Misinfo Monday - Is NYC Affordable Now?

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How'd you guys like my clickbait subject line? The answer is, of course, "not really" but there's a lot to dig into.

While you can get massive sales discounts if you're buying in a $15m price point (not affordable), prices have not dropped the way one might expect.

And while the vacancy rate is higher and rents are sliding, most landlords are trying to preserve their long-term gains by offering months free for one year rather than actually decrease prices.

Plus there are fun, new expenses to come out of this pandemic, like an increased cost for the subway, while millions of people are out of work or had their salaries reduced.

So yeah, it's complicated. Scroll down for more.

Anna

What's the Deal?

There’s a lot of headlines about record low rents and how NYC has suddenly become affordable, meaning young people can move on in and enjoy the city.

Leaving aside the fact that millennials have 1/4 of the wealth that boomers had at our age, and the fact that more young people have been laid of and forced to move home than the ’08 housing crisis, AND the fact that nothing is open because we are in a pandemic, there are still a lot of issues with this “newly affordable” narrative.

First, there is a kernel of truth to the headline; prices in NYC have declined from their peaks of 2014/15 (sales) and 2018/19 (rentals). But that doesn't mean that everyone can suddenly afford housing.

I've written before about rent burden, and in order to purchase an apartment in NYC you generally need 20+% for the down payment (100k even on lower price points) plus a big chunk of cash post-closing as well. This means owners have a large amount of equity in their homes, and it also means they're likely to be people earning <$100k/year, a group far less affected by the pandemic layoffs than those who typically rent.

And while there are headlines about people selling their homes at a discount, those are mostly people who purchased at the peak of the market in 2014 or are in the hyper-luxury space. This doesn't point to a more affordable option for most prospective buyers. Additionally, if 25% are selling at a discount then 75% are selling at a profit, even during a global pandemic that has disproportionately affected NYC.

Rentals are a fascinating situation right now. Landlords are struggling to fill vacancies, but aren't necessarily willing to drop prices. They'd prefer to offer temporary concessions (months free, move-in credits, waived amenity fees) over actually dropping the rent long-term. There are many apartments on the market right now that would cost $2,000 for the first year and $3,000 for the second, even though it's unlikely we will have recovered financially by then.

At the same time, some landlords are trying to use the pandemic to justify eliminating all rent stabilization/control. They're already looking at Amy Barrett's confirmation as a way to overturn all rent protections in NYC. Because clearly the issue here is stabilization, not the fact that many of those who need housing in the city can't afford it, including the 100,000 homeless, and many of those who can afford it are taking their money wherever they want to be while they work remote.

And, as I mentioned earlier, there are new, additional costs associated with living in NYC. Ridesharing isn't an option and cabs have become much more expensive (in most cases). The subway shuts down from 1-5am (thankfully buses still operate) and they expect to raise fares by a dollar a ride next year. All of this is happening as people are trying to avoid catching a potentially deadly disease.

Prices of food and other goods have gone up, people are being billed for COVID tests that their insurance was supposed to cover, people have to take unpaid time off work to quarantine, salaries have been reduced. It's not a great situation for people who aren't at the top, but the ones at the top are writing the "affordability" narrative.

Why Does This Matter?

Whether you rent or own, while the market is softer and more buyer/tenant friendly than it usually is, that doesn't mean it's affordable for people who need it. It also doesn't mean you'll get a huge discount.

As the NY Times put it:

"One in five New York City tenants did not pay rent in September, by one estimate, and there is growing concern of “an eviction tsunami.”

As apartment vacancies climb, sale prices and rents are falling, but nowhere near the magnitude needed to compensate for scarce affordable housing options."

A buyer's market in NYC basically just means that buyers have options rather than being constantly outbid by all-cash investors. And a soft rental market just means you can get an apartment for a year at about $2,000 instead of $3,000. It may be "more affordable" than it has been for the past few years, but it's far from actually being livable for the majority of people, especially young people who are needed to bring the city back economically. Funny how making up 41% of the workforce but only having 5% of the equity doesn't put millennials in a great position. Who'd have thought?

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