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Refute my logic then...with actual facts please...
One, New York is a *very* costly place to build or even renovate anything. Beginning with land costs moving onto construction and rolling down to the vast and byzantine bureaucracy.
Next comes New York's high taxes on residential buildings either condo, co-op or rental; the latter is taxed as commercial property and pay dearly.
All of this is why you see little to none of residential rental or even sales construction for multi-family without heavy subsidies (all those lottery/affordable/ mandatory inclusion and tax abatement nonsense) from the state and or local NY governments.
Cost per square foot is what it is, and becomes baked into the cake. Property owners either rent or sell at prices that cover or there are going to be problems sooner or later.
Large amounts of new residential multi-family in NYC today is not being financed by banks (they foresaw a glut some time ago and largely pulled back), but via investors including the Chinese via EB-5. While a developer may be able to negotiate with a bank when things aren't moving as planned, investors want their money.
For old buildings yes, a LL may be able to drop rents or go with preferential rates for a RS units until he can get what market will bear. But new construction is a different ballgame . This is why rather than offer rent reductions landlords are giving a vast array of concessions that in theory to reduce the rent, but don't touch the legal number. That is something landlords/property owners, banks, and the RE market in general learned a very hard lesion from past market downturns. It is also why banks have been reluctant to lend on many projects. When they do nearly all are demanding developer put some major skin in the game.
There have been at least three major RE recessions am aware of where developers over built (rental or co-ops mostly), and then got stuck with unsold and or units that couldn't be rented a predicted rates if at all. So much sponsor owned supply was lying about spare smart money could pick and choose. Those that did wisely are now sitting quite pretty.
Long story short you won't see any units in these new buildings going for "give away prices". Absent previous agreements to make them "affordable" units they certainly aren't going to dip below $1000k as the legal rent, nor much if at all below market. Again LL's will simply offer concessions....
As for the old brownstone, tenement or whatever buildings in Brooklyn and rest of NYC, much is going to depend upon things on ground by location.
Lots of persons in "brownstone" areas of Brooklyn and Manhattan for instance were getting good money via AirBnB. That money helped not only pay costs of ownership, but put money in their pockets. Faced with being cut off from those funds, and depending upon various particular personal situations owner of a brownstone/townhouse just may decide to sell.
Smaller five or six story walk-up buildings also have options depending upon location. Again in parts of Brooklyn and Manhattan developers are paying serious money to assemble lots. Second Avenue between East 79th and East 80th on east side of block has been sold and all those old five story walk-ups have or are being emptied out of retail and residential tenants. What will be built there and when no one knows yet.
Keep telling you people, absent a natural disaster or wrath of God, land isn't going anywhere. The real *princes* of NY real estate know this and are perfectly happy to let something sit until times seem right. If not in their lifetimes they all have children, grandchildren, great grandchildren...... It is only the little pishers who don't know what they are doing that get into trouble.
Now that the 421a is back in play a few projects have announced they will begin. However make no mistake the market is closely watching rentals and sales (yes that includes "middle income" as well as luxury), and if this over supply turns into a serious problem glut, new construction will cease and or drastically slow down.
Again banks no longer are giving away "easy money". If the city wants "low income" housing and there isn't enough demand for middle income or above to carry the poor residents, it is going to have to pony up deeper subsidies to make it happen. That or pay someone to develop property it already owns and finance the deal, as is being done with a former NYPD parking lot on 11th Avenue.
There are tons of commercial properties and landlords rather keep it empty than get less than what they want.
What you are talking about is dream world. Free market doesn't exist, never has
When over sixty percent of rental housing in NYC falls under some sort of government control mandate (NYCHA, SCRIE, RC, RS, affordable/lottery, 421-a, etc...) there is no such thing as "free market".
New York dug itself into a rat hole when it extended rent control laws back in the early 1970's and things have only gotten worse since. It is a well known fact accepted by economists from both sides of political fence that government interference in markets only causes harm in long run.
Piled on top of New York's rent control laws are previously mentioned other issues such as over regulation, high land costs, taxes, zoning, etc....
What many fail to realize it is *BECAUSE* of all these things (including rent control) that the state and city turn around and offer various carrots and sticks to get developers to build "affordable" housing. In other words city is admitting yes, we know it costs dear to build and run an apartment building here, so tell you what we're going to do..... We'll rezone, lower taxes, or whatever to get you to build, renovate or otherwise create decent housing *but* you have to make (ever) larger portions of it "affordable".
Sorry but that is not how things work in "free" housing market.
And here is another reasons why.
Households make determinations where to live based upon various criteria. In turn rental prices are set by what a market will support. That is how a balance is achieved.
One household may see paying $2500 for a two bedroom apartment on the UES as worth it, while another may decide their money is better spent elsewhere.
Location, location, location is the common mantra for real estate and it still rings true.
If you are going to NYU or work there and found a crappy apartment (say $2k per month) for a small crappy studio in an equally horrible building you might just take it even if the rent far exceeds value. Why? Well the value to you for living close to school/work outweighs some or all drawbacks.
A smart landlord knows what he has and prices according to what the market will bring him. If you didn't take that crappy apartment mentioned above, the LL knows sooner or later someone else will, so rent won't be lowered.
Now move that crappy apartment to some drug, gang and vermin infested building in East New York, far from mass transit and the LL will likely sing another tune.
Unfortunately, I see the declines as only temporary. These buildings will get filled since there isn't much coming online in the next 2 years due to the expiration of the old 421A. The developers of the new buildings have time, and room to offer concessions since asking rents are still higher than when the buildings were first financed several years ago.
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