Key Takeaways
- New York City's housing crisis has been caused by a combination of events, such as a severe shortage of affordable housing, skyrocketing rents, and high real estate costs.
- Mortgage rates increased from 3.1% in 2020 to 6.5% in 2023, making it more expensive to buy or sell homes. This has exacerbated the housing shortage as more people opt to rent rather than buy.
- Rising inflation and living costs strain NYC residents’ finances. The cost of necessities increased significantly, with the food-at-home index rising by 10.8% over the past year, the largest increase since 1980.
- Government initiatives aim to address the crisis through zoning changes, tax incentives, and increased housing construction. Initiatives like the "City of Yes for Housing Opportunity" and "The New York Housing Compact" seek to expand affordable housing.
- The housing crisis reduced demand for moving services as fewer people can afford to move. Vacant rental units dropped from 102K in 2021 to 33K in 2023. Moving companies face increased competition but see opportunities in personalized services.
New York City is at the top of many lists: it is the most populated city in the United States, one of the most expensive cities in the country, and boasts the most languages spoken in the world, to name a few. Despite being one of the most popular destinations for work, life, and play in the country, the city that never sleeps is facing a severe housing crisis that has had major impacts on multiple industries.
Unfortunately for the moving industry, fewer housing options lead to less demand for moving services. Outlooks for the housing market are improving in some ways as mortgage interest rates begin to level, but inventory remains low and prices are higher than ever. People looking to move to NYC as well as New Yorkers looking for new views in different boroughs are being met with challenges that have extended to the moving industry.
What Factors Led to the NYC Housing Crisis?
It’s hard to point fingers at any one cause of the housing crisis. Between a massive housing shortage, an influx of renters and would-be homeowners moving to the Big Apple for job opportunities, exorbitant real estate costs, and other factors, experts aren’t shocked at the state of things. The city has a distinct lack of affordable housing, new construction has stalled, and rent increases have become oppressive. Last year, vacancy rates hit their lowest in decades, with just 1.4 percent of rental apartments and other housing units having availability.
Add to that a global pandemic, a lack of tax incentives for builders, and a consistent rise in the number of low-income families, and you’ll find a recipe for a housing crisis.
Interest Rates, Rising Costs and Inflation
New York City is widely understood to be one of the most expensive cities in the country, second only to San Diego, California in many reports. In the moving industry, we know that the cost of moving in New York City is out of reach for millions of people. But it doesn’t stop there.
Exorbitant rents and home prices, outrageous costs for materials for housing production, and stagnancies in the median income of NYC residents have combined to contribute to the housing crisis. Rents that went down during COVID have skyrocketed post-COVID as landlords reverted to normal or higher rates, driven by the high demand.
For people looking to buy rather than rent, the problems of supply and pricing can be even more pronounced. The current market dynamics show that many homeowners are reluctant to sell due to their existing low mortgage rates. This has led to more people choosing to rent because they can’t afford to buy.
Interest Rates and Housing Market
Interest rates have played a crucial role in the housing market dynamics. The Federal Reserve's decisions to increase interest rates to combat inflation have had a direct impact on mortgage rates. The average mortgage rate for a 30-year fixed-rate mortgage increased from 3.1% in 2020 to 6.5% in 2023. This rise has made borrowing more expensive, discouraging homeowners from selling their properties and locking in lower rates.
Year | Average Mortgage Rate (%) | Annual Home Price Increase (%) |
2020 | 3.1% | 5.7% |
2021 | 3.5% | 10.3% |
2022 | 5.0% | 15.0% |
2023 | 6.5% | 12.5% |
Source: Federal Reserve
The increased mortgage rates have contributed to fewer homes being listed for sale, as homeowners prefer to hold onto their existing low-rate mortgages. This has exacerbated the shortage of available homes and intensified competition among buyers, leading to bidding wars and further driving up home prices.
Housing Costs
Rent prices over the last ten years (especially when compared with the city’s minimum wage) shine a light on how the issue has evolved. This chart compares the NYC minimum wage per year with that year’s median rent for a studio or one-bedroom apartment.
Year | NYC Minimum Wage | Median Rent for Studio Apartment in NYC | Rent for One-Bedroom Apartment in NYC |
2013 | $7.25 per hour | $1800 | $2100 |
2014 | $8 per hour | $1900 | $2200 |
2018 | $13 per hour | $2300 | $2500 |
2019 | $15 per hour | $2400 | $2650 |
2020 | $15 per hour | $2000 | $2400 |
2021 | $15 per hour | $2200 | $2450 |
2022 | $15 per hour | $2800 | $3250 |
2023 | $15 per hour | $3000 | $3350 |
Source: https://comptroller.nyc.gov/reports/spotlight-new-york-citys-rental-housing-market/
The minimum wage was increased in 2014 and 2018 in correlation to the rising cost of rent. Since then, the minimum wage has not changed, while rent prices continue to increase each year. The average minimum wage earner needed $600 more per month in 2023 than 2019 to rent a studio apartment. In response to what has been called a housing emergency in New York State, Governor Kathy Hochul has introduced a $25 billion housing plan that she hopes will help alleviate the crisis.
Impact of Rising Costs on New Yorkers' Financ
Inflation and increased prices of necessities have further strained people's personal finances. The cost of living in New York City, already high, has become even more burdensome for residents. Here’s a detailed look at how the rising costs are impacting the bottom line for New Yorkers:
The inflation rate in the United States has seen a significant rise in recent years, affecting all aspects of daily life. In 2021, the inflation rate was 4.7%, and it rose to 8.0% in 2022. This rise has had a particularly strong impact on New York City due to its already high cost of living.
The price of food has been a significant contributor to inflation. According to the Bureau of Labor Statistics, the food-at-home index increased by 10.8% over the past year, the largest 12-month increase since November 1980. For a city like New York, where food costs are already higher than the national average, this increase has a profound impact.
Supply Shortages
One of New York’s biggest problems is its housing shortage. Put simply, people can’t move into new housing if it isn’t being built, and they can’t rent if there are no affordable units listed. NYC’s housing supply challenge is highlighted in the reports on residential crowding, which is happening at a much higher rate than a decade ago.
A comparison of residential crowding rates from 2010 and 2022 tells a dark story and helps to visualize the housing shortage. For context, residential crowding is defined as any housing unit that holds more than 1.5 residents per room. Below, we look at the rates of severe crowding by borough and census year. The data shows the greatest increase in crowding in Brooklyn, and the only decrease in Manhattan.
Borough | Percentage of Over-Crowded Units in 2010 | Percentage of Over-Crowded Units in 2022 |
Bronx | 4.3% | 5.1% |
Manhattan | 2.9% | 2.6% |
Brooklyn | 3.6% | 5.6% |
Queens | 3.2% | 4% |
Staten Island | 0.7% | 1% |
NYC Average | 3.3% | 4.2% |
Source: https://comptroller.nyc.gov/reports/spotlight-new-york-citys-housing-supply-challenge/
This data shows a significant issue that many property owners blame on actions by the state legislature from 2019 that restricted rent increases further on rent stabilized units. While lawmakers intended to protect tenants from rapidly increasing rents citywide, the housing policy resulted in owners choosing to let disrepaired units sit.
Increased Demand
Despite the fact that the population of NYC has declined somewhat in recent years (following a pandemic, a small exodus of families, and a decrease in the birth rate), demand for housing has increased. Job openings have drawn in young Americans toward the city, and that population overwhelmingly prefers to rent.
In 2020, demand hit record highs. The number of applications per affordable apartment listing varied by income bracket, but were remarkable no matter which category you fell in.
Income Bracket | Number of Applications Per Unit, 2014-2019 |
“Extremely low” | 650 |
“Very low” | 543 |
“Low” | 354 |
“Moderate” | 253 |
“Middle” | 123 |
The higher the income in a given household, the more likely they were to get the apartment they applied for.
Latest Housing Market Data
The numbers don’t lie. From the Bronx to Long Island and everywhere in between, the housing market is difficult. Let’s look at the data.
Changes in Inventory
We can see that the supply is simply not keeping up with demand when looking at the slow increase in housing units year over year. New availability is increasing, but it’s happening at a rate too slow to sustain the needs of New Yorkers.
This chart shows a comparison of the number of new housing units that became available in 2017, 2020, and 2023, organized by borough.
Borough | Housing Units Added: 2017 | Housing Units Added: 2020 | Housing Units Added: 2023 |
Manhattan | 5953 | 3820 | 3761 |
Bronx | 2646 | 4432 | 4315 |
Queens | 5133 | 2819 | 7887 |
Staten Island | 482 | 408 | 303 |
Brooklyn | 11512 | 9981 | 9571 |
Source: https://comptroller.nyc.gov/reports/spotlight-new-york-citys-housing-supply-challenge/
Vacancy Rates
The crowding issue discussed earlier is easily explained by looking at vacancy rates, which have been on the decline since 2021. The chart below shows the total number of vacant housing units compared with the total number of units actually available to rent per year from 2021 to 2023.
Year | Total Number of Vacancies | Total Vacant Units Available to Rent |
2021 | 378,036 | 102,740 |
2022 | 306,024 | 74.612 |
2023 | 273,000 | 33,210 |
Source: https://comptroller.nyc.gov/reports/spotlight-new-york-citys-housing-supply-challenge/
What Is Being Done to Address the Shortage?
Zoning and Construction
Despite the significant building projects over the past ten years since the Bloomberg administration, including those in LIC, Brooklyn, Hudson Yards, and the Bronx, the overall increase in housing options has only been 4%. This limited increase is also due to the existing overcrowding in the city.
Housing industry experts have largely come to the conclusion that problems with zoning had a major impact on the existing housing crisis. Prohibitions against building multifamily units as rental housing created more housing developments with single-family homes and left renters without options.
But now, data shows that zoning could be the answer to the housing crisis, increasing housing production and therefore adding to housing stock. Cities like Minneapolis, which have rezoned single-family lots and now allow multifamily dwellings in those spaces, have shown that it is possible to double or triple the available housing in any given unit.
Mayor Adams has also been working to rezone office buildings, the conversions of which will open up thousands of apartments to renters in the city. The City Planning Commission and City Council of NYC will soon cast a vote on zoning changes that aim for similar results.
Government Initiatives
Governor Hochul, based in Albany, and Mayor Adams of NYC are working on initiatives to respond to the housing crisis that include tax breaks, abolishing parking mandates for new construction, and more.
The initiatives include:
“City of Yes for Housing Opportunity” – Proposes zoning changes within the city that would get rid of parking mandates, introduce the Universal Affordability Preference which would increase the number of affordable housing units within developments, and the construction of housing near public transit options.
“The New York Housing Compact” – Aims to build more housing in New York State, eliminate challenges that prevent new construction, and providing incentives to builders.
Impact of the Housing Crisis on Moving Industry
In the moving industry, businesses are directly affected by the housing crisis. People can’t afford to move, so they don’t need moving professionals. People who have no choice opt to move themselves to save money. Competition between industry leaders turns to bitter price wars that do more harm than good.
Fewer Moves Taking Place
It’s true, fewer moves are happening. If people want to make a big change, the middle of a housing crisis is probably not the most financially realistic time, and the data backs them up. At Oz Moving, we have had to scale back our operations a bit in response to the post-COVID housing crisis. Normally, our business ebbs and flows with the economy; when the economy is good and growing, people move into bigger, better homes. When it is slow and stagnant, they downsize or move back home. In the case of a stagnant housing market, as was in 2007-2008, there simply is less movement.
Price Wars Between Moving Companies
As consumers look for ways to save every penny they can, they’re not afraid to pit moving companies against each other to find the lowest possible estimate. This has resulted in price wars that put moving companies in the difficult position of financial risk in order to make a sale. We know moving can be expensive, there are so many costs involved way beyond the cost of the actual move. It’s important to make an educated decision and use a trusted, reputable mover. Choosing a mover based strictly on price is usually a “pennywise and dollar foolish” way to proceed, it’s not the place to cut corners.
Increased Demand for Personalized Services
The landscape is changing for how people use moving companies. We offer storage, and find more clients are needing the added time to find their new homes, or to renovate the ones they purchase.
We have also expanded our range of services to make every transition easier. We now offer full service international moving, and convenient services like mounting flat screen televisions and hanging pictures. For clients that want to make their move as eco-friendly as possible, we offer reusable plastic crates or gently used boxes in lieu of brand new cardboard boxes.
Conclusion
If you’re considering a move in 2024, don’t let the numbers scare you. Trust the experts and keep an eye on the data. The trends we’ve highlighted should provide insight on the challenges you might face and equip you to handle your move like a professional.