Over the last several months, as the Seward Park Urban Renewal Area planning process chugged forward, we’ve sat through countless community board meetings, interviewed dozens of local residents and decision-makers and published op-eds from various players invested in the proposed residential and retail project. As the guidelines face a vote this evening, we’d like to offer some observations from an expert, NYC real estate analyst Jonathan Miller.
Miller, the president and CEO of Miller Samuel Inc., a real estate appraisal and consulting firm, is widely respected across the industry for his comprehensive data collection and reporting and his market insights.
“There’s no right or wrong answer to whether this kind of development is a good thing,” Miller says. “It’s always going to be a battle of the separate interests.”
While large-scale redevelopment projects invite lots of debate about variables such as process, preservation, pricing and the threat of losing charm and character, Miller’s long experience with Manhattan’s real estate market has proven one constant: They are never bad for existing property values, he says.
“Generally, whenever you have a project like this come into a neighborhood, property values go up. The addition of residential support services such as retail space and restaurants raises values, because it provides residents with more options,” he says. “Newer housing stock of more superior quality than existing stock is going to be more expensive. And that tends to help—certainly not hurt—properties in the vicinity. It tends to pull everything up, or, at the least, be a neutral. I’ve never seen a situation where it pulls anything down.”
Told that some SPURA neighbors have expressed fears that newer, more expensive housing at SPURA would make Grand Street’s mid-century cooperatives seem less desirable—and therefore less valuable—by comparison, Miller was skeptical. “The market just doesn’t work that way,” he says. “That argument is just not based on market forces.” That’s not to say that there might not be impacts on a more individual basis, such as new buildings blocking views of existing apartments, he says. “But that’s New York: There are no guarantees of views,” Miller says.
The plan for SPURA’s 1,000 or so new apartments—half of which would be subsidized for low, middle and moderate income families and senior citizens, under the current proposal—is wisely focused on rentals, Miller says. “Rental is the way to go; the window for condos is passed. We’re anticipating the rental market tightening up significantly, long before the sales market.” For example, landlords stopped offering concessions to lure and retain tenants in 2010—a common practice in the previous year, he says.
The projected $6,000/month rent for two-bedroom market-rate units, however, struck Miller as pretty steep, compared with current figures. His number-crunching shows an average two-bedroom unit going for $4,722 in the fourth quarter of 2010, citywide, with even lower averages downtown. Meanwhile, real wages adjusted for inflation have been flat for three years, and unemployment remains high. It’s tough to prognosticate the economic climate SPURA may eventually come to fruition in, because even under the best-case scenario, nothing would be built for at least five years.
In general, however, real estate is beginning to rebound citywide, Miller says: “The market has certainly stabilized over the last few quarters. Prices are flat. We finished up the year essentially moving sideways.” At the same time, building permits have fallen through the floor, with new developments accounting for only 20 percent of all apartment activity, down from a high of 60 percent during the boom, Miller says. A Jan. 16 New York Times article reported a 95 percent drop in residential building permits from 2008 to 2010.
Those numbers are directly attributable to the ongoing difficulty of securing financing for new construction, which may affect SPURA as well, depending on what happens between now and when it becomes reality. Not only will developers have to “justify to the market what they want to do there, but they’re going to have to justify it to lenders. They’ll have to substantiate the income that can be drawn off from this development, in what is still a very conservative lending environment.”
Community Board 3 meets to vote on the proposed guidelines tonight at 6:30pm, at the Henry Street Settlement’s gymnasium, 301 Henry Street. You can sign up to speak during the public session, beginning at 6pm. The latest version of the guidelines is available on CB3’s web site.
Thanks to Mr. Miller for the insightful analysis. The bottom line is that the City wants a market driven solution and if a private developer is going to build below market rate housing they will have to make money on the remaining units. The project will only make sense for a developer if the combination of cheap land and tax credits are sufficient to subsidize a proportion of the housing.
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