In keeping with its reputation as the city that never sleeps, Manhattan saw its apartment industry stay wide awake this year. Considering that more than 70 percent of this borough's housing is renter-occupied, it's no surprise that 2007 was a very good year for New York City.
A vigorous local economy continues to generate considerable demand for rental housing in the city. Currently, the vacancy rate for market-rate properties consisting of 40 units and more is in the low-2 percent range, where it is expected to remain for the next several quarters. Rents have expanded at a substantial pace in the market-rate sector, while owners of rent-controlled properties must comply with guidelines allowing a 3 percent increase on one-year leases and a 5.8 percent bump on two-year leases.
On the supply side, the inventory of market-rate units was expected to rise more than 2 percent by the end of this year. Permit issuance for future construction remains elevated, though recent revisions to a local tax abatement program may force reconsideration of some projects. Meanwhile, the city is proceeding with plans to redevelop the West Side rail yards, which allows for more than 4,000 units of multifamily housing. Also under consideration: the construction of roughly six towers that could house up to 10,000 residents on a site near the United Nations headquarters on Midtown's East Side.
Several developers were expected to submit bids in the fourth quarter to develop the 26-acre West Side rail yards tract. Located between 30th and 33rd streets on both sides of 11th Avenue, the area could hold more than 4,600 apartments, 20 percent of which will be set aside for low- and moderate-income tenants. The local economic outlook has dimmed only slightly in the past few months due to the financial markets. Housing demand in the Big Apple, however, is expected to remain robust for the next several quarters thanks to decent job growth in other sectors.
The stock of rental properties containing 40 or more units declined just 0.3 percent over the 12 months ending in the third quarter. About 1,260 unit completions were offset by stock reductions, yielding a 250-unit decrease in overall rental stock. Another 1,700 rentals in buildings with 40-plus units are under way and slated for delivery after 2007. Counting all rental properties, 5,700 units were scheduled for delivery this year.
CHANGES AHEAD The popular 421a tax abatement program was recently amended by the state legislature and signed into law. Among the changes enacted was a provision expanding the list of neighborhoods eligible to receive tax abatements; lawmakers are expected to determine the boundaries of those areas by the end of this year. (Currently, developers may receive tax abatements for projects built in several Uptown neighborhoods.)
The city also is conducting several rezoning studies that will affect future housing development. In Manhattan, two of the studies cover the 125th Street corridor in Harlem and 51 city blocks on the Upper West Side. Builders are on track to produce 2,500 rental units in buildings with 40 or more units this year. In 2006, 1,160 units were delivered in the borough.