The answer to New York’s affordable housing problem may ultimately be solved by building LOTS: If you need any evidence of this, think back to the 2007/2008 recession where masses of housing stock sat idle…..and resulted in prices dropping, often dramatically. Or look today towards China….
In big international Chinese cities like Beijing and Shanghai, prices continue to rise, but in dozens of third- and fourth-tier Chinese cities rarely visited by foreigners, overbuilding is out of control and a major property-market slowdown is now under way. This evidence implies a city like Manhattan is somewhat sheltered from over-building with its large foreign demand and very limited land, but the boroughs could be at risk.
The 200 or so Chinese cities with populations ranging from 500,000 to several million account for 70% of the country’s residential-property sales. In many of these cities, developers are slashing prices and offering freebies such as kitchen furnishings and parking spaces as they try to work through vast gluts of unsold property. Buyers are angry that their investments are losing value…..and too many of these buyers are investors.
When too many ‘junior’ investors enter the real estate market with those ‘get-rich-quick’ dreams of buying pre-construction and then flipping, you can be certain trouble is looming. In Manhattan things are somewhat different as a majority of the current ‘flipper-investors’ are rather rich and most can afford to weather downturns. Some areas of New York are definitely being over-built and it remains to be seen if the demand can keep up with the supply.
Over-supply will also put downward pressure on construction, labor and land costs, three of the driving forces behind the lack of affordable housing shortages.