Despite economic uncertainty and rising interest rates, construction spending in New York this year is on track to break its record high. But in terms of actual building, the industry will barely meet or exceed 2019 levels.
The New York Building Congress released a report projecting construction spending in New York to reach $86 billion by the end of the year, totaling 105 million square feet.
Adjusted for inflation, this is an increase of 19 percent from the high level reached in 2019. But the increase is largely due to the fact that construction costs are rising faster than inflation in general. In terms of square footage built, this year is expected to beat 2019 by just 2 percent.
The analysis, previously reported by Crain’s, also showed that higher spending did not create more construction jobs than there were before the pandemic. Construction employment is pegged at 139,000 this year, down from 161,000 in 2019.
However, the activity is expected to increase significantly.
From 2022 to 2024, the Building Congress estimates, about $270 billion will be spent on construction, thanks in part to the Biden administration’s infrastructure bill. That would be a 65 percent increase from $165 billion spent in the previous three years, adjusted for inflation.
But the city is expected to fall woefully short when it comes to building what it needs most: housing.
The New York Real Estate Board says the city will need 560,000 additional homes by 2030. The Building Congress estimates that about 30,000 will be built each year – a decent rate, but only half of what is needed, given the housing shortage that has been building up over the years.
The National Homebuilding Sentiment Index released earlier this week showed a continued decline throughout the year, indicating that homebuilders are pessimistic about the market. Sentiment may be even worse in New York City, as multi-family construction is expected to subside without a review of the property tax system.
The Building Congress report called on policymakers to replace the defunct 421-a, which incentivized developers to create mixed-income rental properties. The tax break expired in June and the state legislature has shown little interest in replacing it. However, that could lead to more condominium projects, as they receive more favorable tax treatment than rentals.
Another finding of the report is that non-residential construction is expected to shift from hotels and retail to office and healthcare projects.