For the love of GOD! – Could developers please build something besides luxury rentals?

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Can we please build inventory people need?

There is an increasingly jarring mismatch between what developers are interested in building and the needs and wants of the general public.  Since the end of the great recession, builders have been erecting one high-end rental after another…and another….and another…Could developers please build something beside luxury rentals? Pretty please?

Initially, I thought this mismatch was a purely local problem, but a simple Google search told another story. The same patterns  are cropping up everywhere. From  Boston to LA, developers are on a luxury rental orgy. What I describe below for the Westchester market is simply one example of a bigger trend.

The Westchester market is being overrun by luxury rentals…

Here are just a few of the  recent rental developments that have opened in Westchester.

Peekskill:

Just this month there was a groundbreaking ceremony for the latest development by Ginsberg Development Companies. The large size and scope of the $64.5 million Peekskill, NY development has become very familiar. In this case, the luxury apartments are being built on an historic site. The 178 luxury rental units are being erected around the former St. Mary’s Convent.  The convent will be converted to a 42-room inn and spa. As give-back to the community 52 acres of the land surrounding the convent will be donated to expand Fort Hill Park.

Ossining:

Every time yet another high-end rental complex appears, I get this strange sense of deja vu. This new development is suspiciously reminiscent  of several other recent rental developments.

The first that comes to mind is Ginsberg’s Harbor Square in Ossining where a 1 BR rental can go for close to $3000. Located on the river, the views for at  least some residents would be great. But anyway you slice it, those are pretty expensive digs for a suburb that is about 50 minutes north of Grand Central Station.

Yonkers:

Then there is the River Tides at Greystone in Yonkers where you can snag a 475 sf closet (a.k.a. studio) for about $2k a month. In this case the train commute is a real perk. Less than 30 minutes to Grand Central Station with very few stops. Like Harbor Square, it is on the riverfront. But Yonkers is a city not a cute village and has been struggling to recover from the housing recession.

Hastings-on-Hudson:

The very toni village of Hastings-on-Hudson is host to the Lofts (another Ginsberg development) where a 1BR unit is sporting a $3500/month price tag. Granted these are oversized units, but still…

Mount Vernon:

Mount Vernon is planning some major development projects in the hopes of becoming the next hipster hot spot. Four major developments totaling $300 million are currently being pitched. Once again – all rental.

White Plains:

Meanwhile, in White Plains somewhere between 4000-5000 small 1-2 BR units are on target to break ground within the next few months to a year. No prices have been mentioned.  But given that they are all highly walkable with a 33 minute commute, we can assume that the middle class need not apply.

To put this in better perspective, White Plains may be a city with a large commuter population.  But the live-in population is surprisingly small – about 58,000. If there are 4500 units and if you assume 1.75 occupants per unit, full occupancy would constitute a near 14% increase in the city’s population.

Affordable rentals? Fuggedaboutit!

One of the biggest issues about the above list is that all but one of these developments are located in mostly middle/working class communities. Mount Vernon, White Plains, Yonkers, Ossining and Peekskill have a long history as affordable island havens in an ocean designed for the 1%.

Today, the difficulty is not in being able to find something to rent. The trouble is affordability. Gentrification may sound nice until you are the one being squeezed out. I get desperate calls from renters all the time saying their rent is increasing some insane percentage. They want to know how they can find a 2 BR unit for under $2k a month. When that’s what a studio is going for, the answer is they can’t.

What happened to condo development?

In my neck of the woods, downsizing boomers and first time buyers want CONDOS. They don’t want to rent. With the rental roller coaster being what it is, who can blame them? Yet the only thing being built is one rental after another.

As far as condo development goes, it pretty much doesn’t exist.  Nothing truly affordable is being built in commutable areas. Units are in short supply and buyers have to scramble with multiple bids to purchase one. Many of these are fixers from the 1970’s.

The few condos that are being built are just not affordable for current residents…

Of course, everything can be had for a price. The largest condo development with a reasonable commute is the well-know Hudson Harbor in Tarrytown. It is a series of boutique condos complexes and townhouses with price points generally in the $1million+ range. The final phase of Hudson Harbor development hit the market this spring with prices starting at $1.3 million. That’s way more than most boomers can sell their 3000+ sf homes for.

There are a few small developments up the line being built, but these involve much longer commutes with varying access to Metro-North parking ( a key component). They are a bit more affordable, but given their location in terms of a NYC commute, they are no bargain. These communities tend to start in the high $775k -$800k+  range.

People with no place to go can’t move on…

This issue is bogging down the market.  I get calls from boomers who are aching to downsize. They long to unload their big house with its heavy upkeep. But, they want to see what is “out there” before listing their homes. When they see that their only choices are overpriced cramped luxury rentals or tired,  rundown condo fixers, 90% stay put. This leaves less inventory for millennial buyers. So the issue has broad implications for a housing market mired in tight inventory.

Reasonably priced condos that offer some elbow room and a convenient downtown location would sell like hotcakes. HOTCAKES. Yet at the lower end of the county where the commute is reasonable, nothing of this nature is being built. Nothing.

A few weeks ago I was talking to another agent from my brokerage. We were talking about the market and the inventory on the market. She summed things up nicely by saying. “The trouble is that we don’t have inventory that people actually want or need.”

As affordability gets tighter and tighter, can anyone expect the market to continue its present trajectory? That’s unlikely when the inventory being produced isn’t meeting people’s needs. I’m no economist, but I sense a bubble brewing. It isn’t an ownership bubble this time, it’s a rental bubble. Bubbles tend not to end well. Remember what happened last time?

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