Not too long ago, Brooklyn was a manufacturing haven that offered blue collar jobs that paid well. Brooklyn also found itself acting as Manhattan’s little secret when it came to affordable and quality housing for the people who worked in Manhattan. For years, the idea of new construction in Brooklyn was not a prominent thought. Today, the topic of housing levels in Brooklyn has become a topic for discussion for investors all over the world.
Brooklyn Apartments By The Numbers
New construction in Brooklyn housing has become a hot topic for conversation lately. The percentage of new apartments in New York City that have been built in Brooklyn went from 18 percent in 2014 all the way up to 36 percent in the third quarter of 2016. From 2014 to 2015, Brooklyn averaged 370 new apartments added per quarter. By the halfway point of 2016, that number had skyrocketed to 1,500 units per quarter.
Brooklyn has gone from being an industrial area to a trendy place where young and successful entrepreneurs come to set up their businesses. That shift in demographic came with an increase in Brooklyn housing rents. While the average apartment rent in the United States is at $1,293 per month, Brooklyn rents have pushed up to an average of $3,671 per month. Along with new construction and higher rents comes gentrification, which is pushing the older residents out. With people leaving and rents rising, is Brooklyn in danger of over-saturating its housing levels?
What Is Causing The Housing Boom In Brooklyn?
To understand why there is so much new housing in Brooklyn, you need to look at a couple of primary indicators. The growth of the Brooklyn business sector has continued for several years, and now Brooklyn has developed the reputation of being the trendy place to start a new business. As more businesses form, more housing is needed and quickly.
A big contributor to the Brooklyn housing boom is the expiration of the 421-a tax program. This program offered financial incentives to developers that were almost impossible to resist, and much of the new construction due to the 421-a tax program was done in Brooklyn because that is the borough that needed the new units the most. The 421-a program expired on December 31, 2015, and there was a run on building permits from developers trying to take advantage of the program. The result was a glut of building permits that have project starting dates that extend into 2017. Thanks to 421-a, there is a lot of new construction that will be going on in Brooklyn for a while.
What Is The Future Of Brooklyn Housing?
If you ask 10 different experts on whether not there is a glut of Brooklyn housing, you will get 10 different answers. Apartment buildings built in or before 2011 are suddenly considered old properties, and many tenants are leaving these older buildings to live in the newer properties. Property owners are offering tenant incentives such as free rent for two or four months to keep tenants in the older buildings, but tenants are still leaving as soon as new buildings are open.
But does this migration of tenants mean that Brooklyn will suddenly be filled with empty and “old” apartment buildings? The experts may not agree on whether or not there is a housing glut right now, but they do agree that any housing irregularities will eventually work themselves out. Rents will start to go up again, and the newer housing being built will be filled in the next year or two.
Right now, the situation appears to be that Brooklyn’s population growth is not keeping pace with the new buildings being built. The gentrification of Brooklyn means that new building owners need to work hard to attract tenants who can afford the rents being established. But as the population of Brooklyn continues to grow with new business owners and people who are moving from Manhattan to Brooklyn to avoid the average Manhattan apartment rent of $4,680 per month, it appears that Brooklyn’s housing issues are temporary at best.