Brooklyn Housing Supply Begins to Match Demand
"There are so many new apartments in the neighborhood — roughly one-fifth of all rental units expected to become available in the city in 2016 and 2017, according to Nancy Packes Data Services, a research firm — that the Brooklyn rental market seems poised to zoom right past boom, to glut," reports Charles V. Bagli, who "covers the intersection of politics and real estate" for The New York Times. "Another four buildings on Myrtle Avenue will add almost 1,000 more units."
Developers and consultants are not predicting that rents will plunge, but they do expect them to stagnate and perhaps ease in the short term.
Is Supply Finally Coming to Rescue the Rental Market? Only on the high-end. And it won't last.
Bagli describes the generous incentives, usually in the form of one, two, or even three months of free rent offered to those who sign leases for high-end apartments, in some ways similar to what is being seen is some new apartments coming on-line in San Francisco.
At 7 DeKalb, a new 23-story tower atop the City Point mall complex, the landlord is offering two months of free rent with a 14-month lease, and use of the building’s fitness center and other amenities for a year without charge. That means a one-bedroom, one-bathroom place can be had for $3,428 a month; a two-bedroom, two-bath apartment goes for $5,057.
In some ways, the effect of the construction here is mirroring the 'market correction' that happened earlier this year across the East River. But the saturation is not seen in the housing market as a whole.
“It’s too many units skewed to the upper end of the market,” above $3,500 a month in rent, stated Jonathan J. Miller, president and chief executive of Miller Samuel, a real estate appraisal and consulting firm. “The top of the market is soft for both rentals and condos. That’s where the bulk of the new supply is coming.”
Ironically, what is in part driving the market is the city's tax incentive program to stimulate development of low and moderate income housing.
[N]early one-quarter of the apartments — a total of 1,654 units — in the Flatbush corridor are reserved for low-, moderate- and middle-income tenants under the city’s 421-a housing program, which offered developers generous property tax breaks for setting aside 20 percent of a project’s apartments for such tenants.
At the Hub, a 56-story tower at 333 Schermerhorn Street with 750 apartments [which will be the borough's tallest building], 150 units are subsidized for poor and working-class families, while 76 of the 379 rentals at 300 Ashland Place and 200 of the 250 units at 7 DeKalb Avenue are set aside for below-market tenants.
Bagli report that the 421-a program will end in January, and consequently the "construction of rental buildings [is] expected to fall to almost zero in 2018."
Hat tip to Mark Boshnack.