Gregory J. Heym
Executive Vice President, Chief Economist
By Daniel Massey
New residential construction in the city continued to plummet in November as developers grappled with tight credit markets and dwindling sales.
Permits for new residential buildings fell 74% to 63 in November compared with a year earlier, while the units authorized by those permits dropped 48% to 1,235, according to new data from the U.S. Census Bureau. The scarcity of new residential projects drove the value of construction associated with permits more than four times lower than November 2007, to just over $51 million.
The decline mirrored a national one that saw housing starts across the country in November fall to their lowest level since the government began collecting data in 1959.
“Until the financing becomes more available for developers, it’s hard to imagine that permits could pick up again,” said Gregory Heym, chief economist at Terra Holdings, the parent company of Brown Harris Stevens and Halstead Property. “That’s the common story you hear— there’s just no financing here.”
While permits for buildings in the city were down 36% for the year through November, the number of units covered by the permits was actually outstripping the 2007 pace—up 13% despite the tanking economy. It was the fourth straight year the city has issued permits for more than 30,000 units. That level was reached during these tough times because developers rushed to get several large projects started to qualify for 421-a tax subsidies and beat changes to the city’s building code.
But Mr. Heym says it is uncertain how many of those pending projects will ever be completed. “We don’t know how many will of those will come to fruition,” he said.
In addition to changes to the 421-a program that went into effect July 1, the inability of developers to get credit and their trouble selling existing units are behind the decline in permits. Banks have also tightened lending standards for mortgages, making it harder to find qualified buyers.
The slowdown appears to be taking a toll on construction workers. The city shed 1,800 construction jobs in November, according to a seasonal adjustment of New York State Labor Department data by real estate firm Eastern Consolidated.
And things are almost assuredly going to get worse before they get better. The New York Building Congress has said the annual number of permitted residential units could fall to 18,500 by 2010. And, the organization predicted the city could lose 30,000 construction jobs by 2010, bringing the industry workforce to just above 100,000, its lowest level since 1997.
Friday, January 02, 2009