SPECIAL FOCUS: AFT’s Top 50
Apartment Markets
APARTMENT FINANCE TODAY • OCTOBER 2007
NO. 3 • NEW YORK CITY: NYC Loves Rentals
Lots of demand but little supply pushes rents into orbit
in the nation’s most densely populated city.
By Bendix Anderson
New York City—
These days, building
cranes are casting
shadows over Harlem,
the Far West Side, and the
waterfront in Brooklyn—
once-neglected neighborhoods
that haven’t seen
market-rate residential construction
on any scale since
before World War II.
Multifamily developers took out
more building permits in 2005 and
2006 than in any two-year period since
1965, according to city officials. The
fancy new high-rise and mid-rise buildings
they’re constructing are bringing
wealthy residents and rising housing
prices to many parts of the city, said
Nancy Pakes, president of Halstead
Leasing Co. in New York.
But so far the flood of new housing
has not created much competition with
existing rental apartments. Almost all
of the new developments are for-sale
condominiums.
The high demand for housing and the
small amount of new rental development
are just two of the reasons New
York City ranked third in our analysis of
the top apartment markets.
New apartment construction is still
sluggish despite a heroic effort by Mayor
Michael Bloomberg to encourage new
housing development, including opening
up large areas such as the Far West Side
and the Brooklyn waterfront to dense
development. The city also simplified its
famously obscure building code, and
attracted national real estate investment
trusts like AvalonBay, Archstone Smith,
and Post Properties, which are all developing
apartments here.
But the high cost of land and construction
still keeps many developers
from building rental apartments. The
rental inventory has grown by an average
of just 1.1 percent a year since 2000.
City officials predict New York’s
population will reach 9 million by 2025.
Where will all those new residents fit?
The city is already one of the most
densely populated places on earth. The
imbalance between the supply of rental
housing and the demand has pushed
the percentage of vacant apartments
down to 2.4 percent.
The competition for apartments is
intense, and gentrification adds to the
tension. Even with the average income
here growing about 5 percent a year
over the last five years, New York is still
one of the least affordable housing markets
in the top 50. It doesn’t help that
Wall Street employees with seven-figure
incomes can pay even more than landlords
are asking for top-tier apartments.
Two-thirds of New York’s more
than 8 million residents are renters,
making the city the nation’s largest
apartment market. With pent-up
demand high, that means that despite
the flood of new condominiums, it will
likely be a long time before apartment
owners here have to worry about overbuilding.
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