10 REMB THE NEW YORK TIMES, SUNDAY, OCTOBER 25, 2020and August, compared with last year.
Still, many experts predict that New York
will eventually bounce back — as it always
does, citing the eventual rebounds after the
Great Recession, 9/11 and the fiscal crisis of
the 1970s.
What Will Happen to the Market?
Rents and sale prices will continue to drop
in the next year, significantly so in some ar-
eas, but most likely not for the people who
need relief most.
Rents in the New York metro area — in-
cluding parts of New Jersey and White
Plains — are projected to drop 7.7 to 11.3 per-
cent by the middle of next year, from the
first quarter of 2020, according to Andrew
Rybczynski, a managing consultant with
CoStar Advisory Services, a commercial
real estate data provider.
After the 2008 recession, rents fell nearly
10 percent in Manhattan because of high un-
employment and rising vacancies, said
Nancy Wu, an economist with the listing
website StreetEasy.
The median rental price in Manhattan, in-
cluding concessions, was $3,036 a month in
September, according to the brokerage
Douglas Elliman. That is an 11 percent drop
from the same period a year ago but still far
beyond the means of most New Yorkers.
Citywide, the median rent last year was
$1,467 a month, according to the New York
University Furman Center.
Rents will continue to drop citywide, in
the absence of a vaccine, Ms. Wu said, but
that trend masks affordability problems in
several neighborhoods hit hard by the co-
ronavirus.
In an analysis of neighborhoods with the
lowest rates of infection — affluent neigh-
borhoods like Battery Park City and SoHo
— rents dropped 1.9 percent from February
to July, largely because of rising vacancies.
In the hardest-hit neighborhoods — includ-
ing East Elmhurst in Queens and Fordham
in the Bronx — rents have actually in-
creased 0.3 percent in the same period, and
a disproportionate share of Black and His-
panic renters, many in the service indus-
tries, have shouldered that burden.
“New York has been a tale of two cities —
not just in terms of the pandemic, which is
known, but also with rent affordability,” Ms.
Wu said, noting the dearth of options on the
lower end of the market.
In sales, the boroughs beyond Manhattan
are expected to recover sooner, because
they are relatively less expensive, and
proximity to Midtown is no longer a top pri-
ority. In August, Brooklyn exceeded the
pace of sales recorded the same time last
year, and Queens is on a similar but slower
trajectory, according to StreetEasy.
Discounts of under 10 percent are wide-
spread, but prices have yet to plummet, ex-
cept in the ultraluxury tier. Buyers waiting
for fire-sale prices may be disappointed be-
cause the market was already three years
into a price correction before Covid-19, Ms.
Wu said.
It is less clear what will happen in the sat-
urated new-development market. Out of
more than 20,000 condo units citywide that
have come to market since 2018, nearly 60
percent remain unsold, said Kael Goodman,
the chief executive of Marketproof, a real
estate data company. That represents $33
billion of unsold apartments, and about
2,000 of those units have not yet even begun
sales.
So far, the glut of new luxury inventory
has not resulted in many distressed sales, in
which units may be sold in bulk to investors
at deep discounts. To avoid foreclosure,
some scenarios could involve converting
condos to rentals, or restructuring loan obli-
gations. Industry observers expect to see
more of these actions in the months to come,
as developers run out of options to satisfy
lenders.
“It’s the ‘Road Runner’ dynamite sce-
nario: The fuse is burning, but it hasn’t
blown,” Mr. Goodman said. “Whichever
way things break, there will be buildings
that will have to be traded.”
What About the Industry’s Political Clout?
In recent years, the real estate industry’s
clout has waned as local legislators have
leaned increasingly to the left, and cam-
paign contributions from the Real Estate
Board of New York have shriveled. In July,
progressive challengers, like Zohran
Kwame Mamdani, a housing counselor, top-
pled incumbents viewed as too moderate.
City and state legislators are mulling an
apartment vacancy tax and other measures
to discourage speculative investment,
while opponents warn of a “death spiral,” in
which overtaxation could scare away the
wealthy. The highest-earning 1 percent of
New York City residents generated 43 per-
cent of city income taxes and 51 percent of
state income taxes collected from individu-
als living in the city as of 2016, according to
the Empire Center for Public Policy, a fis-
cally conservative think tank.
But more than any statistic or legislation,
the most consequential factor for real estate
is what will happen on June 22, 2021.
That is the date of New York City’s next
primary election, and it will be the most
consequential since 2013, when Bill de Bla-
sio, bolstered by his “tale of two cities” cam-
paign, swept into office. Now, with term lim-
its forcing out a deeply unpopular Mayor de
Blasio, along with most of the City Council, a
wide-open battle for the city’s leadership is
underway. And real estate interests say the
stakes have never been higher.
The city’s next mayor will need to ad-
dress urgent land use and housing issues
that have dogged the current administra-
tion even in a time of prosperity and free-
wheeling spending. A $9 billion budget
shortfall looms.
Depending on what happens in the presi-
dential election, it is too early to gauge
whether voters will opt for, say, a technocrat
like former Mayor Michael R. Bloomberg or
a rising progressive like Representative Al-
exandria Ocasio-Cortez. One presumed fa-
vorite, City Council Speaker Corey Johnson,
has already bowed out, highlighting the un-
predictable nature of the race.
“What these two crises have laid bare is
that this extraordinarily wealthy city which
was doing so well for one segment of the
population was completely failing other
segments of the population, including peo-
ple we now call essential workers, and com-
munities of color, generally,” said Vishaan
Chakrabarti, a former city planning official
who is now dean of the College of Envi-
ronmental Design at the University of Cali-
fornia, Berkeley. “Now how can we use this
pause to think about the city that should be
— a more equitable city?”
Some power brokers, like the developer
Stephen M. Ross and Daniel L. Doctoroff, a
deputy mayor under Mr. Bloomberg, are al-
ready plotting how to best use their influ-
ence and money to elevate their preferred
mayoral candidate.
“Just vote — vote in the Democratic pri-mary,” said Mary Ann Tighe, chief execu-
tive of CBRE, a commercial brokerage, dur-
ing a Zoom panel organized by the Partner-
ship for New York City, an influential busi-
ness group. “And get people to serve on the
community boards who come from the
world of business who understand the basic
economics of the city.”What Will Happen to Big Projects?
In light of the virus’s disastrous effects on
the economy, some believed the path for-
ward for several stalled megadevelop-
ments would be cleared, because of their
promise of new jobs and infrastructure.
Instead, opponents have grown more cir-
cumspect, and the de Blasio administration,
in its waning days, could push for some-
thing critics have long demanded: rezoning
in wealthier, whiter neighborhoods, not the
communities of color that have often been
the reluctant recipients of major redevel-
opment.
A large expansion of Brooklyn’s Industry
City complex, which developers said would
create 20,000 new jobs, was quashed last
month by opponents who doubted that
claim and said the project would hasten the
displacement of the largely lower-income
immigrant community nearby.
Also in September, the city backed out of
a proposal to build up to 15 mixed-use tow-
ers on 28 acres in Long Island City, Queens,
where Amazon previously failed to garner
support for its New York campus, because
of local concerns about gentrification and
inadequate infrastructure.
The Justice for All Coalition, a communi-
ty group opposed to the project, explained
in a letter in July: “The proposed rezoning
— for the purpose of building luxury resi-
dential and commercial mega towers — is
exactly what this community does not need
in the face of Covid and the urgent issues
raised by Black Lives Matter.”
Alicia Glen, a former deputy mayor under
Mr. de Blasio, rejected that thinking.
“This is not the time to double down on
the narrative that business is bad, that de-
velopment is bad,” said Ms. Glen, who re-
cently started a development firm, M
Squared, which builds mixed-income hous-
ing in cities across the country. “We can’t
play to the cheap seats of being against ev-
erything and everybody.”
But the disproportionate harm the virus
has caused to Black and Hispanic residentsin lower-income neighborhoods has em-
boldened another view, critics say: that the
argument is not simply pro- or anti-develop-
ment, but a matter of where the effort is
placed, and for whom.
So the mayor’s decision this month to
back a rezoning in SoHo, one of the wealthi-
est neighborhoods to be eyed for new af-
fordable housing, is a significant moment,
said Alex Fennell, the coordinator for the
Racial Impact Study Coalition, a communi-
ty advocacy group.
“It’s the first time the city has flat-out
said, ‘We need to put more affordable hous-
ing in affluent, white neighborhoods,’ and
that’s an important rhetorical shift,” Ms.
Fennell said.
The proposal, which made scant mention
of new housing when it was floated last year
as a mostly commercial rezoning, is now
seeking to allow about 3,200 new housing
units to be built, including 800 below-mar-
ket-rate apartments. The city has also sig-
naled that a rezoning of Gowanus, a neigh-
borhood in Brooklyn that is wealthier than
several other neighborhoods eyed for re-
development, is also a priority.
“There was an unspoken rule that you
don’t rezone wealthy neighborhoods,” said
Will Thomas, a board member of Open New
York, a pro-housing group. While local op-
position is already building, he said, “SoHo
is the first step in really showing that it’s po-
litically possible.”What Happens to Affordable Housing?
The Department of Housing Preservation
and Development, which funds and main-
tains much of the city’s affordable housing
stock, suffered a deep cut this summer,
when the city agreed to decrease its capital
funding by 40 percent over two years.
Rachel Fee, executive director of the New
York Housing Conference, a policy and ad-
vocacy nonprofit, estimated that would
translate into 21,000 fewer new and pre-
served affordable housing units and 34,000
fewer jobs, mostly in construction and relat-
ed industries. (In a reversal, the city said
Thursday that it would restore about half of
the funding that had been scheduled to be
cut.)
The cuts could delay or derail a number of
once-assured projects. In Far Rockaway,
Queens, an 11-building complex called
Edgemere Commons with more than 2,000
units, all of which would be offered below
market rate, was scheduled to receive city
financing in December, but a backlog of
stalled closings this summer means their
project will most likely be pushed back fur-
ther.
“Now we’re in limbo,” said Daniel Moritz,
a principal at Arker Companies, the devel-
oper, which planned to begin construction
this year.
Millions of dollars in predevelopment
costs like architectural plans, legal fees and
engineers can overwhelm developers
awaiting funding, said Ron Moelis, a co-
founder of L+M Development Partners. His
firm expected to close city financing in June
on the first phase of Bronx Point, a mixed-
use project in the South Bronx with 542 be-
low-market-rate units expected to be com-
pleted by 2023. Now financing has been
pushed back until at least December.
“At the exact moment in time when we as
a city know that we should be doubling
down, the city is pulling back,” said Barika
Williams, the executive director of the Asso-
ciation for Neighborhood and Housing De-
velopment, a coalition of housing organiza-
tions.
In a September survey representing
about 85,000 apartments in New York,
nearly 20 percent of tenants paid no rent,
according to CHIP, a group that represents
4,000 landlords and managers of primarily
rent-stabilized buildings.
And unemployment figures do not show
the full scope of struggling renters, Ms.
Williams said, because many who are out of
work or are underemployed were paid in
cash, and therefore not recorded by official
counts. “We’re on the brink of an eviction
tsunami,” she said.When the Smoke Clears
The Manhattan skyline, awash
in vacant offices, as
photographed from the
observation deck at Rockefeller
Center in August. Remote work
has already had a profound
effect on the real estate market.ANGELA WEISS/AGENCE FRANCE-PRESSE — GETTY IMAGESThe 1970s fiscal crisis,
9/11, the Great Recession
— the city always
bounces back.CONTINUED FROM PAGE 1
The city’s push to rezone SoHo,
one of the wealthiest
neighborhoods to be eyed for
more affordable housing, could
signal a shift in land use policy
that had long favored
redevelopment in less affluent
communities of color.SPENCER PLATT/GETTY IMAGES.