We have a severe affordable housing crisis on Long Island and in many cities around the U.S.  This began with the historic demand from consumers who had left large cities and towns in combination with the historically low interest rates during the pandemic, sending housing prices through the roof.

Before the pandemic, the market in 2019 had run its course and was cooling off as every cycle has its start and finish.  Once Covid-19 became a serious threat to life, however, those cities with large populations saw an unprecedented exodus.  New York City (lost 328,000 residents), Chicago (lost 91,000), Los Angeles (lost 176,000), and were the top three on the list that lost a considerable number of their inhabitants.

On the other end, the top three cities to gain population were Phoenix (added 78,000), Atlanta (increased 43,000), and Miami (added 34,000).  Prices in those cities and outlying suburbs and areas away from the big cities and towns saw a marked increase.

Because a portion of the population was able to do their jobs and businesses from home, it created an environment that was never experienced before in the U.S. Those homes with an extra room or two to enable one to work remotely became a crucial part of the decision-making when purchasing.  Remote work was the key word to describe that situation.  Then hybrid work became the term as people went back to work part-time.

The other factor causing our current critically low housing inventory was the Fed cutting interest rates to the lowest point in history.  About two-thirds of homeowners refinanced either to the lower rate or did a rate and term Refi, reduced their rate substantially but at the same cutting the time to repay the loan.

So we now have millions of homeowners with the lowest mortgage rate who will not be moving any time soon, due to the current considerably higher costs.  There are those who have gained phenomenal appreciation and have a large equity position.  They can put a larger downpayment on their next purchase to upgrade, so interest rates aren’t as much of a concern.

The real problem is more purchasers going after a finite inventory.  This will continue, increasing overall prices for first-time and repeat purchasers.  It is the same old supply-demand economics 101.  The question is when will it end and when will we see prices adjust downwards?  This will only occur when demand is reduced for whatever reason and supply has the opportunity to increase, which I said last week could take five to ten years.

Affordable housing hasn’t yet been seriously addressed and no concrete steps or solutions have been considered or taken to ease the continued loss of the population of Millennials, GenZ, and GenX to other lower-cost states, which also may not have any state income tax. Foreclosures are still at historic lows (20% lower than in 2023) and there isn’t enough housing available.

Even rental prices increased drastically for those who couldn’t afford to buy due to downpayment requirements by the banks and the higher-priced housing.  Personal credit issues caused much higher rates for those who do not have Tier 1 credit.  Stricter bank regulations were enacted, due to the 2008 impact of the implosion and collapse of the mortgage industry, eliminated no doc, stated income, or what we call “liar” loans to secure financing.

The local, state, and federal governments now have to step up to the plate and be cognizant of our real problems, and have more creative ideas and provide lower-cost funding, which could lead to solutions.  This will hopefully keep more of our residents here in New York State rather than leaving. My professional opinion is to construct affordable housing upstate, where land is plentiful and more economical per square foot.

Constructing low-cost housing on Long Island is cost-ineffective and more importantly, our water supply from our underground aquifers will be depleted more quickly as per research (seatuck.org) that has been done.  We may only have 50 years remaining before greater pollution or salt infiltration become the major obstacles for potable water.   Traffic would be even more unfathomable than it already is today.  The infrastructure would suffer greater wear-and-tear and would increase drastically.

Abandoned and unused buildings in NYC and the five boroughs could also assist in providing reasonable rental housing.  Even a rent-to-purchase situation could be devised, where you have an option to purchase.  First-time buyers could be given grants to buy. Having an ownership position will assist in creating a family’s future wealth.  Also, those who own tend to be more proactive and spend more on upkeeping and upgrading their properties than those who lease.

We need to move forward more quickly to solve the housing dilemma locally and nationally for the U.S. to stay competitive and have capable and available workers for our local and national economy.

Philip A. Raices is the owner/Broker of Turn Key Real Estate at 3 Grace Ave Suite 180 in Great Neck. For a free 15-minute consultation, value analysis of your home, or to answer any of your questions or concerns he can be reached by cell: (516) 647-4289 or by email: Phil@TurnKeyRealEstate.Com or via https://WWW.Li-RealEstate.Com