Well, ladies and gents, seems that there’s enough to report on.
But here’s the best part of them all:
I think all of us stalwart NYers are breathing a sigh of relief at this. Seriously: we have had enough “luxury condos” – read: tax shelters that stay unoccupied – popping up all over the place. This has become a city where even a decent salary isn’t enough to make a solid living anymore. No joke: 10 years ago, if I were to make 60K a year, then a 1BR would be about $800-$1,000 a month, and this wouldn’t completely wreck a monthly budget. Right now, if I were to try and find even a studio for that price, I’d have to sacrifice something to the Gods of Apartment Hunting and pray that the place I’m getting isn’t falling apart at the seams. I’ve no issues doing my own repairs, but really – I don’t ask for luxuries. And nor do the people who really, really need an apartment that won’t get them broke.
As it is, the 421-a program was originally set into place to give developers an incentive to build affordable housing. Quite obviously, as more and more of these developments are coming up from the ground, it’s clear that the program has failed absolutely miserably in that respect. The developers still make money off building severely overpriced properties, they reap the benefit of the tax abatement and get to write off the depreciation on the buildings they put up. And do the regular joes of NY have a place to call home that isn’t going to make them go broke? NOPE. Of course not.
The bubble is going to burst eventually, but more on that below… First, a little something else.
Here’s the deal, kids: I’ve lived in the southern parts of Brooklyn most of my life. I’m LONG familiar with the N train and its woes. Usually, I take the N only to loop through Coney Island and end up on the D, mostly because I really like tucking myself away in a window seat with an extra-large coffee from Dunkin Donuts (I’m a writer, so sue me). However: these repairs are extremely past due. The walls of the N line stations they’re shutting down have been dripping a liquid of unknown chemical composition for quite a while; the steel girders have been rusted through, and the paint flakes off if you look at it wrong. I am not even asking about the lead content of that paint, trust me. And shutting down one side of the entire line is not an awful thing. Why? Temporary platforms! The line still runs, it’s just going to be a wooden portable platform and a different staircase. That’s what happened when the stations on the Q line got their facelifts.
But the repairs are long past due on the N. Believe me, it’s pretty much the only reason I’m not bitching.
Hey: the same thing can be said for the F line, where I noticed they’ve started replacing the wooden staircases with metal ones. About time, too, because I really haven’t the foggiest how old the wooden planks in those stairs/mezzanine landing were, but it’s a relief they’re getting replaced.
I can expect the F line to get its longer-intentioned facelift sooner rather than later, to note.
Now, here’s the thing about NY real estate. The bubble that has led to the fiasco that we’ve seen with mortgage lenders in the past has been reinflated. In NY, it’s pretty much the stuff of legends, and it would be very amusing, except that there’s very real people suffering in all of this.
The bigger picture, though, means that the city will soon become a ghost town if the rents don’t get in line with the actual income of the residents. I’ve originally discussed this with friends, tossed it around with my ex-boss, talked about it even with my landlord (who saw me grow up in my building, so he’s chill).
So I’ll dig into it a bit more here.
Here’s the deal: statistically, there are just simply not enough rich people to fill all those luxury buildings. Period. There just aren’t. For every person making $400K a year, there are at least 10 people who make 1/10th of that. People from 22-35 – in other words, college grads and people who have been paying back their student loans since graduation and have been working for some time – rarely make higher than 50K a year, and yet they outnumber the six-figure brigade pretty damn easily.
Back to the original point: the majority of the NYC workforce simply cannot afford those apartments.
So what will they do? Eventually, leave NYC.
It’s kind of inevitable. This is what happens when people get priced out of their own neighborhoods. Eventually, between rent appreciation for long-term residents, and the new rental prices, getting a place to live becomes an impossible task. If the prices are within their reach, then consider basic budget: student loans, utilities, food, transit, medical. This is after taxes. How long can a person sustain a hand-to-mouth existence? Not long. It’s next to impossible to build up any savings when you’re being priced out of your own neighborhood and salaries don’t keep pace with inflation. Right now, it’s estimated that 56% of all US residents have less than $1K to their name. Between lack of living wages and housing costs rising – not just in NYC, but all over – there’s a lot to be said for that, and none of it is encouraging.
In NYC, though, this is the conundrum that drives people to leave NYC. And if their departure doesn’t land them within a commuting distance of NYC, the workforce begins depleting. And so does the consumer base, by correlation.
This is the side effect of a consumption-driven economy: you need consumers. The workforce and the consumer force is one and the same. To note the obvious, not everyone will be a doctor, a lawyer, or a CEO. There’s enough of those already. People still need their lunches catered and still need their offices cleaned. Someone needs to run the subways, drive the buses, fix them when they break down. And what happens when those people can’t find a place to live that they can afford? They go elsewhere. And who will do those jobs then?
When a city prices out its lower-income population, it inevitably depletes its own workforce and puts the brakes on its own economy. When these people leave, they take their money with them, what’s left of it, but above all, they take the behind-the-scenes work with them. You don’t notice your delivery guy until you sign for the delivery – and then he goes away. Nor do you think twice about the corner bodega, until it’s forced to close because the commercial rent is outrageous.
The close-to-home effect is that small businesses begin shutting down. We’ve seen this with some iconic bars in NYC, but the bars aside, small mom-and-pop shops in the city go out of business quite frequently, and very often, the number-one reason is the same: “The rent is too high”. They can’t afford to pay their employees, can’t afford to keep the business going, barely break even month-to-month… Eventually, they have to shut their doors. Small businesses are a majority employer in NYC – and where does this leave their employees?
They all leave in search of cheaper rent. And eventually, where does this leave the city, if the trend continues?
Half of all small businesses fold within the first three years of operation. How many more fold because the operating costs in a city with out-of-control rent costs are just unsustainable?
You can argue that there will always be enough people coming into the city and willing to live with a roommate, two roommates, three… and so on. But again: this model is unsustainable. How long will their money last? And how long can one expect a person to live with multiple other people in a cramped environment (come on, NYC isn’t known for roomy residences)? Eventually, that too gets old. Plus, roommates come and go, job situations change, etc. So the landlords actually lose out on this, on account that there’s absolutely no guarantee of income for the long-term. If you have someone in a building for 20+ years at a low/regulated rate of rent, then you’re guaranteed income for those 20 years. Put 3 people in a 1BR apartment for a year, and you’re not promising that you’ll have the same 3 people turning in their keys at the end of the lease – if they will last that long. So landlords don’t really benefit from this either, but they make an easy buck off the roommates and don’t think about the people who can, realistically, raise a family or grow old in their buildings and continuously provide revenue.
Penny wise and pound foolish. You hike up the rents, make your quick buck…and completely shaft yourself for long-term income.
Take my neighborhood. A decade ago, we had construction on two apartment buildings: one is condos, the other rentals. Neither one is finished, and both stand empty, primarily because the going prices per unit were completely out of control. So now one more developer bought another patch of land within a block of the other two, and the building is approaching completion. Rumor of the neighborhood has it that the starting price will be $3,000/mo.
In a neighborhood where $1,000 is the average rent? Okay, sure. I’ll make some popcorn, extra butter and no salt.
I promise you, the building will continue standing empty for quite some time to come. That or I’ll be able to go to the landlord and name my own price if he’s desperate enough to occupy the building.
And who benefits from all of this? Well, the developers, certainly. They get their deduction any way you slice it. But what about the people hunting for a place to live after the neighborhood they’re in basically priced them out?
Somehow, no one ever thinks about that. The same developers and landlords just snap for their tenants to “get better jobs” – ignoring completely that the reality of things is that there are not enough of those better jobs to go around. It’s a reality of life: not everyone is going to be a CEO or a CFO or make six figures a year. It’s just not the way it works. The boomers are retiring, and the new workforce is having to deal with ridiculously low wages because – and this is an old rule of thumb – the easiest way to save on costs is to cut payroll. And they don’t stop to think that if people can’t afford their rents, they won’t make money either if no one can afford to live in their buildings.
I’m not even starting on the whole “luxury” idea. Just what is luxury, really? Most people don’t give a damn about it. My idea of luxury is having a window that doesn’t have a constant draft. Hot water that runs without issues. Do I really need a dishwasher? No. It’s called a sink and a sponge. Central air? Great, fabulous, but what’s wrong with a window unit? They worked fine for decades. I would love a washer/dryer, but I’m perfectly okay with the three laundromats within easy walking distance. Gym in the building? Don’t give a damn; I’m working so much it’s not even an option. Terraces/balconies? Again, when would I go out onto them? And unless I’m allowed to plant and grow things on those balconies, it’s not even an interest.
But, again, that’s just me, and I’m a no-frills type of person. I know people will disagree on the amenities. The thing that gets me though, is that I make too much to qualify for the low-income housing – which, technically, has a price that most people can afford without trouble – and make entirely too little to come near affording a “market price” apartment.
And by no means am I alone.
So where does all of this construction leave the rest of us?
Think about it. Think about it long and hard.