For years, until a city rezoning slowed development, Staten Island was the fastest growing county in the state. But since the onset of the credit crunch, the borough has, by many accounts, suffered more pain than any other part of the city.
Building permits plummeted 43 percent in 2007 (to 826 compared to 1,345 in 2006). That decline was the sharpest in nearly 15 years.
A slew of other economic indicators took a beating too. New condo offerings fell by 92 percent, and the number of sales agents, which generally tracks newcomers to the profession, dropped 6.4 percent, the steepest decline in the city. Foreclosures, meanwhile, spiked a stunning 223 percent.
“We’re in the worst of it,” said Michael Diaz, a broker and owner of Village Realty in Staten Island. “The zoning changes coupled with the downturn the rest of the country is facing have put us where we are.”
Though the glamorous Manhattan market has managed to hold steady and buck national trends, Staten Island more closely resembles the rest of America, in both its demographic makeup and stock of single- and multi-family homes on cul-de-sac streets. As a result, the borough is experiencing the fallout from the subprime crisis in a way that is more like the rest of the country, real estate experts said.
“What’s happening in Staten Island parallels the larger market more so than the other four boroughs,” said Brian Scully, vice president of marketing for PropertyShark.com.
More foreclosures, fewer agents
While Staten Island’s population of about 478,000 is dwarfed by that of every other borough, it ranked second, behind only Queens, in raw foreclosures citywide. In percentage terms, none of the other boroughs came close to Staten Island’s 223 percent foreclosure spike — the second biggest increase was in the Bronx, which saw a 75.6 percent jump.
More telling, perhaps, is that the number of real estate salespeople (agents rather than brokers) dropped 6.4 percent in 2007. The only other borough to see a negative trend in that category was Brooklyn, which saw a drop of less than 1 percent. The number of brokers on Staten Island did increase, by 1.8 percent, but that was the lowest rise in the city.
Sandy Krueger, CEO of the Staten Island Board of Realtors, said he is not overly worried about the numbers. Krueger said he hasn’t seen a sharp decline in membership or enrollment in the training programs the Board of Realtors offers agents. “We generally see some drop-off at this time of year anyway,” he said.
Dawn Carpenter, president of the Staten Island Board of Realtors and owner of her own real estate firm, said some agents decided to break from the day-to-day grind of being an agent and pursue it as a part-time career. Carpenter works with many of these agents on a referral basis. “The agents refer their clients to me in exchange for a fee,” she said. Since last year, Carpenter said she’s seen a 5 percent increase in her referral business.
Industry observers say Staten Island is now fully a buyer’s market. Housing prices have dropped around 5 to 10 percent, with entry-level houses selling for around $350,000, according to R. Randy Lee, who is chairman of both of the Building Industry Association of New York City and the Staten Island Economic Development Corp.
Zoning changes
While Staten Island is being hit relatively hard by the recent downturn, observers
said that some of the pain the borough is
feeling traces back to the overhaul of its
zoning laws in 2004 — and last year’s loss of a property tax abatement that benefited owners of newly constructed one- and two-family houses.
The zoning regulations aimed to stem overdevelopment problems by limiting the number of allowable homes per parcel of land and requiring that houses have larger yards and greater distances between them. For example, on a 3-acre parcel of land, builders are now limited to 19 housing units, whereas in the past, they could have built 55 new units.
“We were overdeveloping,” said Staten Island Borough President James Molinaro. He noted that the federal government was turning a blind eye to greedy lending companies, who were allowing homebuyers to purchase a new house with only a 5 percent down payment when their income couldn’t support the monthly mortgage payments.
“On top of that, property taxes have now increased, and people simply can’t meet their expenses, which is why we are seeing so many foreclosures,” he added.
Many Staten Island residents welcomed the restrictions in development when they were passed and say they are still needed.
“We have so much congestion, and streets are jammed with traffic, and that has gotten continually worse over the past 10 years,” said Chan Graham, executive director of the Preservation League of Staten Island, which champions the fight to get older houses in the borough landmarked.
Frank Naso, one of Staten Island’s prominent builders, said that while the market has slowed, it isn’t dead. “I’ve had a steady year and have not had to lay off any of my workers,” he noted.
After the abatement
Still, Naso and others worried that the loss of the 421b tax abatement program, which slashed a homeowner’s property taxes for the first eight years after he or she bought a newly constructed house, will further delay any pickup in the market.
“The abatement helped a lot of first-time owners to afford their purchase,” said Naso. He noted that a semi-attached home selling for $450,000 would have cost an owner $200 quarterly in taxes with the abatement — and will now cost them $1,500.
“The average Joe just can’t afford that,” he said.
Carpenter said builders also used tax abatements as an amenity to lure buyers. “All in all, though, I think there is still a healthy inventory out there, and the market will rebound,” she said.
Carpenter added that Staten Island is the most affordable borough in the city and thinks an upzoning on the more
urban North Shore would make the borough more appealing.
The North Shore, which includes neighborhoods like St. George and Stapleton that are convenient to the ferry, is indeed seeing some large-scale construction projects. A 700-unit waterfront complex in Stapleton is currently underway.
Molinaro agreed that with proper planning, there is plenty of room for expansion. “We have 33,000 acres on Staten Island, and we only have 500,000 people,” he
said. “There is potential for high-rises and condos in places like St. George, but not in the suburbs, and that’s where we have to manage our growth.”