New York City needs no introduction. As the cultural capital of the world, the city that never sleeps is the go-to location for young professionals across many industries—especially creative ones. Its iconic cityscape has been in countless movies and works of literature throughout the 20th and 21st centuries. Its status is perhaps best expressed in the infamous John Updike quote that “the true New Yorker secretly believes that people living anywhere else have to be, in some sense, kidding.”
This mythical notoriety has made New York City one of the most expensive cities in the world, with rents second only to the laughably expensive San Francisco. Especially for lower and middle-income individuals, affordable housing is a hot button issue; especially in areas such as Brooklyn where gentrification has led to many communities being priced out of their own neighborhoods.
Interest in New York markets slumped substantially throughout 2017 and the first half of 2018. Manhattan looks particularly grim—according to CNBC, its worst quarter in six years came at the end of 2017. But where do things go from here?
Luxury markets are slumping for a number of reasons. New York is the slowest high-end housing market in the US—it takes an average of 134 days to sell a home here. This is mostly because of excess inventory and also because the wealthy are “extra vigilant managers of their own money and highly risk-adverse.”
Additionally, the landscape is tumultuous based on one specific factor: as the fallout from the tax overhaul remains to be seen, many housing professionals are keeping their cards close until they see how the plan shakes out. Many people were predicting that blue states would be hit disproportionately by the tax plan. StreetEasy wrote recently that the reduced deductible for federal taxes would “hit New York particularly hard, given the high income taxes and property taxes that fund the array of public services we use every day.” But these concerns are also suspected to be overblown. Rent concessions granted by the tax plan might make for a more ambitious renting population. Regardless the tax plan is behaving like a self-fulfilling prophecy; uncertainty has a paralytic effect on markets, and it will be difficult to evaluate the effects of the tax plan as we’re still in the process of understanding it.
There’s other confounding factors. In a city that is heavily dependent on public transportation, an event like the 2-year long L train shutdown will significantly threaten rent prices given that the L is a highly-trafficked train for professionals commuting into Manhattan. There are other transportation changes on the horizon as well. Most notably, the ferry expansion might increase demand in areas by the new ports.
Many of the tax plan’s predicted consequences remain highly speculative. Additionally, dips in luxury housing prices, while problematic, are sometimes downplayed as merely the market “correcting” itself. For now, both the tax plan and the NYC housing market remain big question marks.