New York City and the surrounding area, including northern New Jersey, the Hudson Valley and southwest Connecticut, is home to 22.8 million people working at 10.4 million jobs, the Metro Economic Snapshot released Tuesday by the Department of City Planning found. Since the last recession, the region has added around 708,000 new jobs—much more than anywhere else in the country in terms of raw numbers—but at a growth rate of just .9%, which is about half that of other metros and roughly on par with the country as a whole.
Over the same time period, the New York area added just 378,000 new housing units, far fewer than the number of jobs created and not nearly enough to meet demand. The mismatch was centered in the five boroughs and helped drive around 100,000 people to the suburbs each year between 2012 and 2016.
The metro area also lost a significant number of recent college graduates to lower-cost cities elsewhere in the country—something Glen has experienced personally.
"I just moved my daughter to Minneapolis," she said. "It was great, but it was also really sad."
Researchers at the Fed found there were no "direct estimates of the rent elasticity with respect to new housing supply in the literature." No one knows how much housing you'd have to add to have any significant impact on costs. So, the researchers built a simulation to estimate, directly from data, the elasticity of rent with respect to housing supply.
They wanted to know how much rents might change if there was an influx of new housing. Given metropolitan housing crises and a lack of other data, it was an important study.
However, elasticity isn't a simple phenomenon. There are products where changing the price doesn't necessarily result in big shifts of demand. Look at the Apple iPhone X: $1,000 for the device and tens of millions purchased it.
The Fed report suggests that housing will be much the same:
The implication of this finding is that even if a city were able to ease some supply constraints to achieve a marginal increase in its housing stock, the city will not experience a meaningful reduction in rental burdens.
Add 5% more housing to the most expensive neighborhoods and the rents would drop only by 0.5%.
The reason is that people like the amenities in given neighborhoods and want to live there, so will continue to pay higher prices. Amenities can include shopping, schools, and ease of access to public transportation.