Gothamist excerpt -
The housing crash of the late 2000s was supposed to have decimated
property values across the nation. But in Brooklyn, the housing market
barely broke its stride. Supply and demand is supposed to be an
immutable truth, yet a well-documented boom
in development has done little to stop spiraling prices. Every few
weeks, a different neighborhood in New York City's most populous borough
seems to break its own record
for most expensive sale. Intuitively, it feels like the borough is at a
breaking point. If something goes up, must it come down?
"There's no end in sight," says Jesse Keenan, the research director at Columbia University's Center for Urban Real Estate, referring to Brooklyn's obscene housing market.
Currently, the monthly payments on a median-priced home in Brooklyn eat up 98 percent of the borough's median income of $46,000. The median sales price in the nation's "most unaffordable city,"
just passed $600,000 for the first time. The 70 percent of Brooklyn
residents who rent aren’t faring any better—average rent in the borough rose by 77 percent between 2000 and 2012. According to a March report by StreetEasy,
"the typical new renter will spend 60 percent of their income on rent
in 2015," the highest rent-to-income ratio in all of New York.
And the Times is running trend pieces about how Brooklynites are moving to Manhattan because it's cheaper, which means the trend started at least five years ago.
In order to bring housing prices down in any significant way, Keenan
told me, the city would need to massively expand its housing stock.
That's especially true of Brooklyn, whose historic neighborhoods are
largely made up of townhouses and not apartment buildings.
A 2013 report
Keenan co-authored estimates that 300,000 to 350,000 new units must be
built to house the next generation of New Yorkers, nearly double the
200,000 affordable units that Mayor Bill de Blasio has pledged to build or preserve.
"I know that sounds crazy and there are significant sensitivities
there, but we're so far in the hole that it's a long-term challenge to
our labor economies," Keenan said.
New York lags behind other cities in construction of new housing units. According to figures from the Department of Housing and Urban Development,
20,483 new housing permits were issued in the five boroughs in 2014, or
about 2.4 units for every 1,000 people. While this represents a strong
improvement over the city's paltry permitting pace during the '80s and
'90s, it's still low compared to other cities, including San Francisco
(3.2) and Washington, D.C. (6.4), to say nothing of famously
pro-development cities like Seattle (11.5 permits per 1,000).
A housing expert who works for a prominent real estate investment
company who asked to remain anonymous because he was speaking so
candidly, agreed that New York has a chronic supply shortage that will
take decades to fix. Even if the housing market cools off, he said,
"when the bottom falls out ... you will only see massive rent decreases
in marginal neighborhoods."
Even if Brooklyn's housing sales end up being a bubble, the expert
says, it's unlikely that renters will reap the benefit of it bursting,
as "rents are not speculative, whereas housing prices are."