Here’s some bedtime reading for supply skeptics.
Adding supply brings prices down, yet when a lot of new apartment buildings go up in a neighborhood, the median asking rent for StreetEasy listings goes up. That does not defy the laws of economics. It is simple math: About 70 percent of the new units are market-rate and priced above the median, so the median rises.
At the same time, tenants in older, occupied units enjoy smaller increases than usual when they renew leases because their landlords don’t want to lose them to the newer, nicer buildings. Unlike the listings for new units, these renewals are not captured by StreetEasy.
Numerous market reports based on listings, not renewals, are released to the media each month. They showed Jersey City rents, for example, soaring as a flood of luxury buildings there started leasing.
The danger is that someone will publish a story linking development with rent increases, fueling the myth that adding supply makes housing more expensive.
Unfortunately, Crain’s did that last month in an article about StreetEasy data. “In the past year, some of the neighborhoods with the biggest boosts in inventory actually also saw double-digit price hikes,” the report read, citing Gowanus and Inwood, which were rezoned at the end of the de Blasio administration.
The Real Estate Board of New York and NYU housing economist Sam Chandan were aghast. They dashed off a letter to Crain’s that has yet to be published.
“A substantial body of long-term research demonstrates that increased inventory moderates rent,” they wrote. “As StreetEasy’s economist notes in the article, the effects of increased supply on demand — and the resulting moderation of rent growth — emerge only over time.”
Let me clarify that last sentence: Rent growth actually moderates right away, but it’s not evident in quickie reports based on listings, for the reason explained above. Census data, and the sophisticated housing studies that use it, take much longer to come out. They offer a fuller, more accurate picture that includes lease renewals.
Those analyses all show exactly what you’d expect: Rents rise faster when housing development does not keep pace with demand, and slower when it does.
The laws of economics have not changed, folks. They will never change.
What we’re thinking about: One Greenpoint rental during the city’s post-Covid comeback vividly demonstrated that when a listing causes people to line up around the block, they bid up the price. Have you seen any bidding wars lately? Send thoughts to eengquist@therealdeal.com.
A thing we’ve learned: Fishers Island, 11 miles northeast of the North Fork’s Orient Point, has about 250 year-round residents but several thousand during the summer. It is governed and policed by Southold Town and accessible only by ferry or plane. By ferry the trip from Long Island takes two and a half hours and two boat rides — first to New London, Connecticut, then to the island.
Elsewhere…
— The state may have spent $1.2 billion on Medicaid for people who do not live in New York, the Times Union reported. An audit from the state comptroller’s office found the New York Department of Health may not have thoroughly verified the residency of Medicaid beneficiaries, leading to these payments.
— Waymo has invested more than $3 million since 2019 in a lobbying effort to overturn New York state rules banning self-driving cars, according to The City. Despite Mayor Eric Adams’ last-minute approval of a limited test of autonomous vehicles, hurdles abound: stalled legislation in Albany and City Hall, strong opposition from taxi and for-hire driver groups, and concerns about safety on the city’s dense streets.
— Although President Donald Trump and others have pushed for Mayor Eric Adams and Curtis Sliwa to drop out of the mayor’s race to give former Gov. Andrew Cuomo a better shot of defeating Zohran Mamdani, it will be nearly impossible to remove their names from the ballot after Sept. 11, City and State reported. Once the Board of Elections certifies the ballot, candidates are effectively locked in unless they can prove they will no longer live in New York City by Election Day. That means even candidates who suspended their campaigns, such as Jim Walden, will appear on the ballot.
— Quinn Waller
Closing time
Residential: The top residential deal recorded Tuesday was $21 million for an 8,700-square-foot townhouse at 16 East 64th Street in Lenox Hill. Thomas Wexler, Tyler Wexler and Hannah Hebda of Leslie J. Garfield had the listing.
Commercial: The top commercial deal recorded was $66 million for a 125-unit apartment building at 250 West 85th Street on the Upper West Side.
New to the Market: The highest price for a residential property hitting the market was $18.5 million for a 7,000-square-foot townhouse at 175 Clinton Street in Brooklyn Heights. Paul Johansen with Corcoran has the listing.
Breaking Ground: The largest new building permit filed was for a proposed 36,657-square-foot, six-story, 45-unit apartment project at 212 West 231st Street in Kingsbridge. Panagis Georgopoulos filed the permit on behalf of Galaxy General Contracting Corp.
— Matthew Elo
