Recently, New York City gained the distinction of being the most expensive place on planet Earth.
In spite of prices for goods and shelter climbing to unprecedented heights, and evidence continuing to mount that ordinary New Yorkers are unable to keep pace, some experts are saying that the flow of residents in the city is shifting, moving heavily inward instead of indicating an exodus. “That dynamic of when you grow up — either your company grows up or you grow up — then you move out of the city has completely reversed,” David Ehrenberg, the President and CEO of the Brooklyn Navy Yard Development Corporation, said in a panel discussion during the Appraisal Institute’s Annual Conference over a week ago.
“It just represents that people want to live and work in New York.”
According to census data from last April, the number of people in the city has grown to almost as high as the population projection for 2020.
For 2014, the city’s population was at 8,491,079, just 59,892 people less than the expected 2020 population. The growth in the population happened in spite of a drastic jump in rental prices.
According to a market report from Douglas Elliman, in May of 2014, the average rent in Manhattan climbed to what was then a record high of $3,902 per month. Benjamin McGrath, the executive vice president and CFO of Edward J. Minskoff Equities, predicts that the effects of New York City’s affordability problem may kick in at a slower rate.
“It’s possible, over the next 10 years, that we see a new migration to the suburbs because of this affordability issue,” he said.
The migration may have already started. Towns in Westchester County such as Rye, Chappaqua and Scarsdale, are becoming preferred destinations for Manhattan residents, especially those who want to enroll their children in good public schools.
According to census data from 2014, nearly half of the households that move to Westchester come from New York City. This has boosted the area’s diversity. Hispanics now make up 22 percent of the county’s population.
While the possible migration of New Yorkers means that many residents would be priced out of their neighborhoods, Ehrenberg insists that the lack of affordability is actually positive.
“It’s a huge problem to the housing world, but it is a sign of strength,” he said. “And so I think most of us would say that, as opposed to a downward trend in those markers, we would prefer to see stability.”
Michael Rudin, the vice president of family-owned real estate firm Rudin Management, said that affordability is as much a problem for developers as it is for residents.
This goes against the perception that the real estate industry is the biggest beneficiary of the city’s exorbitant rates.
“I think affordability in both residential and commercial has always been and continues to be a problem for developers,” he said.
“I think the important thing about today’s market is that construction prices right now are pretty crazy and prices are also pretty crazy. It’s really hard to justify buying an existing building or site and building affordable units if you’re not getting some sort of subsidy from the city or a break on the land price.”
According to a September report from Swiss bank UBS, the city’s high prices extended far beyond rent.
In the whole world, only two cities — Zurich and Geneva — had higher prices for goods and services. However, the cost of living was the highest in New York City when rent was factored in.