Despite economic uncertainty and rising interest rates, construction spending in New York this year is on pace to shatter its all-time high. But in terms of actual building, the industry will just barely meet or exceed 2019 levels.
The New York Building Congress released a report projecting that construction spending in New York will reach $86 billion by the end of the year, for a total of 105 million square feet.
Adjusted for inflation, that represents a 19 percent increase over the high reached in 2019. But the increase is largely attributable to the costs of construction rising more than inflation in general. In terms of square footage built, this year is projected to beat 2019 by just 2 percent.
The analysis, previously reported by Crain’s, also showed that increased spending has not translated into more construction jobs than existed before the pandemic. Construction employment this year is pegged at 139,000, down from 161,000 in 2019.
Activity is expected to ramp up considerably, however.
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.
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The Real Estate Board of New York says the city needs 560,000 more housing units by 2030. The Building Congress estimates that about 30,000 per year will be built — a decent pace, but only half of what is needed, given the housing deficit that has opened up over the years.
The national homebuilding sentiment index released earlier this week showed a continuing yearlong decline, indicating that homebuilders are pessimistic about the market. Sentiment might be even worse in New York City, as construction of multifamily rentals is expected to fade without an overhaul 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 housing. The tax break expired in June and the state legislature has shown little appetite to replace it. That could lead to more condominium projects, though, 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 health care projects.