There’s so much to hate about New York’s acquisition to – nay, encouragement of – the Amazon invasion. I’d like to zero in on one frustrating and even poetically tragic part of the HQ2 mess that is being overlooked. New York’s housing policy has chugged along for years without producing much in the way of overall rent decreases. In Long Island City, this was poised to change – a true surplus of housing, built partly as a result of the city’s longstanding rezoning and development policies, meant that lower rents across the neighborhood were becoming a reality. And then came Amazon.
If New Yorkers want lower rents, we need to build, build, build, both market-rate and affordable housing. That was the refrain from the Bloomberg administration, which rezoned 40 percent of the city’s landmass to increase housing density. Bill de Blasio took this torch and ran with it, declaring in his first State of the City address that New York “MUST build more to achieve our vision” (yes, he said it in caps, as per the transcript). For the Mayor, this has meant a carrot-and-stick approach with private developers: the city rezones and “up-zones” neighborhoods to allow for bigger and denser buildings; in exchange, developers build more affordable housing. Under de Blasio, building across the city has been turbo-charged, with new construction permits being issued at a rate 182 percent higher than in the 1990s, and close to the boom-time figures of the mid-2000s. The promise of this policy is clear and simple, in market terms: more supply means lower prices; and as a bonus, the city gets significant new affordable housing units. Sounds great if it works, right?
Long Island City is a good test-case for this ongoing experiment. It has long been a hotbed of new development, with targeted rezoning in the neighborhood dating from the Koch administration. The de Blasio administration has furthered the cause, identifying LIC in 2017 as ripe for neighborhood-wide rezoning.
And boy, have these efforts worked to create new housing. Perhaps no neighborhood in New York – maybe even the country – has seen more of a housing boom than Long Island City. Since 2010, the Queens neighborhood has added more new apartments than any other in NYC, with thousands more on the way. In 2017, LIC led the way for new development, including the announcement of a new waterfront rezoning project “at least 1,000 units” of new housing to add to what real estate blog 6spft calls “a small city worth of skyscrapers.” All a New Yorker needs to do is look at the Long Island City skyline to see the results – what was once a lonely industrial enclave has been transformed into a mini-Manhattan, all gleaming glass and shiny steel.
So that’s step one of NYC housing policy: build. What about step two? Was supply starting to catch up with demand?
Crazily enough – at least for those of us long accustomed to broken promises by city officials when it comes to housing costs – the policy worked. Or at least, it was about to. For much of 2017 and 2018, the real estate story in Long Island City was a tale of too much supply. First, the buyer’s market was softening. As reported by NBC News, brokers were seeing sparse attendance at LIC open houses, with potential buyers adopting “a wait-and-see stance as mortgage rates rose, luxury construction flooded the market and interest from foreign buyers waned.”
Of course, most of us can’t afford to buy even in buyer’s markets. But in LIC, renters, too, were starting to see some relief. The glut of new housing was forcing LIC developers to “lavish,” in the words of Bisnow New York, prospective renters “with incentive packages at record levels.” The CEO of one LIC brokerage noted, “In prior years, buildings would do 25 to 30 rentals a week, now the same buildings are doing 25 to 30 a month.” Indeed, 2017 saw rents in Long Island City fall by 1.3 percent, and landlords cutting asking rents an average of 33 percent from their initial listing. Here’s how StreetEasy Senior Economist Grant Long put it: “The cooling in the market is no longer limited to new, high-end buildings in select pockets of the city — there’s a broader trend of rents topping out across all price points. The slowdown is forcing landlords across the city to cut deals, and renters now have the most negotiating leverage in years.” Words like that are music to the ears of rent-burdened New Yorkers.
In a very real way, this was a vindication of the housing policy New York has now pursued for nearly 20 years. We were told, time and again, that eventually, if we just built enough, supply and demand would level out, the market would cool off, rents would eventually come back to ground level. And finally, in Long Island City, these promises were starting to come to fruition. Hallelujah.
And then came November 13, 2018, when Jeff Bezos broke the news that Amazon was coming to Queens.
Since Amazon’s announcement, it’s hard to understate just how relieved Long Island City brokers are, with reports of open house attendance soaring by 250 percent, and frantic buyers closing deals sight unseen, via text message. Some industrious brokers are renting vans to ferry groups of clients from listing to listing, and holding group tours in Chinese for those foreign buyers whose interest had previously waned. As one real estate agent told the Wall Street Journal, “This is like a gift from the gods for the Long Island City condo market.” The president of appraisal firm Miller Samuel may have said it best: “[Amazon] has been a bail out for those developers.” To be fair, some of this interest came before Amazon’s announcement: The Real Deal reported that Amazon employees in-the-know purchased condos before the move was official, a practice they referred to as “insider gentrifying.”
It isn’t hard to predict the effect on rent prices. Danielle Hale, chief economist for realtor.com, told Forbes rents are going to rise: after a surge of nearby development, “we are likely to see sustained price increases within a five-mile radius from the HQ2 campus.” StreetEasy economist Long seconded this assessment, telling AM NY, “”Rents are highly likely to go up, and at a faster rate than everywhere else.”
In one day, Amazon wiped out any progress New York was making when it came to lowering rents in Queens. This is what Governor Cuomo and Mayor de Blasio, who talk endlessly about new tech jobs and stridently defend corporate subsidies, don’t understand, and why they seem so blindsided by the opposition to Amazon. Even if New York gave nothing away to Amazon, even if we really do get some new high-paying jobs, even if the tax base expands, at the end of the day, New Yorkers are trying to survive a housing crisis. Anything that makes that harder, not easier, is going to be a non-starter for all but the city’s wealthy. We were told that new skyscrapers were going up everywhere to lower rents by the wonderful mechanism of the free market, not to house our new tech overlords and foreign speculators. But here we are.
Oh, and just to add a little insult to economic injury: Amazon’s arrival means plans for 1,500 new units of affordable housing at the development site have been cancelled. Oh well.