By Forum Staff
This week, the Office of City Comptroller Brad Lander turned its Spotlight on homeownership in the five boroughs.
Recent Trends in NYC’s Home Purchase Market
As challenging as housing affordability is for prospective renters, it is even more dire for all but the most affluent prospective homebuyers. Based on data from StreetEasy, the median sales price for homes that sold in 2023 was $764,000 down about 2 percent from a record high of $782,000 in 2022 but back up to $785,000 in early 2024. However, compared with the months leading up to the pandemic, the city’s median home price has risen far less dramatically than nationwide: up roughly 16 percent, compared with 42 percent nationwide, corresponding to average annual price growth of roughly 4 percent (locally) and 10 percent (nationally).
One factor bolstering home prices is a relative dearth of inventory. The inventory of homes available for purchase has declined steadily over the past three years and is just about at a seven-year low. In addition to the restraint on supply caused by a chronic shortfall of new housing development, the rapid rise in mortgage rates over the past two years has created a condition called “housing lock”. That is, many homeowners who might otherwise be inclined to sell are reluctant to give up the exceptionally low mortgage rate that they locked in while rates were low, or to sell at prices they perceive may be lower given prospective buyers’ higher rates.
Profile of the Owner-Occupied Housing Stock
The homeownership rate in New York City is 30 percent—well below the nationwide average of 66 percent. As is the case nationally, there are significant racial disparities: the homeownership rate is for Non-Hispanic Whites (41 percent) and Asians (44 percent) but below the average among Black (26 percent) and Hispanic (18 percent) householders.
Overall, the homeownership rate has barely changed over the past decade, though a couple dimensions of it have. As is the case nationwide, the most traditional segment of owner-occupied housing is single-family homes. However, the proportion of single-family homes that are renter-occupied has more than doubled since 2005: it rose steadily up until 2017 and that rise accelerated following the onset of the pandemic. The share of condos occupied by renters has also risen substantially since the pandemic.
As of 2023, there were estimated to be 466,000 single-family homes in the city with about 378,000 (81 percent) owner-occupied. This accounts for roughly 28 percent of all owner-occupied housing in the city. There are approximately 225,000 two-family structures, where the homeowner typically (but not always) lives in one unit and rents out the other. There are 216,000 such owner-occupied units in these structures, accounting for slightly more than 20 percent of all owner-occupied homes. Both one- and two-family homes are almost exclusively found in the outer boroughs (outside Manhattan). There are another roughly 77,000 homeowners living in three-to-five-family family and other multi-family buildings that are not co-ops or condos—this is generally because the building owner lives in one unit and rents out the rest.
There are 450,000 occupied apartments in cooperative buildings and another 318,000 in condominiums, together accounting for 22 percent of the city’s occupied housing stock. However, while rental buildings are, by definition, exclusively filled with renters, buildings developed as condos or co-ops may house a combination of renters and homeowners.
These units may be rental apartments for a number of possible reasons. First, many residents of rental buildings, when they converted to co-ops, opted to remain as rent-stabilized tenants within those buildings. Second, many condo owners purchased their apartment as an investment, with the express purpose of renting it out; in co-ops, this is generally not permitted, though there are exceptions. Third, condo or co-op owners may have initially owned their units to live in but subsequently vacated and are renting out their units. This last scenario may be particularly relevant now, given that many homeowners with low locked-in mortgage rates may be disinclined to sell, even if they are moving out.
One measure that may shed some light on the high renter occupancy rate of condos pertains to corporate ownership or LLCs. Based on the comptroller’s office’s analysis of Department of Finance tax records, 18 percent of condo units citywide are owned by LLCs; in Manhattan, the corresponding figure is 21 percent. Some LLC-owned properties may be structured that way to shield the identity of a public figure or celebrity, in which case they are effectively owner-occupied. However, many are purchased as investment properties with the express purpose of renting them out. While these units are still in the supply of available housing overall, they reduce the share of units available for homeownership.
Home Purchase Affordability
One measure of homeownership affordability is the price/income ratio—that is, how many years’ worth of income would a typical homebuyer need to pay for a typical home? Looking at how this ratio has changed over time can be instructive, though changes in mortgage rates also clearly affect affordability. This ratio has declined slightly since 2010: in 2022, based on the Census Bureau’s American Community Survey, a family earning the median household income (~$75,000) buying a median-valued home (~$724,000) would be paying 9.7 years of their income. In 2010 the ratio worked out to 10.3 years (holding interest rates constant).
With mortgage rates considerably higher than in those earlier years, financing that purchase would be more burdensome today for a family at the same income. Another metric, which does capture financing costs, is the proportion of homeowners paying more than 30 percent of their income on housing costs. This measure provides a clearer indicator of stress on existing homeowners, though it says little about prospective homebuyers—those looking to purchase a home. This measure had been receding throughout the prior decade, likely due in part to falling/historically low interest rates, but turned up since the pandemic, even among homeowners without an underlying mortgage—likely reflecting, in large part, higher utility and insurance costs. Higher interest rates take longer to work their way into this metric, given the length of mortgages, and are likely to push burdens up in the 2025 City Housing & Vacancy Survey.
How does New York compare with other major cities on this indicator of homeowner affordability? Not very well, according to Lander. For homeowners with mortgages, more than 40 percent are housing-burdened, as defined above, which is second only to Los Angeles among top U.S. cities. Within the city, the proportion is highest in the outer boroughs. A recent study by the Federal Reserve Bank of New York found that, at least nationwide, “Low- and moderate-income homeowners were less likely than other homeowners to access lower mortgage rates through refinancing between 2020-2021,” further contributing to housing burden for those homeowners. And even among homeowners without mortgages citywide, nearly 25 percent are burdened; and on this measure, the proportion is highest in Manhattan.
While rental affordability has worsened considerably in NYC in recent years, price escalation is even worse in the homeownership market, Lander noted. From 2010 to 2022, the price-rent ratio rose from 14 to 18.7—that is, the median cost of a NYC home used to equal 14 years of median rent; today it equals almost 19 years of rent. Put another way, median rent has increased 32 percent, while the median homeownership price has increased 74 percent. On top of this, because mortgage rates are somewhat higher now than in 2010, the cost of financing a home purchase adds still more to the relative cost of a home purchase.
“[T]hose looking to purchase a residence in the city face a combination of high prices and relatively high mortgage rates (at least compared with the past couple decades). Thus, many people and families looking to own their home in the city are priced out of the market,” Lander noted in Tuesday’s report.
