impact of new subway on rents unclear

Even after a report indicating that long-anticipated residential rent hikes on the Upper East Side have been slow to materialize following the Second Avenue subway’s opening in January, locals remain concerned about the line’s impact on the area’s already high-priced housing market.

An April 17 analysis by Crain’s New York Business found that since the new line opened New Year’s Day, asking rents had dropped for more than half of apartments listed near the three new stations. But according to some community members, year-to-date data paints an incomplete picture of how the subway has changed the neighborhood’s real estate market.

“The rent increase with the subway has already been cooked in,” Community Board 8 member Ed Hartzog said at an April 24 meeting of the board’s housing committee, which he co-chairs. “So just because it hasn’t gone up in four months doesn’t mean that we haven’t been feeling the effects of that.” Hartzog cited research compiled by the real estate website StreetEasy to support his point: as of November 2016, two months before the subway line opened, residential rents had increased 27 percent along Second Avenue over the previous five years (rents along First and Third Avenues increased 19 and 14 percent, respectively, over the same period).

It is also likely too early to assess the subway’s influence on commercial rents, said Sarah Chu, co-chair of the board’s small business committee. “With businesses, one thing we know is that they have long-term leases, so we may not see the impact immediately,” Chu said. “It may be something that we see a year or two down the road, and it may or may not be better or worse.”

The subway’s opening has highlighted and intensified larger issues within the neighborhood’s housing market, according to local resident Kara Collins, who moved to the Upper East Side while in her mid-20s, a decade ago. Collins has lived in the same studio apartment since — she agreed to a $100 rent increase due to the subway opening when she renewed her lease earlier this year — but is ready to “put down roots” and purchase a unit in the neighborhood she has grown to love.

“I feel like that’s putting more pressure,” Collins said of the subway. “It seems like there’s more people willing to consider Yorkville since it opened.”

In the course of her search, Collins, who works in marketing, has found herself in an unhappy middle — unable to qualify for “affordable” units based on her income, and priced out of the luxury condominium market, which accounts for much of new construction. “A lot of what’s being built isn’t for anybody who lives and works in this neighborhood,” she said. “You’re talking about condos at the Kent” — a new complex on East 95th Street — “that start at $2.5 million. I don’t know a single person who can buy that.”

It’s a problem, she said, that is forcing many of her friends to leave the neighborhood, even though they are the kind of residents the area should seek to keep — “People who want to stay here and establish families, have an education, have great jobs, who really establish the fabric of a neighborhood.”

Local leaders have struggled to address rising residential rents, but members of CB8 identified reforming the city’s Commercial Rent Tax — a 6 percent tax on businesses paying more than $250,000 in rent annually — as a potentially feasible avenue for easing pressure on neighborhood businesses. Businesses above 96th Street and in portions of lower Manhattan are currently exempted from the tax, and some feel that the tax should be altered to help Upper East Side businesses.

City Council Members Dan Garodnick, Corey Johnson, Ben Kallos, Margaret Chin, Mark Levine and Helen Rosenthal are among the co-sponsors of a bill that would change the tax to apply only to commercial tenants paying more than $500,000 in rent annually, thus narrowing the field of impacted businesses.

“That’s one of the few things I think we can actually get accomplished,” CB8 member Barbara Chocky said. “That’s a very realistic action that I think we should really support.”