2009: Construction Industry’s Annus Horribilis
The year of 2009 was an ungodly awful one for the New York construction industry, according to a report issued Tuesday morning by the New York Building Congress, an association representing members of the construction industry.
The full report on residential construction is below, but here are some fun excerpts:
— In 2009, the city issued only 6,057 permits for new apartments, an 82 percent drop from 2008, when the city issued a much healthier 33,911. The city hasn’t issued so few permits since 2000. And even in 2000, 15,050 permits were issued, more than twice as many as were issued last year.
— Brooklyn, and then Manhttan, suffered the greatest declines.
— Sadly, January and February of this year haven’t shown much improvement over last.
Even worse, as construction ground to a halt, construction pricing actually increased! For the first time, price-per-unit exceeded $100,000, averaging $114,013. In 2008, the average apartment unit cost a comparatively modest $90,215.
Here’s the full report:
A New York Building Congress analysis of U.S. Census data found that the New York City Department of Buildings issued residential permits for just 6,057 units in 1014 buildings in 2009, an 82 percent decline in units from 2008, when permits were issued for 33,911 units in 2,434 buildings. The previous low for the decade was the year 2000, when residential permits were issued for 15,050 units.
The declines were most pronounced in Brooklyn followed by Manhattan. In Brooklyn, 12,744 dwelling units were authorized for construction in 2008 compared to 1,003 units in 2009, a decline of 92 percent. In Manhattan, 9,700 dwelling units were permitted in 2008, compared to 1,363 in 2009, a drop of 86 percent.
The Bronx led the five boroughs in 2009 with a total of 1,647 units permitted, down from 2,482 in 2008 (a decline of 34 percent). Queens was second with permits for 1,474 units, a decline of 81 percent from 7,730 units in 2008. Staten Island declined 55 percent – from 1,255 units permitted in 2008 to 570 in 2009.
The current year has started off slowly as well. In January and February 2010, 463 units were permitted throughout the five boroughs. This compares to 576 units in the first two months of 2009.
The cost of construction per unit in 2009 rose to $114,013 from $90,215 in 2008. This marks the first time that the per-unit cost topped $100,000 for a year. While the Building Congress is not able to precisely pinpoint the factors that led to a spike in unit costs, it is safe to assume that the primary driver was a tilt toward higher-end units rather than an overall spike in construction material and labor costs.
A separate review of the S&P/Chase Shiller Home Price Indices found that New York City housing prices have stabilized over the past year. Housing prices in January 2010 were down 5 percent from January 2009, but very much in line with prices for most of last year. At present, housing prices are similar to what they were in 2004, which represented the midway point in a remarkable rise in prices. Currently, City housing prices are about 21 percent below the June 2006 peak.
“These numbers only serve to confirm what we have been hearing from contractors and union labor representatives for quite some time. New residential construction has screeched to a virtual stop,” said Building Congress President Richard T. Anderson. “Some of the disparity between 2008 and 2009 was due to residential developers securing their permits for new construction prior to a change in the J-51 tax abatement program in July of 2008. However, that is just part of the story. Right now, the demand, and thus the financing, has not been sufficient enough to start new residential projects.”
Mr. Anderson added, “The Case Shiller data offer some cause for very cautious optimism, as housing prices appear to be stabilizing, which is an indication that the residential market could be finding its footing.”