Construction Outlook

Construction Outlook Update
April 2009

Building permits: 2000 - 2009

STEEP DROP IN BUILDING PERMITS SIGNALS AN END
TO NEW YORK CITY RESIDENTIAL BUILDING BOOM

Permits Issued for Just 576 Residential Units in Five Boroughs in January and February; Three Building Permits for 38 Units Issued for Borough of Manhattan at Start of 2009

The New York City Department of Buildings issued building permits for 576 residential units in 133 buildings citywide in January and February of 2009, which is a steep decline from the same period in 2007 and 2008. While some of the drop is explained by seasonal factors, regulatory changes and unique financial circumstances, the numbers also signal the end of a virtually unprecedented residential building boom in New York City.

At 576 units, the number of permits issued in January and February of 2009 is just 20 percent of the total reached for the same period in 2008, when permits were issued for 2,878 units in 344 buildings. Further, the initial 2009 numbers represent just 13 percent of the units that were permitted in January and February of 2007, when permits were issued for 4,476 units in 621 buildings throughout the five boroughs.

The Bronx and Queens were the most active boroughs for residential development to start the year. In Queens, permits were issued for 243 units in 56 buildings, while permits were issued for 153 units in 32 buildings in The Bronx. In Staten Island, where one to two-family homes predominate, 59 units were approved for construction in 28 separate buildings.

By far the steepest declines in potential housing starts were experienced in Manhattan and Brooklyn. In January and February, permits were issued for 38 units in three Manhattan buildings, compared to 1220 units/22 buildings in 2007 and 272 units/9 buildings in 2008.

In Brooklyn, permits were issued during the first two months of the year for 14 buildings totaling 83 units. That is substantially down from 1,309 units in 99 buildings for the same period in 2008 and 886 units/156 buildings in the first two months of 2007.

These numbers could represent a significant geographic shift in residential construction given that Manhattan and Brooklyn ranked number one and two in annual residential building permits in all but one year since 2002.

“While the initial numbers for 2009 are alarming, it must be noted that this is a small sample size and the numbers can fluctuate considerably from month to month,” said New York Building Congress President Richard T. Anderson. “The winter months are not traditionally the peak months for new permits, and we may still be feeling the effects of last year’s rush to accelerate projects prior to changes in the 421(a) tax incentive program. There also are signs that the credit squeeze is loosening, which could spur increased development in this low-interest rate environment.”

Added Anderson, "But even after taking these factors into account, the numbers do not bode well for the coming years. If the current trend holds, annual construction could fall below 20,000 units for the first time since 2002 - a more than 40 percent drop from last year. In a worst case scenario, we could potentially slip to under 15,000 new units in 2009, which is a level we have not seen since the mid-1990s."

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