Posted on October 27, 2020

What Will New York Real Estate Look Like Next Year?

David W. Chen and Stefanos Chen, New York Times, October 23, 2020

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.

And while the flight of affluent residents to the suburbs appears to be overstated, major companies are downsizing and fewer people are commuting, setting the stage for a new reckoning over personal and business priorities.


The outlook is daunting. Unemployment in New York City is still 14 percent, after hitting 20 percent in June and July. The hotel occupancy rate is 39 percent, down from 95 percent this time last year, according to the research firm STR. Roughly one-third of the city’s 240,000 small businesses may never reopen, and iconic retailers like Neiman Marcus are closing.


In recent years, the real estate industry’s clout has waned as local legislators have leaned increasingly to the left, and campaign contributions from the Real Estate Board of New York have shriveled. In July, progressive challengers, like Zohran Kwame Mamdani, a housing counselor, toppled incumbents viewed as too moderate.

City and state legislators are mulling an apartment vacancy tax and other measures to discourage speculative investment, while opponents warn of a “death spiral,” in which over-taxation could scare away the wealthy. The highest-earning 1 percent of New York City residents generated 43 percent of city income taxes and 51 percent of state income taxes collected from individuals living in the city as of 2016, according to the Empire Center for Public Policy, a fiscally conservative think tank.

But more than any statistic or legislation, the most consequential factor for real estate is what will happen on June 22, 2021.

That is the date of New York City’s next primary election, and it will be the most consequential since 2013, when Bill de Blasio, bolstered by his “tale of two cities” campaign, swept into office. Now, with term limits forcing out a deeply unpopular Mayor de Blasio, along with most of the City Council, a wide-open battle for the city’s leadership is underway. And real estate interests say the stakes have never been higher.


Depending on what happens in the presidential election, it is too early to gauge whether voters will opt for, say, a technocrat like former Mayor Michael R. Bloomberg or a rising progressive like Rep. Alexandria Ocasio-Cortez. One presumed favorite, City Council Speaker Corey Johnson, has already bowed out, highlighting the unpredictable nature of the race.

“What these two crises have laid bare is that this extraordinarily wealthy city which was doing so well for one segment of the population was completely failing other segments of the population, including people we now call essential workers, and communities of color, generally,” said Vishaan Chakrabarti, a former city planning official who is now dean of the College of Environmental Design at the University of California, Berkeley. “Now how can we use this pause to think about the city that should be — a more equitable city?”


In light of the virus’s disastrous effects on the economy, some believed the path forward for several stalled megadevelopments would be cleared, because of their promise of new jobs and infrastructure.

Instead, opponents have grown more circumspect, and the De Blasio administration, in its waning days, could push for something critics have long demanded: rezoning in wealthier, whiter neighborhoods, not the communities of color that have often been the reluctant recipients of major redevelopment.

A large expansion of Brooklyn’s Industry City complex, which developers said would create 20,000 new jobs, was quashed last month by opponents who doubted that claim and said the project would hasten the displacement of the largely lower-income immigrant community nearby.

Also in September, the city backed out of a proposal to build up to 15 mixed-use towers on 28 acres in Long Island City, where Amazon previously failed to garner support for its New York campus, because of local concerns about gentrification and inadequate infrastructure.

The Justice for All Coalition, a community group opposed to the project, explained in a letter in July: “The proposed rezoning — for the purpose of building luxury residential and commercial mega towers — is exactly what this community does not need in the face of Covid and the urgent issues raised by Black Lives Matter.”

Alicia Glen, a former deputy mayor under Mr. de Blasio, rejected that thinking.

“This is not the time to double down on the narrative that business is bad, that development is bad,” said Ms. Glen, who recently started a development firm, M Squared, which builds mixed-income housing in cities across the country. “We can’t play to the cheap seats of being against everything and everybody.”

But the disproportionate harm the virus has caused to Black and Hispanic residents in lower-income neighborhoods has emboldened another view, critics say: That the argument is not simply pro- or anti-development, but a matter of where the effort is placed, and for whom.

So the mayor’s decision this month to back a rezoning in SoHo, one of the wealthiest neighborhoods to be eyed for new affordable housing, is a significant moment, said Alex Fennell, the coordinator for the Racial Impact Study Coalition, a community advocacy group.

“It’s the first time the city has flat-out said, ‘We need to put more affordable housing in affluent, white neighborhoods,’ and that’s an important rhetorical shift,” Ms. Fennell said.

The proposal, which made scant mention of new housing when it was floated last year as a mostly commercial rezoning, is now seeking to allow about 3,200 new housing units to be built, including 800 below-market-rate apartments. The city has also signaled that a rezoning of Gowanus, a neighborhood in Brooklyn that is wealthier than several other neighborhoods eyed for redevelopment, is also a priority.

“There was an unspoken rule that you don’t rezone wealthy neighborhoods,” said Will Thomas, a board member of Open New York, a pro-housing group. While local opposition is already building, he said “SoHo is the first step in really showing that it’s politically possible.”