With the mayoral election and the end of the state’s legislative session weeks away, let’s look at some of the issues facing the industry.
- The city’s vacancy rate for apartments is 1.4 percent.
- Not a single construction loan appears to have been made for a 485x project.
- A socialist is polling second in the Democratic primary for mayor.
- Rent-stabilized buildings are being systematically defunded.
- The cost of rezoning has risen to $82,000 per unit.
The truth about No. 1 is that the city’s record-low vacancy rate is a plus, not a problem, for owners of free-market rentals because low vacancy pushes rents up.
The super-tight market is a problem for nearly everyone else, though, so it’s encouraging that all of the major mayoral candidates want to build hundreds of thousands of units. Later this month, I will break down their plans in more detail.
The short version is that Sen. Zellnor Myrie has the boldest plan, and Comptroller Brad Lander might have the most comprehensive. Andrew Cuomo’s plan covers a lot of ground, but he won’t push density in neighborhoods that don’t want it because those are his voters. (Sorry, real estate donors.)
Scott Stringer favors preserving the Elizabeth Street Garden over building affordable housing with public open space, and wouldn’t tell me why. No reason to waste any more ink on him.
Assembly member Zohran Mamdani has the only socialist housing plan of the bunch. It is best described as fictional — 20,000 union-built units per year at $500,000 apiece, plus a free annual trip to Vienna for all tenants and their pets.
Diving into No. 2, multifamily development tax break 485x’s failure to launch is bad for developers and all those who benefit from multifamily projects — contractors, construction workers, building service workers, lenders, brokers and more.
No one is raising alarms, however, because many projects using its predecessor, 421a, are still underway. But when those peter out, housing production will fall. Only then will there be political impetus to fix 485x. The lost opportunity to build could be two years or longer.
Issue No. 3 might seem like a temporary concern because Mamdani is likely to lose the June primary. But his campaign has gained traction based in part on promises of a rent freeze and the social housing fantasy.
Those narratives cause headwinds for real estate. They create unrealistic expectations among elected officials, leading to bad legislation and project-killing demands for affordability and wages.
No. 4: The defunding of rent-stabilized housing is not even on the agenda in Albany this year. It’s going to take more than the New York Apartment Association’s blunt podcast to get it there. CEO Kenny Burgos can’t lobby his former colleagues directly yet because he hasn’t been out of office long enough.
No. 5 is the one-size-fits-all policy called Ulurp that essentially prevents small rezonings and adds cost and uncertainty to big ones. The Charter Review Commission has targeted it for an overhaul, and figures to give voters a shot to make it happen.
What we’re thinking about: Lander initially said he’d support a rent freeze if the data did. Now he says it does, despite the Rent Guidelines Board staff recommending a 6.25 percent increase. Would Lander have backed a freeze no matter what the data said? Send your thoughts to eengquist@therealdeal.com.
A thing we’ve learned: A spate of fraudulent insurance claims for staged construction site accidents in the past several years has plagued contractors and property owners throughout the state and especially in New York City, according to Gotham Government Relations. The lobbying firm is trying to pass a state law making the staged incidents a Class E felony. The Assembly and Senate versions of the bill got stuck in committee last year.
Elsewhere…
Longshot mayoral candidate Whitney Tilson did some statistical gymnastics in his first campaign ad. He said New York spends $1 million to educate two children, while Mississippi spends $12,000 per child and has better reading scores among fourth graders.
Everything costs less in Mississippi. Its average teacher salary was dead last among the 50 states at just $53,704 in 2023-24. Some first-year teachers in Mississippi are paid roughly New York City’s minimum wage.
If New York districts paid so little, they would not be able to hire enough teachers, let alone any quality teachers. That would immediately depress real estate values, not to mention violate the state’s class-size law.
Tilson’s even less-clever trick was comparing the cost of educating two children from kindergarten through high school to the cost of educating one child for one year. Clearly, he thinks not only students but also voters lack basic math skills.
But that is his rationale for running. Tilson is a fan of charter schools, which use lower-paid, nonunion teachers.
Closing time
Residential: The priciest residential sale Wednesday was $12 million for a 3,889-square-foot, sponsor-sale condominium unit at 50 West 66th Street in Lincoln Square. Hilary Landis and Beth Benalloul of the Corcoran Group had the listing.
Commercial: The most expensive commercial closing of the day was $26 million for two 105-year-old rental buildings at 243-245 East 13th Street in the East Village. Peak Capital Advisors’ purchase included 42 units and totaled 30,888 square feet.
New to the Market: The highest price for a residential property hitting the market was $40 million for a 6,000-square-foot, full-floor co-op at 1030 Fifth Avenue on the Upper East Side. Adam Modlin of the Modlin Group has the listing.
— Matthew Elo
