What it means if a 20% rent price drop in Manhattan may be enough to reverse the market

With rents in Manhattan and San Francisco declining, how much will prices drop before demand increases? Perhaps 20% in Manhattan:

Photo by Pixabay on Pexels.com

A big drop in rental prices appears to be luring new, younger renters back to the city, even as office workers and wealthy New Yorkers remain in the suburbs and more rural resort towns. New leases in Manhattan increased 33% in October, making it the best October in 12 years, according to a report from Douglas Elliman and Miller Samuel.

The typical rent paid for apartments including discounts, or the median net effective rent, fell 19% from a year ago to $2,868 — a record decline. Smaller apartments, which cater to younger renters, fell the most. The price of studio apartments was down 21%, and one-bedroom apartment prices dropped 19%.

“I think we’re at a tipping point where the consumer starts coming back to the city,” said Jonathan Miller, CEO of Miller Samuel. “Sellers are slowly recalibrating what the values are, and the lower pricing is beginning to bring more people in.”…

And with the average rental price for a one-bedroom apartment still over $3,200 — more than twice the national average — Manhattan is still far from affordable for many young renters. Still, experts say the October increases could begin a long, slow recovery for the nation’s largest real estate market.

Manhattan is an important real estate market. It is part of the leading city in the United States and one of the most important global cities in the world. Housing is desirable there for multiple reasons.

But, Manhattan’s prices are unusual. There is a limited amount of land. Few other places in the United States have a similar local economy and cultural scene. Prices will remain high because they have been high for a while. There is a lot of capital tied up in buildings and land.

Thus, it is hard to know what to do with an article like this in regards to housing. The suggestion is a 20% price drop may be enough to attract new renters who are interested in Manhattan and have the resources to move in. Most people, and perhaps even most residents of the New York City region, do not have the interest or the resources. At the least, this is a reminder that real estate is a very local affair.

But, at the same time, housing is a city-wide, region-wide, and a national concern. The Manhattan market has unique traits but many people face housing challenges, particularly during COVID-19. Manhattan may be a bellwether or it could be more of a curiosity of how a small slice of people think about housing. The bigger question from a story like this could be: have housing costs dropped elsewhere in the United States? Since few markets are like Manhattan, perhaps not. How does this affect people? What are the long-term housing price prospects across different kinds of markets and for more typical residents?

When bricks and mortar stores can’t make it even in Manhattan

Heart of one of the world’s leading global cities, Manhattan has its own struggles with keeping brick and mortar retailers in operation:

That’s right: On a nine-block stretch of what’s arguably the world’s most famous avenue, steps south of the bustling Time Warner Center and the planned new Nordstrom department store, lies a shopping wasteland.

Yes, there are bank branches, restaurants, fast-food outlets, theaters, Duane Reades, a vitamin shop and a few tourist-targeted “discount” stores. But mainly there are oodles of empty spaces covered with signs touting SUPERB CORNER RETAIL OPPORTUNITY.

The same crisis blights the rest of Manhattan. The people invested in storefront retailing — real-estate developers, landlords and retail companies themselves — tell us not to worry. It’s a “transitional” situation that will right itself over time. Authoritative-sounding surveys by real-estate and retail companies claim that Manhattan’s overall vacancy is only just 10 percent.

But they are all wrong. Bricks-and-mortar retail is shrinking so swiftly and on such a wide scale, it’s going to require big changes in how we plan our new buildings and our cities — although nobody wants to admit it.

This is an interesting argument to make: even with all of the tourists, wealth, and attention bestowed upon the borough, retail is disappearing from Manhattan. And if shopping disappears, with shopping being one of the favorite leisure activities of Americans, might this negatively affect the business and social life of a Manhattan used to ultra-busy sidewalks?

On the other hand, Manhattan may not be the best example. The median household income in Manhattan is not as high as one might expect, there is not much of a middle class, and the cost of living is high. Add in that Manhattan does have a lot of tourists, workers that arrive for the day and leave at night, and concentrations of residents in different parts of the island. The sheer density of people might suggest that retailers should be able to make it in Manhattan but it is a complicated place.

More broadly, what will tourist locations of the future look like if even more shopping is done online? For decades, the international tourist destination includes significant amounts of shopping. What would fill that space?

More (pricey) senior housing units in the (expensive) city

Several developers are constructing luxury senior housing in Manhattan and trying to tap a new market:

Senior housing has traditionally been suburban-focused because land is so much cheaper outside cities, and developers hadn’t seen a big enough market to justify paying more, and charging more, for urban locations near transportation and nightlife, Knott said. The aging members of the massive baby-boom generation helped change their minds. Now, he said, many living in cities have the means to pay a premium to remain in familiar environments.

And many will need special care. In New York state alone, about 460,000 residents aged 65 and older are expected to be living with Alzheimer’s-related dementia in 2025, some 18 percent more than there are today, according to the Alzheimer’s Association.

To serve the wealthiest of them, senior-housing developers are taking cues from their tony-apartment building counterparts and putting extra emphasis on finishes and flourishes, to make their facilities look like the places residents left behind…

It is, of course, a rather small group of any age or mental ability that can handle the monthly rents these kinds of places will command. They’ll start at $12,000 at the complex that Maplewood Senior Living and Omega Healthcare Investors Inc. are putting up on Second Avenue and 93rd Street. Some will top more than $20,000 at the building Welltower Inc. and Hines are about to break ground for on the corner of 56th Street and Lexington Avenue.

The top 10% ages as well.

If this catches on, will it make it even harder to construct senior housing for average Americans (those who lived as adults around the median household income)?

I had a somewhat radical thought: many community leaders suggest that their residents should be able to age in their community, if they so desire. Would it be possible to set aside plots of land to be used for senior housing? The community would not necessarily have to designate what kind of housing is placed there but setting aside or zoning certain land might take away some of the market-rate pressure for land. Communities and developers regularly do this for other important uses such as parks or schools. Why not get out ahead of the aging population and make a tangible contribution to allowing senior residents to stay?

Could bad traffic in Manhattan lead to fewer cars on the road?

One way to reduce traffic might be to make it so unpleasant that people stop driving so much:

City officials have intentionally ground Midtown to a halt with the hidden purpose of making drivers so miserable that they leave their cars at home and turn to mass transit or bicycles, high-level sources told The Post.

Today’s gridlock is the result of an effort by the Bloomberg and de Blasio administrations over more than a decade of redesigning streets and ramping up police efforts, the sources said…

The goal of the jammed traffic is to shift as many drivers as possible to public transit or bicycles.

An added benefit was supposed to be safer streets, but city officials have said that while 45,000 fewer cars and trucks now come into Midtown daily than in 2010, pedestrian deaths are on the uptick this year.

The city denies such efforts with the mayor’s spokesperson saying, “The notion that we want or are somehow ‘engineering’ traffic congestion is absurd.” But, there is little argument that the city has tried now for over a decade to introduce additional transit options beyond people driving cars.

The real question we should ask is whether such efforts can reduce congestion. Even though the public may not like it or believe it, there is some evidence from road diets and closing highways (in places like San Francisco or Seoul) that traffic is not static: limiting roads can affect the choices people make regarding how to get around. In other words, build more highway lanes and more people will drive.

Perhaps Manhattan itself is simply too crowded for the transportation options Americans currently have. Even the sidewalks are supposedly overrun. Could this be remedied with a new, innovative regional transit plan that would work on ways to get people in and out of Manhattan more efficiently? Would affordable housing help so fewer people have to make long commutes to Manhattan?

Overcrowded sidewalks in Manhattan

Manhattan is crowded and this includes the sidewalks:

While crowding is hardly a new problem in the city, the sidewalks that cemented New York’s reputation as a world-class walking city have become obstacle courses as more people than ever live and work in the city and tourism surges. The problem is particularly acute in Manhattan. Around Penn Station and the Port Authority Bus Terminal, two of the city’s main transit hubs, commuters clutching coffee cups and briefcases squeeze by one another during the morning and evening rushes. Throngs of shoppers and visitors sometimes bring swaths of Lower Manhattan to a standstill, prompting some local residents to cite clogged sidewalks as their biggest problem in a recent community survey.

Foot traffic has slowed to a shuffle along some of the city’s most famous corridors. On Fifth Avenue, between 54th and 55th Streets, 26,831 pedestrians — enough to fill Madison Square Garden and Radio City Music Hall combined — passed through in three hours on a weekday in May 2015, up from 20,639 the year before, according to city data.

Transportation officials are taking measures to alleviate the congestion. To help accommodate foot traffic, they are adding more pedestrian plazas across the city, expanding the presence of a streetscape feature first embraced by the administration of Mayor Michael R. Bloomberg. One is scheduled to open soon on 33rd Street near Penn Station. There are also plans to widen a half-dozen sidewalks in Flushing, Queens, in the next year (the city’s sidewalks vary in width, but must be at least five feet wide).

While a crowded sidewalk is simply a symptom of a crowded city, it resonates deeply because it affects almost everyone. Unlike overstuffed subways or tourist attractions like, say, Times Square, there is no going around the sidewalks. They are to New York what freeways are to Los Angeles: an essential part of the infrastructure. Sidewalks not only get people from Point A to Point B, but also serve as a shared public space for rich and poor, native and tourist alike.

As Jane Jacobs highlighted, crowded sidewalks are critical for thriving cities. And, don’t most urbanists today want more people walking? As the article notes, this is a problem in numerous cities where tourism is encouraged and there are a mix of important uses in proximity.

There seems to be an easy answer that is not discussed here: close more streets for stretches to allow for more pedestrian traffic. If there are so many people walking, this shouldn’t hurt businesses too much. Additionally, it could allow for pedestrian corridors that might also then reduce foot traffic on nearby streets. At least, perhaps some areas would benefit from road diets. If you have so many people in a small area and then prioritize vehicular traffic, problems like this will arise.

Even more radical than limiting vehicles in major urban stretches would be some version of the High Line in high-trafficked areas. Imagine raised platforms for walking above the sidewalk that could add both capacity and recreation options.

“Eager to Move to the City, but Stranded in the Suburbs”

The New York Times recently profiled a number of suburbanites who would prefer to live in the big city but can’t because of high housing prices:

Like many others in her sociological cohort these days — men and women whose children are grown and who want to trade those unused rooms in Tudor- and Victorian-style houses, as well as the steep suburban property taxes, for the city’s excitement and convenience — Ms. Fomerand finds herself stranded in the suburbs.

These empty-nesters have reaped the benefits of the suburbs: They sent their children to excellent public schools and raised them in safety and comfort, in backyards, playrooms and cul-de-sacs. And their houses have increased nicely in value. Now they would like to find apartments with doormen and elevators so they don’t have to climb stairs, shovel snow and schlep packages. They want a place where they can “age in place,” as the phrase goes. But they are finding that in the past 15 years, prices for such apartments in Manhattan and Brooklyn have risen far more than the values of their suburban homes, so much that they may never make it back to living in the city they always thought they would return to. Instead, they end up staying in their houses, or downsizing to smaller suburban homes or apartments.

To be sure, this is a problem largely felt by the comfortable: New Yorkers who have had the luck and income to live where they choose, who have had the luxury of planning and expecting a certain lifestyle when they grow older. These people could live less expensively in other cities, but often their family, friends and work are here, and they don’t want to leave the area.

“This is one of the most commonly discussed issues,” said Mark A. Nadler, director of Westchester sales for Berkshire Hathaway HomeServices. “People will say, ‘Yes, I’m moving to the city,’ but unless they’re wealthy, they end up resigning themselves to staying in the suburbs.”

Two quick thoughts in reaction to this piece.

  1. Those profiled in this story generally want to move to Manhattan or Brooklyn. Why don’t they consider moving to other parts of New York City? Underlying this could be continued ideas about what areas of New York City are desirable, safe, and more white. It is not really whether they can move to the city at all; it is more about whether they can move to the trendy neighborhoods in which they would prefer to live.
  2. There is only brief mention of affordable housing in a piece that is largely about housing prices. At the same time, this is kind of an odd note to hit; New York City prices are too high because a number of older suburbanites cannot find affordable housing in the city. If you want to talk about housing prices and affordable housing, why not highlight the less wealthy in the region who could truly benefit from such a move to the city (as opposed to doing so as a lifestyle choice)? Too often, stories about affordable housing highlight empty-nesters and downsizers (often alongside young professionals) – probably the sorts of people cities would love to have – rather than consistently examining the lives of lower-class residents.

Taking a meat axe to Manhattan for a highway

This retelling of efforts to build a highway across lower Manhattan include this graphic description of what Robert Moses was proposing:

Even Moses acknowledged that his methods were extreme. In fact, he had a term for it: The meat ax. New York, he argued, was already so dense and complex that you had to make cuts somewhere. Sure, other newly-planned metropolises could preserve history and make sure everyone was happy. But according to Moses, New York City needed drastic measures, as he argued in a quote from The Power Broker:

“You can draw any kind of pictures you like on a clean slate and indulge your every whim in the wilderness in laying out a New Delhi, Canberra and Brasilia, but when you operate in an overbuilt metropolis you have to hack your way with a meat ax.”

Imagine a bureaucrat saying that today! It was a time before preservation and urban advocacy existed in organised form. Preserving the grit of the city was a laughable idea — the city needed to be purged of its dirt, not protected…

This strange, antiseptic mindset can be traced alllllll the way back to Europe at the turn of the century, when academics and architects first started thinking about cities as living networks. The sociologist Georg Simmel, writing in 1903, was the first to really describe how cities affected the mental outlook of their inhabitants — city dwellers, Simmel reasoned, were blasé, even neurotic, because of the impersonal, overwhelming, and money-obsessed demands of the city.

But to the architects of 1920s and ’30s Europe, the city wasn’t just neurotic. It was actually sick. The thinking went that a city’s ills — crime, poverty, you name it — could be linked to its poor design its thoughtlessly narrow alleys and dirty streets, its crumbling tenements and poor plumbing. Le Corbusier described “the Cancer of Paris,” as Andrew Lees recounts in his book about the urbanism of the time.

If cities or neighborhoods are diseased, planners and others can justify all sorts of actions. Urban renewal in the mid 1900s operated on a similar premise: slums (often home to non-whites or immigrants) could not be redeemed and instead should be replaced with land use that would be much more valuable (and make a lot more money for developers and politicians). Why should older buildings or poorer residents stand in the way of progress for the city and region? Thus, many American cities moved forward with plans that did what Moses suggested: used a meat axe to chop away land from existing neighborhoods for highways, high-rises, and other land uses. While some of these projects have since been reversed (think the Embarcadero Freeway in San Francisco) or others never got off the ground (see freeway protests as detailed by historian Eric Avila), other projects continue to influence city life. In Chicago alone, think the major expressways in the city including the Eisenhower, the Dan Ryan, and the Kennedy as well as the University of Illinois at Chicago campus.

Quick Review: The Island at the Center of the World

Russell Shorto argues the Dutch colony of New Amsterdam helped kickstart the American mindset and dream even though the city’s history before the English takeover is often ignored. Shorto bases his claims on research in recent decades that involves translating the old Dutch records and revealing the political and social history of the colony. In the end, Americans might see their origins largely in the English colonies but Shorto suggests “it helped set the whole thing [the American experiment] in motion…They reshuffled the categories by which people had long lived, created a society with more open spaces, in which the rungs of the ladder were reachable by nearly everyone.” (317)

Here is what the Dutch colony of New Amsterdam gifted to the United States:

1. Emphasis on trade. Even in its early decades, the city was a hub for shipping in the New World. The English colonies in New England and Virginia both worked through the Dutch port. The protected harbor was important as was its connections to the interior.

2. Giving rights to all the citizens. While the English colonies only had a limited number of freedmen, the Dutch had much broader citizenship rights and this social standing allowed people of all backgrounds to rise up the social ladder. This also involved quite the fight for control over the colony; Shorto describes the efforts of the lawyer Adriaen van der Donck to fight for citizen control rather than the autocratic rule of the Dutch West India Company and their charge Peter Stuyvesant. This did have an interesting side effect in the end. When the English ended up moving in from their colonies in Connecticut, the people of New Amsterdam wanted to be handed over peacefully to the English in order to continue the life of their city and the English largely granted them the continuation of their lives.

3. Religious tolerance. The Netherlands was open to people of different faiths – mainly different Christians – and this continued in their colony. Thus, a number of immigrants ended up in New Amsterdam rather than the much more restrictive English colonies. Other fun fact: those same Puritans who founded Plymouth and its more narrow restrictions had arrived from the Netherlands where the Dutch had offered them religious freedom.

4. Openness to immigrants. With the emphasis on trade, rights, and religious tolerance, New Amsterdam from the beginning was home to people of many backgrounds.

Another large factor in shaping New Amsterdam: the larger political and military conflicts between England and the Netherlands over this period. The two countries fought three wars and the colony’s fate was often caught in the middle.

Overall, an interesting summation of recent research on the early decades of New York City. The English weren’t the only Europeans to help found the United States and the Dutch played an important role in this influential global city.

Manhattan population increasing, affordable housing decreasing

One of the wealthiest areas of the world continues to see a decrease in affordable housing and the population keeps going up:

The latest estimates put the population at more than 1.6 million people, up slightly from the 2010 census.

According to NYU’s Furman Center, in the last year alone, Manhattan lost nearly 3,000 rent-regulated apartments…

In many cases, those stabilized, often affordable homes are being replaced by “market rate” units.

From 2002 to 2012, the number of stabilized or controlled apartments in the borough plunged more than 19 percent. The number of “market” rate and ultimately significantly more expensive apartments soared more than 19 percent…

Nearly 29 percent of the borough’s population is foreign born, but experts say the wave of change could drive that number down even in traditionally immigrant neighborhoods.

“It doesn’t happen all at once; what happens is that neighborhoods change in pieces,” says City College of New York Sociology Professor William Helmreich.

The wealth flowing through Manhattan is incredible so it is little surprise that real estate prices are going up. This isn’t a phenomenon limited to Manhattan: the ultra-wealthy are developing and buying real estate in numerous big cities like London and Miami. The bigger issue is what happens to these cities. Do they become primarily the province of the wealthy or is there still space for average residents and immigrants? This discussion or struggle has been illustrated in recent years in San Francisco where actions by tech companies to bus employees to Silicon Valley has been met with resistance. The answers are not easy as many politicians need to keep and attract the jobs and wealth that help keep the city coffers full as well as look attractive to other firms. In other words, it is hard to fight growth machines.

Looking at inequality in NYC by translating wealth differences into building heights

It can be difficult to visualize inequality but here is an innovative way of doing so: imagining wealth as buildings in New York City.

In his most recent visualization project, the Pittsburgh-based artist and researcher re-imagines what the city’s skyline would look like if building height were a direct reflection of a neighborhood’s net household wealth. “I was inspired to create this project after standing atop Mt. Washington in my hometown of Pittsburgh and looking at the Pittsburgh skyline,” he explains. “I thought to myself, ‘What if you could actually see inequality?’ This relatively even landscape would look much different.”

Lamm, who is responsible for other viral visualizations like Normal Barbie, translated Esri’s map of median household net worth in New York City (based on 2010 Census data) into the bright green 3-D bars you’re looking at. Every $100,000 of net worth in a section on Esri’s map equals one centimeter in height on Lamm’s visualization. So if one section (which appears to consist of multiple blocks) had a net worth of $500,000, Lamm’s rendering would measure 5 cm high. Similarly, if another section had a net worth of $80,000, the green would appear at a much flatter 0.8 cm.

Of the maps/visualizations available here, the best one is probably the first one that shows much of Manhattan from the northwest looking southeast.

Choosing to visualize wealth rather than income is a strategic choice. Much talk about inequality involves income but this may be the wrong metric. Income is more about short-term access to money but wealth may be more important for longer-term outcomes (purchasing a house, etc.) and the wealth differences between groups are quite a big larger. For example, the differences in wealth between the top 5% and the rest of America are astounding as are the differences between whites and blacks as well as Latinos.

Additionally, singling out New York, particularly Manhattan, is an interesting choice. The differences here are indeed stark. Manhattan is the seat of the financial sector. But, few places in the United States would have this much wealth inequality.