NYC Construction Spending On The Rise Even As Housing Production Plummets
Housing production in New York City fell dramatically this year, thanks to an expired tax break and soaring interest rates, but other types of construction kept the industry growing.
Overall, construction spending on projects hit $83B in 2023, according to the New York Building Congress outlook report released Wednesday. Between 2023 and 2025, spending is projected to hit $261B, which would represent an 18% increase over pre-pandemic spending.
But the spending isn't coming from the development of desperately needed housing units, per the report. The number of new units projected for this year dropped from 30,000 to 11,300. The city’s housing gap is expected to reach more than 500,000 by 2030.
“Construction spending has always served as an indicator of a region’s economic health, and we’re proud to report continued growth and resilience, high levels of employment and billions of dollars in economic outputs across New York City,” NYBC CEO Carlo Scissura said in a statement. “Notably, residential construction has declined citywide due to the expiration of 421-a, high interest rates and outdated bureaucratic red tape. The Building Congress calls for policies to support housing production at all levels of affordability to combat our housing shortage and ensure New York is a functional and affordable place for all New Yorkers.”
Roughly 6.7M SF of new office space is projected to be delivered by the end of the year, but the decline in office usage and values is causing a slowdown, with new office deliveries expected to drop by 1M SF annually leading up to 2025.
Construction employment is still lagging behind pre-pandemic levels, with 153,353 people employed, but the NYBC projects employment to reach pre-pandemic levels by 2025. Manufacturing, laboratories and educational locations are expected to drive nonresidential spending over the coming years. In 2023, the total spend is expected to be $34.9B.
Meanwhile, government spending on infrastructure increased this year to $22B, and the Metropolitan Transportation Authority is projected to significantly increase its spending between now and 2025 to $30B. That amounts to a 47% jump from the spending total between 2017 and 2019.
The slowdown in housing production is one of the biggest citywide issues for policymakers, developers and advocates alike, as the cost of renting is largely accepted as a threat to the viability of the city. Rents have begun to dip, but only after months of record highs.
In Manhattan, the median apartment rent was $4,350 last month, a 1% drop from August but still 8% higher than the same time last year, according to appraisal firm Miller Samuel.
Many policies floated haven't come to fruition. Gov. Kathy Hochul in January set an ambitious goal to create 800,000 new housing units across the state in the next decade. However, none of the policies that went before the state legislature, including mandating that municipalities grow their housing stock and lifting the density cap for New York City residential structures, passed.
The NYBC urged the government to renew the expired 421-a tax incentive and remove the Floor Area Ratio cap and find new ways to push for office-to-residential conversions.
