Residential Building Permits Plunge 50 Percent
- Jun 02, 2008
By Rachel Block, ReporterNew York–In the past year, the total number of residential building permits issued in New York City has plummeted 50 percent. After a record high in 2007, this is a huge drop for the city’s “building boom.”According to the U.S. Census Bureau, the number of city building permits issued in April alone fell from 459 in April 2007 to 223 in April 2008. In response, the number of permitted units fell 29 percent, from 2,809 in April 2007 to 1,989 in April 2008. Permitted units fell 42 percent this year during the months of January to April, dropping from 10,073 to 5,882 units.”I think the primary reason is that the credit crunch has impacted funds for development just like they affected the availability for mortgages of homeowners,” said Jonathan Miller, Co-founder and President/CEO of Miller Samuel Inc., a certified general real estate appraiser in New York State. “Funds for condominium development were particularly impacted, and that has been the source of permit activity over the last five years.”Many developers say the decline is partly due to artificially inflated numbers in 2007 as well as to the credit crunch. “With changes with sales activity you are coming off a record year that exaggerated the decline but clearly permit issuance is not likely to rise until the credit markets have sorted themselves out,” says Miller.Last year’s changes to the 421-a tax abatement program, which provided partial tax relief for condo owners and co-op tenant-shareholders, is another factor for the decline in permits. “It is expiring the end of this month so if you didn’t have your foundation as of now you won’t be eligible for the abatement,” said Miller. “That is also likely one of the causes of declines of permits — until land prices and acquisition costs decline, the loss of the abatement program removes a significant portion of the profit spread for the developer.”Queens and Brooklyn had both reached record highs for issuance of permits in 2007, and dropped 51% and 48% in April, respectively. The only borough to record a gain in units was Staten Island, which rose from 236 to 376, and Miller does not foresee a turnaround any time soon.