April 24, 2014
NYC’s Housing Affordability Challenge
NYC’s Comptroller Stringer has issued The Growing Gap: New York City’s Housing Affordability Challenge. The report tells
a sobering story—of stagnant incomes, rising rents, and a deepening affordability crunch, especially for the working poor and others at the lower end of the income spectrum. This financial squeeze comes despite significant housing investments during the 12 years of the Bloomberg mayoralty. From 2000 to 2012, this report found:
• Median apartment rents in New York City rose by 75 percent, compared to 44 percent in the rest of the U.S. Over the same period, real incomes of New Yorkers declined as the nation struggled to emerge from two recessions.
• Housing affordability—as defined by rent-to-income ratios—decreased for renters in every income group during this period, with the harshest consequences for poor and working class New Yorkers earning less than $40,000 a year.
• There was a dramatic shift in the distribution of affordable apartments, with a loss of approximately 400,000 apartments renting for $1,000 or less. This shift helped to drive the inflation-adjusted median rent from $839 in 2000 to $1,100 in 2012, a 31.1% increase. In some neighborhoods – among them Williamsburg, Greenpoint, Ft. Greene and Bushwick in Brooklyn, average real rents increased 50 percent or more over the 12-year period.
• The elderly and working poor are making up a growing portion of low-income households with 40 percent of the increase tied to households in which the head is 60 years or older.
• In 2000, renters earning between $20,000 and $40,000 in inflation-adjusted dollars were dedicating an average of 33 percent of their income to rental costs. Twelve years later that average jumped to 41 percent. Their housing circumstances became more precarious even though their labor force participation rates soared.
It is clear that affordable housing remains one of New York City’s most pressing needs. Mayor de Blasio has laid out a goal of creating or preserving 200,000 units of affordable housing over a 10-year period, an ambitious increase over the 165,000 units pledged under Mayor Bloomberg’s 12-year New Housing Marketplace Plan.
Now, with the winding down of one major housing initiative and the launching of another, it is appropriate to take stock of the City’s housing circumstances, to evaluate the changes that have taken place in the city’s housing ecology, and to outline strategies for future housing investment that are informed by the city’s evolving housing landscape. (1)
While the report diagnoses many of the problems in the housing market, it does much less in terms of proposing solutions to them. It also fundamentally misunderstands the role that new housing plays in the housing market (see page 24). The report only focuses on the high rents for the new units without taking into account the fact that those new units reduce the pressure on rents for older units of housing, a process that housing economists refer to as “filtering.” There is no question that the CIty needs to increase the supply of housing if it wants to reduce the cost of housing overall. The de Blasio Administration understands this. We will have to wait and see how the Mayor’s housing plan, to be released in May, will tackle the under-supply problem head on.| Permalink