Is The Bloom(berg) Off The Big Apple?
It's been a great run. Anyone who lives, works or plays in Manhattan or the boroughs knows what a fantastic improvement has taken place since Rudy Giuliani first got tough on quality of life issues. New York City and Manhattan are cleaner, crime is down, and many neighborhoods that were down and out are bustling with commerce, entertainment and new residents. But like all cycles, this one has gotten a bit long in the tooth. The cost of living in Manhattan has gone through the roof, mere mortals are being priced out of the market and affordable housing has been taken off the market at a rapid pace in the last number of years. We are even seeing the real estate foreclosure debacle impact the boroughs.
Let's look at some numbers:
The Observer served up these figures in an April article on "Where Manhattanites Move When They Want to Stay in New York." (FYI, the punch line was: The Bronx...from 2001 to 2006 over 23,380 Manhattanites moved there).
From 2005 to 2006 10,000 Manhattanites moved to the outer boroughs.
The average Manhattan apartment price hit nearly $1 million in 2005, $1.25 million in 2006 and by the last quarter of 2007 it was $1.4 million (the latest data according to Prudential Douglas Elliman).
The City is losing 30,000 rent-regulated apartments per year and 28,000 similar unregulated units, according to the Gotham Gazette article As City grows, Affordable Housing Shrinks.
The number of foreclosures in the five boroughs increased 51.4% from q4 2007, to 918, according to PropertyShark.com.
Manhattan's population of children under 5 years old jumped 29.4 percent from 2000 through 2006, according to the US Census Bureau. This compares with 6.6% growth for the city overall.
We have recounted several impending quality of life and economic issues on Urban Digs before,
in "School Crowding A Concern!" and "The Ax Man Cometh: Can the Tax Man Be Far Behind?".
The school crowding problem was discussed again in a recent New York Times article, "New York's Coveted Public Schools Face Pupil Jam," which pointed out issues downtown, on the upper west side, as well as in Brooklyn, the Bronx and Long Island City. The surge in families staying in the city is also impacting recreation opportunities, as pointed out in a Crain's New York article in April, "Ballfields become new community rallying point," which quotes a little league board member saying "The fields are absolutely filled to capacity."
The financial industry layoff issues continue to mount. The recent Lehman losses and dilutive capital raise could obviously foreshadow, more head count reductions there as well as at other firms who may have more losses coming. One friend of mine at a big bank believes there are new losses from CDOs that need papering over. Another friend who is a partner in a small securities firm confided that they had their first ever layoffs. The firm has been around since at least the late 1980s and just cut 25% of their staff, due to the lack of investment banking business.
Noah has noted the rise in the cost of a slice of pizza in New York as a lighthearted reminder of the increased cost of living resulting from recent inflationary pressures. But more serious signs of financial stress on New York consumers are now in evidence. According to a recent Crain's New York article entitled "More Can't Pay Utilities Bills," "Con Ed alone says that more than 187,700 customers were in arrears last month, a 9% rise from a year earlier."
So while New York City retail rents are reportedly surging, according to this New York Observer article, which cites a recent REBNY report, Urban Digs readers are reporting seeing lots of empty storefronts around town in more residential neighborhoods(see "Manhattan Downshift, Yes or No?....Let us Know").
Foreign demand for apartments, shopping, entertainment and meals has certainly been bolstering the city's economy thus far in the downturn, while the quality of life for New Yorkers from rich to poor shows signs of fraying. The overheated environment of recent years is now taking its toll, with the crane wrecks of late being a clear manifestation of the intersection of fevered growth, cost increases and a slowing economy. If New York becomes an unfriendly place for New Yorkers, unfriendly New Yorkers may make it an unfriendly place for our foreign guests (that makes sense, I think).
So with undeniable signs that the city has challenges, what we really need is a solid leader, a guy who can do what's necessary to address the city's problems, a guy who doesn't have to answer to special interest groups, a guy who can make hard decisions and keep the city government moving forwards....OOPs - We already have Mike Bloomberg and perhaps the biggest risk to New York City over the next couple of years is the loss of leadership like Mr. Bloomberg's.
At least there is some hope here, according to the New York Times, Mayor Mike is considering trying to overturn the city's term limitation statute so that he can run for Mayor again in 2009. Alternatively, he may seek the Governor's chair in 2010.
Comments (14)
Been a while guys.
Jeff, I understood what you wrote in BOLD about unfriendliness, but I'm not sure how it manifests itself. Deport consuls that don't pay parking tickets? Foreigner targeted crimes? I get the logic, but how do people distinguish foreigners in this melting pot?
Guiliani tried to tackle the term limitation issue too and a lot of us were up in arms about it. It might be interesting to see how selective we may become about the issue when we have such a great mayor now...
Posted by Nobi | June 11, 2008 10:05 AM
being unfriendly to foreigners .. the most stark example I've seen of this is in Rome, Italy..
many of the locals are 'extremely' unfriendly to tourists.. ripping them off at any opportunity, being unpleasant, pick pockets etc etc
Posted by uwsider | June 11, 2008 10:38 AM
I see.
So an unfriendly place simply becomes that way for everyone, except non-locals become disadvantaged by lacking the local street smarts. A worsening economy will do that to any local.
Posted by Nobi | June 11, 2008 10:45 AM
Hey guys, interesting piece, but once again, wanted to know if you could comment/blog on a different subject. Wanted to know if you could compare today's NYC real estate market with the market of 2000-2001. To me, it seems as if there are a lot of parallels. You had an asset bubble popping, M&A drying up, a recession, impending investment banking regulation (charging for research, Chinese walls, etc) creating concerns on how I-banks were going to make money, increased liquidity due to Fed stimulation. In addition, you had the events of 9/11 that must have created buyer fear as well as companies leaving the City for New Jersey. Was the market flat during this time? I don't know and thought you would have the data. Obviously the market has risen subsequently. Why is today different from then going forward?
Posted by AA | June 11, 2008 10:56 AM
Still, all the demographic information I have read suggests that the desire to live in a city, in walkable neighborhoods, is part of a long-term trend that outlasts economic cycles. Retiring baby boomers especially are tending to look for this kind of living environment as opposed to the last generation's tendency to live in warm-weather retirement communities. There may be a short-term economic downshift, but nothing I've read leads me to think that it's part of a long-term trend (of decline) for the Big Apple
Posted by NYer | June 11, 2008 11:23 AM
Great post, Jeff.
Retiring baby boomers now have significantly less equity in their home. They also need to find someone to purchase said home. Many recently saw retirement plans shrivel.
We also do not have nearly enough spaces for all of the children. The next few years should be interesting, although if more people are indeed priced out and move this may be alleviated. The better public schools are, for the most part, filled beyond capacity and anyway, are they really still so great if they can no longer offer computer, art, science rooms because they don't have the space? Private school tuition is in the mid 30s PER child. Those Westchester taxes seem like a bargain (plus NYC real estate taxes have grown tremendously under Bloomberg, except for the abated units for the wealthy, of course).
Posted by brenda | June 11, 2008 12:17 PM
While I agree with your description of NYC situation, I disagree with your cure. Many of the changes (not enough affordable housing, school crowding) are due to Bloomberg-Doctoroff sellout of the city to the developers. Third term Bloomberg administration will help the city wealthy but will hurt everybody else. You wouldn't give more bacteria to cure pharingitis. We need a city leader who understand the middle class needs and promotes urban policies accordingly.
Rep. Anthony Weiner may do us a favor if he run again to be the next NYC mayor.
Bloomberg should go back to his private company, Oligarchs like Bloomberg claim that private industry is better then government so I don't understand why they want to be in government.
Posted by RM | June 11, 2008 1:48 PM
Guys,
I am so glad there was such interest in this piece and as always we welcome all views. One clarification, I am a believer that New Yorkers, despite their reputation are incredibly friendly. I don't expect anything to cause New Yorkers to mistreat foreigners. What I really meant is that the city has been in a fell good trend for a long time and for good reason, it builds on itself and helps the quality of life when new Yorkers don't dump on New York. I was only suggesting that the upbeat mood of the city could darken some due to emerging stresses and strains and make it a less attractive place for all. As far as the property value trends post 9/11, I can tell you that commercial took a dip and then recovered, we will have to get back to you on residential stats - which I don't think were hurt for more than 6 months. That said New York has been in a long-term up cycle since the days when "the Bronx was burning" and residential building owners were literaly torching buildings for the insurance money, because rents couldn't possibly cover the cost of carry on buildings. I am not suggesting that we are going back that way, by any means. But I am suggesting that the city is headed for a rougher patch and we will need strong leadership. I plan to educate myself more on the leading candidates, because I think the election will be very relevant to the real estate industry in New York City. As far as the re-zoning's in NYC and their impact - that topic is too involved for me to discuss in an already lengthy comment.
Posted by jeff | June 11, 2008 3:30 PM
This sums up my feeling about NYC real estate in light of the posted article:
2 Bedroom Apartment: $2,100,000
Monthly Real Estate Taxes post 421-A: $1,800
Four bags full of groceries: $150
Yearly Physical: $500
A short commute which allows me to see my daughter before AND after work: Priceless
Posted by JR | June 11, 2008 10:50 PM
JR,
That's why we stayed in the City, only it was before and after and before. My husband wound up returning to work 3 nights out of five until she was seven, losing I can't even calculate how much sleep. Men without children were pretty impressed, but those with didn't want to hear about his efforts.
The number of men who can afford these prices and also who return home in time to see their children is EXTREMELY small. All of the women I know say their children do not see their fathers on weeknights.
Posted by brenda | June 12, 2008 7:31 AM
JR,
That's why we stayed in the City, only it was before and after and before. My husband wound up returning to work 3 nights out of five until she was seven, losing I can't even calculate how much sleep. Men without children were pretty impressed, but those with didn't want to hear about his efforts.
The number of men who can afford these prices and also who return home in time to see their children is EXTREMELY small. All of the women I know say their children do not see their fathers on weeknights.
Posted by brenda | June 12, 2008 7:32 AM
JR,
I hope you did not construe my article to be negative on New York, rather I hoped to point out issues that are percolating that will need to be addressed by an incoming administration, and as the title implies, the loss of Mike Bloomberg must be considered to pose an additional risk to the city maintaining it's current excellent quality of life. You mention the 412a tax abatement which you enjoy. I failed to mention the change in 421a and rise in the monthly nut that most new buyers will have to carry as another issue facing the New York real estate market.
Posted by jeff | June 12, 2008 10:01 AM
I have been in Manhattan a long time - 22 years - and the quality of life peaked here a few years ago, probably in 2000 or early 2001. City services are fraying in ways that weren't noticable until recently. Budget issues have resulted in a 7% cut in the number of cops, from 39,000 to 36,000. This, combined with a wobbly economy, is likely to make crime a growing issue going forward. I've seen real estate price cuts here in Tribeca, on the UWS and UES. The layoffs in financial services (which provide a huge percentage of the city's tax base) are getting worse. Many companies engage in "stealth" layoffs, cutting positions but keeping it quiet. I have one friend who lost a job at Goldman and another at a smaller, lesser known firm, who were recently let go because of slowing business conditions. An apartment in my building - a 2BR in a terrific doorman building - had a buyer who pulled out in March. Why? He worked at Bear Stearns. Lehman is now failing and it's getting worse. I would NOT buy Manhattan real estate because prices ARE coming down and will likely come down at least 10%. I love this city. But it's not the same. Trust me.
Posted by Tribeca Tom | June 12, 2008 5:11 PM
I am sorry Tribeca Tom i would have to politely disagree with you. Although private real estate may be dwindling in the Big Apple the commercial market i believe is on the rise again. Bear Stearn's bankruptcy should be able to pave the way for other small businesses to be given a chance at the industry as well as others. New York has always been a real estate value indicator as to the progress in the rest of the world. Therefore i would suggest to at least infer the current status of New York's commercial real estate market before deciding not to buy at the first mention of dropping prices before a recession. I have been buying up Manhattan Commercial Office Space for the past ten years and Norman Bobrow & Co have helped me tremendously . I would suggest getting in touch with them for buying commercial real estate in New york becuase they have 25 years experience in the field.
Posted by Peter Scottel | July 7, 2008 7:31 AM