The economists have spoken. If you don’t allow your 125-year-old brownstone to be torn down to make room for high-rise apartments, then you hate America.
Or that’s what you might think if you’d read recent stories by New York Magazine, WNYC, and The Real Deal. According to them, a new study by economists Chang-Tai Hsieh of University of Chicago and Enrico Moretti of University of California, Berkeley can be boiled down to one sentence: “Brownstones cost the economy billions.”
The argument is that the entire U.S. economy would be 9.5 percent bigger if just three cities — New York, San Francisco, and San Jose — increased their housing stocks by knocking down their Brooklyn brownstones and historic San Francisco Victorians, and putting up high-rise condos in their places.
Only that’s not at all what the study said. (more…)
The Fed Reserve has been warning for years it plans to raise interest rates, but never follows through on the plan. It gets scared because the economy doesn’t look good, and then backs off. The Fed warned yesterday that it could raise rates in June.
Just the warning could send folks running to brokers to refinance (again) or buy something asap. If the Fed were really to do it, it could depress home prices — or more.
Brooklyn is the “least affordable” home market in the country, followed by San Francisco and Manhattan, in that order. “A resident would need to devote 98 percent of the median income to afford the payment on a median-priced home of $615,000,” reported Bloomberg News.
The story made headlines and confirmed what many of us living here already suspected.
The affordability problem is part of a bigger trend where “one in five U.S. housing markets are now less affordable than their historic average,” said Bloomberg, as housing prices keep climbing even while income stagnates.
Real estate investors and foreign buyers have been fueling the price gains in parts of the country where housing costs are already high, locking locals into high-priced rentals because they can’t afford to buy, in a vicious cycle, said the story.
Across the country, housing prices are up 25 percent since their February 2012 nadir, according to the S&P/Case-Shiller index.
“Incomes have not grown nearly as fast as home prices,” the story quoted an exec from RealtyTrac as saying. “That disconnected home-price growth has been driven by investors and other cash buyers who aren’t as constrained by income.”
Rents have risen significantly in Brooklyn, where the median rent was $2,858 as of October. That’s an increase of nearly 6 percent vs. the same month a year ago, according to data from Miller Samuel and Douglas Elliman cited in the story.
Of course, comparing the median income of a region to the median house price is only one way to measure affordability. It reflects the variability of incomes in an area as well as home prices.
But even as home prices climb in Brooklyn, across the U.S. they have cooled off slightly in recent months, according to published reports, and quite a few REITS — investor backed real estate investment firms — have in the past year said they are pulling back from buying rental properties or getting out of the rental business in the U.S. altogether.
Not Dixon though! We just heard from Dixon Advisory USA Managing Director and CEO Alan Dixon this morning. He is off to Australia tomorrow to raise another round of funding for company’s next investments here in the tri-state area.
As for prices of townhouses in Brooklyn specifically, they continue to rise, according to the most recently recorded sales. New records were set in both Park Slope and Bed Stuy in recent weeks, as we reported yesterday. We have heard scattered reports of fewer people attending open houses and noticed fewer desirable properties on the market but we guess that’s just the usual seasonal slowdown. So far we’ve seen no sign of actual closed sale prices declining.
Hey, look, here on October 25, 2004, we predicted the coming crash! OK, well, the post, titled “It’s All About the Interest Rates, Stupid,” was actually a reblog of a New York Times story that predicted the coming crash. Still.
The real problem lurking below the surface of the real estate market, according to The New York Times, is the large number of the adjustable rate mortgages (ARMs) and interest-only loans that people have taken over the past couple of years to enable them to afford the monthly payments on the increasingly expensive homes they are buying. If rates do rise a few percentage points over the next couple of years, a lot of these folks could find themselves unable to make their payments. But The Donald isn’t too worried: “I just don’t think that the politicians can allow the rates to go up because then the economy beyond real estate will tank.”
This week we have received notice of not one but two panels on gentrification and real estate in Brooklyn. After a year of rapid price escalation in Brooklyn, “housing matters are on the minds of all Brooklyn residents,” said the Rev. John E. Denaro, Rector of St. Ann & the Holy Trinity Church, which is hosting one of the events. “We are pleased to explore this urgent topic with guests who are asking the hard questions about the future of our beloved borough.”
The first event, hosted by two Corcoran agents, is specifically focused on Bed Stuy and has some very heavy hitters planned for the lineup. Brooklyn Borough President Eric Adams will speak. Columbia professor of Urban Planning Lance Freeman will keynote. If you have read anything about gentrification, you will know Freeman has published what may be the definitive work on the topic, “There Goes the Hood: Views of Gentrification from the Ground Up,” an ethnographic study of gentrification in Clinton Hill and Harlem that outlines the good and the bad effects of gentrification through interviews with long-term residents of both neighborhoods. He is most famous for a study that showed people move in and out of poor neighborhoods as often as they do in gentrifying ones.
Panelists include President and CEO of Bridge Street Development Corp. Emilio Dorcely, Community Board 3 Chair Tremaine Wright, Council Member Robert Cornegy, Richard Flateau of Flateau Realty Corp. and Brownstoners of Bedford-Stuyvesant President Ava Barnett. The event will “explore current trends and future growth possibilities” in Bed Stuy “and how the public can benefit from these new opportunities,” said the email.
It will take place Saturday, June 21, from 9 am to noon at the Nazarene Congregational Church at 506 MacDonough Street. Breakfast will be served. Seating is limited so please RSVP to 718-765-3732 or firstname.lastname@example.org before June 19.
The second panel, “Brooklyn Housing Matters: Tackling Affordability,” is billed as a “public forum on housing issues, initiatives and prospects.” Hosted by The Forum @ St. Ann’s, the panel will be moderated by New York Public Radio urban policy reporter Cindy Rodriguez. Panelists include Council Member Stephen Levin; Caitlyn Brazil, VP of Strategic Partnerships of CAMBA, a housing nonprofit; and Aaron Koffman, Director of Affordable Housing for developer Hudson Companies.
The panel will explore how Brooklyn “can preserve the qualities and diversity that make it distinct, as the borough develops as an epicenter of world culture,” said the email we received. “Brooklyn’s special character, cultural vibrancy, and quality of life have attracted global attention. With it has come dramatic and rapid change. Residents are seeing their neighborhoods change so fast that they hardly recognize their surroundings, often cannot benefit from improvements and feel shut out or alienated on their own turf. What are we losing in the process? The key to it all is housing. As New York’s new mayor and developers pursue common ground on conflicting housing priorities, retaining the rich flavor and uniqueness of Brooklyn will be challenging.”
Panelists will cover “the definition of affordability…the housing needs and prospects of those who are evicted, foreclosed, displaced, unemployed, elderly or disabled, how to honor the character of neighborhoods marked for development, and how to retain community cohesion while gentrification significantly alters the traditional resident profile.”
The community forum takes place Thursday, June 24 at 7 pm at St. Ann’s the Holy Trinity Church in Brooklyn Heights. For more information, check out St. Ann’s event page.
The Mayor, Brooklyn Borough President Eric Adams and a bunch of other pols gathered at Brooklyn Brewery for a press conference this morning about the economic success of Brooklyn. The borough leads New York City in economic growth, according to a report out today from the office of the comptroller. Since 2003, the number of businesses in the borough has grown by 21 percent, a much faster pace than in the rest of New York City.
While health care and social assistance employ the most, accounting for one-third of all Brooklyn jobs in 2012, leisure and hospitality are growing the most quickly, increasing 36 percent between 2008 and 2012 — or nearly 10,000 jobs, most of them in restaurants and bars.
“Educated young people have been pouring into Brooklyn for the past two decades, and they responded to the 2008 recession by starting businesses in the food, beverage, media and tech sectors,” said Brooklyn Brewery cofounder Steve Hindy at the press conference. “There now is a vibrant economy in Brooklyn and an educated workforce finding new opportunities.”
Manufacturing in the borough is on the rebound, thanks mostly to the food business. In 2012, “for the first time in decades,” according to a press release, the number of manufacturing jobs in the borough rose rather than fell. The number increased by 2.5 percent, or 19,910 jobs.
Young people, immigrants and others are flocking here, drawn by “world-class cultural and academic institutions…many restaurants, growing nightlife and diverse neighborhoods,” said the report. Challenges include recovery from Hurricane Sandy, unemployment and the high cost of housing.
The report also singled out four significant developments in the borough: The Downtown Brooklyn Cultural District, the redevelopment of the Domino Sugar factory, the Livonia Commons Project in East New York and the redevelopment of the Loew’s Kings Theater on Flatbush Avenue.
The rent vs. buy equation has changed again in places like Brooklyn, where home prices are now so high it might make more sense to rent, according to a story in The New York Times. In fact, the market turnaround may show we’re in a bubble that is going to crash soon, the story said:
An analysis by The New York Times finds that in the country’s most expensive places, including New York, the San Francisco Bay Area and Los Angeles, buying a home again looks like a perilous investment, based on the relationship between their prices and rents or incomes. And in a longer list of areas, including Boston, Miami and Washington, prices have risen enough that buying is no longer the bargain it looked to be a few years ago.
…But across much of California and the Northeast, prices are now high enough that the costs of owning a home – property taxes, repairs, fees to real-estate agents and mortgage interest – may outweigh the financial benefits, including the tax break.
It is the latest change in a yo-yo pattern over the past decade. From 2004 to 2006, the math overwhelmingly favored renting rather than buying across most of the country, even as many Americans mistakenly decided that home prices could never fall. From 2009 to 2011, buying was an extraordinary deal in most of the country. Even the markets that have experienced huge price increases are far from the clear-cut bubble conditions of the mid-2000s, but they’re inching closer with every bidding war.
This viewpoint comes as a surprise to us: Even as housing prices in Brooklyn have risen steeply in the last six months or so, so have rents — or so it seems to us.
But an analyst at Moody’s sees it differently: “A lot of these coastal markets look overvalued compared to rents. In these markets, it seems generally more attractive to rent than to buy, even as the national market is broadly well balanced.”
If you are considering a house that costs $500,000, it might make more sense to rent if a similar place is available for $1,956 a month or less, said the Times. Do you agree?
Average rents rose 77 percent in Brooklyn while city wide real median income fell 4.8 percent from 2000 to 2012, according to a report out from the city comptroller described in The New York Post. The increases were the largest in any borough.
A story in the Times implied that meeting Mayor de Blasio’s stated goal of keeping or creating 200,000 affordable units will not fix the problem:
In an interview, Mr. Stringer said numeric goals were not enough. He noted that the Bloomberg administration spent $5.3 billion of city money and leveraged another $18.3 billion to both create new affordable units and preserve existing housing — for a total of 165,000 units over 12 years — yet the city today is still grappling with record homelessness and the loss of low-rent housing.
A separate story in the Post described a young woman paying only $1,256 a month in rent for a spacious two-bedroom rent stabilized in Crown Heights — on the face of it, an excellent deal. But, with a salary of only $30,000 a year before taxes for her retail sales job, she can barely afford it. Her landlord has offered her money to move, but she didn’t take it, knowing she would not be able to find a lower rent elsewhere.
Rents are going up and wages are falling everywhere, not just in New York City. “In the rest of the nation, rents rose by 50.1 percent over the same period — hitting an average of $773 per month,” said the Post.
The comptroller’s report recommended that affordable housing in New York City should focus on the poorest, not middle income New Yorkers. What do you think should be done?
Community Board 8 is holding an economic development forum to encourage business and jobs in Crown Heights and Weeksville. The forum is free and open to the public.
“The goal is to educate the community about strategies to invest and diversify investment options in CB8, look at what has been done and look ahead to what could be done,” said Atim Annette Oton, chair of board’s Economic Development Committee. “The board is looking to explore ideas to create businesses and jobs not just in retail and food but manufacturing in our M1 zone as well as attract other business types.”
There will be panels on real estate opportunities in the neighborhood, expanding the cultural assets of the area, and local businesses. Local business owners, including from Docklands and Franklin Park, and financial consultants will talk about the challenges and rewards of owning a business as well as offer advice. Representatives of Weeksville Heritage Center, Friends of Brower Park, Five Miles, Haiti Cultural Exchange, and others will talk about cultural development. There will also be speakers from the New York Business Development Corporation, Brooklyn Chamber of Commerce, and Atlantic Avenue Industrial Center/Greenpoint Manufacturing and Design Center. The latter’s manufacturing space at 1102 Atlantic Avenue, pictured above, is scheduled to open next year. (more…)
Brooklyn is among the areas hardest hit by a steep decrease in affordability of housing in New York State, a report from the New York State comptroller found. From 2000 to 2012, statewide the percentage of renters paying more than 30 percent of their incomes to housing rose to 50.6 percent from 40.5 percent, while the percentage of homeowners doing the same rose to 33.9 percent from 26.4 percent.
On these cold and slippery days of winter, it’s hard to realize how important ice was to life in turn of the 20th century New York. Greater New York City, including the new borough of Brooklyn, consumed more ice than any other city on the East Coast. Ice was necessary for the storage and shipment of meat produce and dairy, was used in restaurants and hotels, and in the iceboxes of private homes. It was used in the production of beer and in other food industries. For a history of commercial ice making in New York, please see Part One of this story.
In the days before reliable artificial ice or electric refrigeration, the company that controlled ice controlled the fortunes and health of America’s largest city. The New York City area had many ice companies, all of which made good money. Just think of the power and money that could be made if all of those companies were consolidated into one huge “trust”. Customers would have no choice but to pay whatever this mega-company demanded. Where else were they going to go? That was exactly what happened, beginning in 1896, when a man named Charles W. Morse bought up the largest of New York’s ice companies and made himself the “Ice King of New York.”
Charles W. Morse was a character. Someone should have made a movie of his life by now, because he was one of the great despicable rogues of the 20th century. Businesses and industries that came under his grip were ground under his heel in his attempts to control prices, destroy rivals and make a huge pile of money for himself and his cronies. The collateral damage to individuals, municipalities and the companies and lives he ruined never seemed to enter his mind, or his concern. He started off innocently enough, hailing from Bath, Maine. (more…)
Yesterday mayor elect Bill de Blasio announced Goldman Sachs exec Alicia Glen will be his deputy mayor for housing and economic development, a key appointment for a pol who has pledged to end the economic divide in New York City. Questions were immediately raised about her current position working for one of the highest-paying companies in the city.
“I don’t care about any stereotypes or assumptions,” The New York Times quoted de Blasio as saying in response to questions about her Goldman employment. “I care about who shares my values and can get the job done.”
Glen was assistant commissioner for housing finance at the Department of Housing Preservation and Development under Mayor Giuliani. At Goldman, Glen “runs a division that focuses on good works,” as the Times put it. Goldman’s Urban Investment Group helps finance projects in neighborhoods that have difficulty attracting loans and investment. Projects have included a program to reduce recidivism among ex-convicts; Citi Bike; and development of manufacturing, retail and office space at Brownstoner’s 1000 Dean Street in Crown Heights.