)
Gotham Gets a Plan
New York is well aware of its existing housing issues. And the city is stepping in.
Mayor Bloomberg’s widely touted PlaNYC was designed in part to create sustainable, affordable homes for the million incoming residents. The plan says New York must add housing for 500,000 people over the next decade so that the population hopefully won’t rise before housing options do.
That would, after all, increase demand — and rent prices — further.
Another thing abundant in the Big Apple? Reasons to move there. New York will always offer unparalleled job opportunities for those in the media, entertainment and finance industries; it’s still known for its glamour and glitz and 24-hour nightlife.
As a result, people will always want to live in New York — so life in the Big Apple isn’t cheap. It’s the simplest economic theory — the demand for living in the city is high; the supply of housing, not so much.
For New York’s financially upward, housing may not be a pressing issue as new condos continue to hit the market.
Over time, PlaNYC will hopefully alleviate some of the financial difficulties lower-income earners face finding housing in New York. If effective, it will ward off a real housing crisis for those facing low incomes and high rents.
Middle-class earners close to the salary average, however, will likely still have to dedicate a large chunk of their salary to rent. But that challenge and sacrifice, in a way, is part of the deal to live in New York. And New York is upfront about it. It’s a busy city, it’s a cultural city — and it’s an expensive city.
Living in New York invariably will include finding somewhere affordable to live. It isn’t easy. Even with the additional housing being built over the next 10 to 15 years, housing is likely to still be expensive, tight on space and highly competitive to get.
As Frank Sinatra sang in "New York, New York," if you can make it there you can make it anywhere. And that’s all true. It just seems Sinatra left the line about finding a rent-stabilized apartment out of the song. Possibly because he couldn’t find one.