Here’s something that would have seemed pretty much inconceivable two years ago: According to Zillow, home prices have now risen more in New York City and its environs since the beginning of 2020 than in metropolitan Austin, Texas.
The trajectory looks a bit different for rents but ends up in almost exactly the same place.
New York City was the epicenter of Covid-19 in the early days of the pandemic in the US and experienced an exodus of population in 2020 that has since slowed but not stopped entirely, according to Census Bureau estimates through mid-2023. Many of those who fled didn’t get farther than the city’s suburbs, but the metropolitan area’s population declined, too, and has continued to drop. Austin, on the other hand, was a pandemic boomtown, with its metro-area population growing an estimated 8.3% from April 2020 to July 2023.
Since the start of the pandemic, though, housing has turned out to be a better investment in New York than Austin. One can — correctly — interpret this as evidence that New York is not in fact “dead forever,” as was famously proclaimed in 2020. But it’s also an indication that the Austin area built more than enough new housing to meet all that pandemic-era demand, while the New York area continued to not build much at all.
There’s more open space on which to build new housing around Austin than around New York, but its outperformance isn’t just about suburban sprawl. More than half the new housing units permitted in the Austin area since the beginning of 2020 have been in multifamily buildings, and the city of Austin has been ahead of New York City on pro-density reforms such as ending minimum parking requirements for new housing.
The sharp fall in Austin-area home prices since 2022, along with similar struggles in commercial real estate, has led to headlines about Austin’s glow fading. Maybe it is, a little — that tends to happen in the aftermath of a boom. But the fact that houses and apartments there are less expensive than they were two years ago should be viewed mainly as a sign of success. The Austin area needed more housing and built it.
Meanwhile, the New York area lost more than 500,000 residents, yet prices and rents there have mostly kept rising. With purchase prices, that’s mainly a function of the lack of new construction. With rents, there are other contributors such as high property taxes and, perversely, rent regulation — in particular a 2019 strengthening of New York rent laws that tamped down rent increases for those in regulated apartments but, by reducing the supply of deregulated apartments, put upward pressure on the market rents shown in the chart above.
One byproduct of all this is a New York area inflation rate that has risen this year even as the national rate falls.
I actually embarked on this data-gathering exercise because I was wondering whether inflation could explain some of the New York area’s especially sharp shift toward Donald Trump in this week’s election results. Maybe it can, a little, although the overall increase in the price level since the beginning of the pandemic remains much smaller in and around New York than in the rest of the country.
To me, the recent inflation increase is mainly another sign that the region’s broken housing market is holding it back. The New York area’s high cost of living was driving people away even before the pandemic, but apart from a temporary dip in rents in 2020 and 2021, this reduction in housing demand hasn’t translated to lower costs. It has translated into lower relative costs — as with the overall consumer price index, the CPI for shelter has risen less since January 2020 in the New York area than nationwide (18.7% compared with 25.1%). But Austin’s example shows that New York could have done much better than that.
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