Ghosts of New York City Real Estate: Hard to Spot, Harder to Bust
New York City is a beautiful, historic city with some of the most lovely and desirable neighborhoods in the country. But the Big Apple also has a ghost problem. In the always-desirable New York housing market, behavior at each end of the economic spectrum illustrates why New Yorkers looking for a place to live can face considerable difficulties.
First up: Ghost apartments. Not literally haunted, ghost apartments are units that are owned by a wealthy person (or a shell company) that, for the most part, remain unoccupied.
Why is this a concern? There are multiple reasons but, primarily, it’s the hidden costs associated with the empty apartments that contribute to the overall housing challenges in New York. Starting with the most obvious impact—there’s no one living in the apartment. That means that a costly piece of real estate has been purchased or rented, but no money is flowing into the economy on that street. If no one lives in the apartment, there is no one shopping at the corner store, eating out, joining the neighborhood gym or even grabbing the occasional cup of coffee.
The math is pretty simple. Fewer housing units mean fewer people, less foot traffic, and not as much need for local goods and services.
There’s a second major impact on the housing economy when wealthier residents rent an apartment, rather than purchasing a single-family home—taxes. Single-family homes in New York are taxed at a higher rate and produce more tax revenue than a single rental unit generates.
Finally, there’s the cost to the average New Yorker—time. When “ghost apartments” become common, residents may move further away from their place of employment, or areas that are familiar socially. Walking is replaced by long commutes, and employers have less ability to hire hyper-locally.
So, what’s an average New Yorker to do?
Some choose to go off the books and become ghost tenants, another not-so-supernatural phenomenon. Ghost tenants are people (adults) living in an apartment without being on the lease, or having any formal status as a tenant. According to a 2016 article in Slate, which focuses on public housing, “Although 400,000 people officially live in New York City’s traditional public housing units, it’s estimated that as many as 100,000 to 200,000 more reside there secretly.”
The market rate for a one-bedroom apartment in New York, in 2015, was $3,100. In the Slate article, the Ghost Tenant “Gigi” was sharing a mid-town apartment, with her parents, in a public housing project that rented for under $1,000.
If “caught” the whole family can be evicted from public housing. In both public and privately owned buildings, more tenants mean more wear-and-tear on facilities which can lead to hazardous or unpleasant living conditions. At best, the rent will increase based on the income that’s brought to the household by the ghost tenant, which is hardly helpful in reversing the problem.
Then there are communication and safety concerns. If a ghost tenant has a P.O. box and no official street address, they are harder to find, by, say, a school or employer, if needed. If there’s a problem in the building—a gas leak, a fire–emergency responders won’t know to look for the ghost tenant.
When it comes to real estate, it’s best kept balanced and affordable when the appropriate amount of tenants live in an apartment, and when the owners of said apartments actually live there. But eradicating these ghosts is easier said than done, and productive solutions remain few and far between.
It’s clear that ghost apartments and ghost tenants are part of the New York real estate landscape, and one the Ghost Busters can’t solve. These issues, present on both ends of the economic spectrum, must be addressed by developers focusing on building, refurbishing, and maintaining housing units that are affordable by the average New Yorker who lives in the wonderful city so many call home.