Brooklyn’s Housing Shortage Eats Into Its Reputation as Manhattan Alternative

Brooklyn’s population loss over the past five years could make one believe that securing housing in the borough should be a breeze. According to the U.S. Census Bureau, Brooklyn’s population declined by 6.4 percent from April 2020 to July 2023, with a net total of almost 175,000 residents relocating out of the borough.

Despite this seeming relief for those seeking new accommodations, residential supply throughout the borough has rarely been tighter, while demand continues to grow.

An examination of the Brooklyn residential pipeline shows that while there are a few bright spots, securing housing in the borough will be as tough as ever in the years to come due to a supply shortage.

“Brooklyn right now is honestly pretty starved for new supply in terms of new development condos,” said Ryan Schleis, senior vice president of research and analytics at residential brokerage Corcoran. “The pipeline is not big enough right now to provide the kind of relief and amount of future inventory that buyers and agents are looking for.”

From 2015 to 2019, developers delivered an average of about 1,400 condo units a year to market in the borough, according to Corcoran. That yearly average dropped to 920 units for the period from 2020 to 2024, and the company’s projected average drops further to 800 units annually from 2025 to 2028.

Demand, meanwhile, continues to rise as buyers compete for fewer and fewer homes.

“Demand [for condos] was up 22 percent year-over-year as it relates to the number of contracts signed in Brooklyn,” said Robin Schneiderman, managing director and director of new business development at Brown Harris Stevens Development Marketing. “The year-over-year supply is down 23 percent. So that’s a very strong indicator that demand is high, supply is dwindling, and there’s not a tremendous amount in the condominium pipeline in Brooklyn.”

Supply within the rental market appears to be a bit looser. Corcoran said developers averaged 6,000 new units per year from 2015 to 2019, with that number dividing in half for the period from 2020 to 2024. But for the years from now until 2028, Corcoran expects an uptick to around 5,350 new rental units per year, which it credits to several factors.

“There are a few areas in Brooklyn where there’s a lot happening, notably in Downtown Brooklyn. There’s a lot of construction happening there,” said Schleis. “And there are so many buildings happening in Gowanus. That’s what’s causing the shift from a decline to a big uptick.”

However, outside of a few neighborhoods, including those two and Williamsburg, the overall hope for supply has been stymied by several factors.

“The fact that interest rates have spiked over the last three years means there’s going to be a lot [of supply] coming over the next couple of years, and then the pipeline gets small quickly,” said Jonathan Miller, president and CEO of appraiser Miller Samuel. “Higher rates keep the numbers from penciling in. That’s the challenge for development right now.”

Miller went on to say that the lagging reaction of land prices to rising rates makes transacting on new developments all the more challenging.

“It’s been my experience that land-owners take four to five years to adjust to market conditions when the market weakens,” said Miller. “That makes it much more difficult for developers when creating an assemblage to pencil in the numbers. So higher rates work against new development.”

It’s little surprise to learn that given all this, rents in the borough continue to increase.

“Rents in Brooklyn began rising over the last three months,” said Miller. “Prior to that, they had fallen all through the summer on a year-over-year basis. But they began rising again because it became clear that interest rates were not going to come down in a meaningful way, and those that were on the fence between renting and purchasing were pushed back into the rental market, which created tighter conditions. I think we’re going to see rising rents well into 2025.”

In general, Brooklyn sales prices are still cheaper than Manhattan’s — but not by much. According to Miller’s research, the median Manhattan home price in the fourth quarter was $1.1 million; in Brooklyn, it was $989,000. Both boroughs’ prices were well above the overall New York City median of $800,000. The median monthly rent in December was $4,334 in Manhattan and $3,495 in Brooklyn, according to Miller Samuel.

One anomaly to the dearth of overall supply, according to Schneiderman, is that 2024 actually saw a 28 percent year-over-year increase in new condo supply, with 1,108 units delivered to market. That was due in large part to two new developments in Williamsburg.

Naftali Group’s One Williamsburg Wharf launched sales last year for its 89 condo residences. The building, however, is just one of five in the Williamsburg Wharf development, which will ultimately deliver roughly 850 condos and rentals. The $7.2 million contract in December for a three-bedroom, three-bath penthouse at the development is set to break a record for most expensive sponsor sale in the neighborhood if it closes at that price.

And One Domino Square, from Two Trees Management, will be adding 600 units of condos and rental apartments over two towers.

Despite trickles of optimism, though, some developers have all but given up on doing business in the borough.

GAIA Real Estate, a New York City-based real estate investment firm which has owned over $3 billion in real estate, has cut deals in Brooklyn, including acquiring the Williamsburg rental building 55 Hope Street for $80 million in 2022.

But company co-founder and CEO Danny Fishman told Commercial Observer that while Brooklyn has provided excellent returns, he’s done doing new business there.

“Brooklyn is definitely the good surprise of New York. No one thought Brooklyn would have this demand, or prices even higher than Manhattan,” said Fishman. “But we don’t develop anymore in New York City. Most of our activity is focused in the Sun Belt or South Florida. We’re not increasing our Brooklyn portfolio, but we’re not also selling. We’re basically in a steady situation there.”

Fishman cites the bureaucracy of New York City government as making development conditions too arduous to continue, despite the obvious demand.

“I love the city, I live here and I enjoy it, but to do business in the city becomes more and more difficult. There’s a reason why most of the developers and investors left New York, including Brooklyn,” said Fishman. “Everything with the city takes way, way too long. And, when you buy an asset in the city, you don’t know which new regulations they’re going to put into effect. You can’t evict a tenant here if the rent’s not paid. Everything here is hard, and, with the high interest rates, the delays place a huge financial burden on you as an investor. We enjoy red carpet treatment in other places, so why do we need this headache?”

From the developers who are still willing to endure what’s needed to create housing in the borough, here are some of the projects set to come online in 2025 and beyond.

According to the Downtown Brooklyn Partnership, as of the third quarter of last year, its coverage area had 4,857 units under construction, most scheduled to come online within the next two years, and then an estimated 3,565 units in the pipeline further into the future.

Significant rental projects expected to come online this year, according to the partnership, include the Rabsky Group’s 1,044-unit 625 Fulton Street; Witkoff Group and Apollo Global Management’s The Brook at 565 Fulton Street, with 591 apartments; Triangle Equities and The Michaels Organization’s 111 Willoughby Street, with 227 units; and Rabsky’s 240 Willoughby Street, which will offer 300 units. 

Also in Downtown Brooklyn, RXR’s 89 DeKalb, the developer’s first all-electric tower, will deliver 324 rental units this fall. Demolition of several single-story structures just wrapped at 275 Flatbush Avenue Extension, making way for a five-tower development from Jacob Kohn of The Jay Group that will include five towers offering 450 units of housing. Maddd Equities’ 71 Prince Street, alternately known as 202 Tillary Street, is expected to deliver 465 rental units.

In Gowanus, which is seeing a wider range of development types thanks to a 2021 rezoning, 668 rental units are en route over two buildings at 310 and 340 Nevins Street in a joint venture involving Tavros, Charney Companies and Incoco Capital.

Brooklyn Yards in Borough Park is a 14-building project over four city blocks that is expected to deliver 267 rental residences. Built over a freight line, the unconventional project will include mostly four-story townhouses, and offer three- and even four-bedroom apartments, a rarity.

Along the Greenpoint waterfront, Lendlease and Aware Super’s 1 Java Street, expected to finish in 2026, will bring 834 rental units to the area over two towers. The project will be the largest residential geothermal-heated building in New York state.

Daniel Lebor, executive vice president of sales and a partner at investment sales firm TerraCRG, said he also expects to see more new projects in Gowanus, as well as in Clinton Hill, Bed-Stuy, Prospect Heights and Crown Heights.

“I think you’re going to see a lot in Gowanus and along the Atlantic Avenue corridor,” said Lebor. He referenced 1057 Atlantic Avenue, where Douglaston is scheduled to deliver 456 rental units later this year, and two projects from EMP Capital Group: a 246-unit rental building at 870-888 Atlantic Avenue, and 193 units at 1034-1042 Atlantic Avenue. “You’re seeing a couple thousand units going online there. When you talk about bubbles, that’s where there’s demand, activity and availability.”

All of these projects are much needed and likely to fill up quickly, as the coming supply is expected to be overshadowed by the ever-growing demand. 

That’s because Brooklyn has been trapped by its own success. With the borough’s growing hipness and overall desirability over the past few decades, it’s far more common now for people from other places to want to call Brooklyn home without even considering Manhattan, a situation that would have been virtually unheard of not that long ago.

“Historically, people were driven to look at Brooklyn for value reasons, because they were priced out of Manhattan for comparable product. That continues to be a huge driver of the market,” said Corcoran’s Schleis. “But I have been seeing more and more that people aren’t even considering Manhattan. Brooklyn is their first choice, either for lifestyle reasons, because they work there, or because they work from home or have a hybrid schedule, so they’re not going into Manhattan as often.”