Record High Rents Drive New Construction Financing In Brooklyn
Earlier this month, the Council for Community and Economic Research released a study which showed that Brooklyn is now the second most expensive city in America. The Council based its findings on a cost of living index that included the prices of 60 basic goods and services, including housing, utilities, food items, health care, and other expenses. While the Â national index average was around 100, Brooklyn’s score was 183.4, second only to Manhattan, which came in at 233.5.
As of August, the average monthly rent for a two-bedroom apartment in Brooklyn was $3,083. At the same time last year, this number was $2,824. Â With rents increasing by 9 percent annually, many real estate investors are eager to finance construction of new rental units.
Slow Mortgage Lending Causes Increased Demand For Rentals
Even as other types of lending like small business loans showed gains in recent months, mortgage lending has not shown significant growth since the financial crisis began 4 years ago. With fewer buyers able to obtain mortgage loans, the demand for rentals has increased, driving prices up and prompting increased construction financing. The New York Department of Buildings has issued 256 construction permits for new buildings in Brookyln so far this year, the highest number since 2008.
Residential construction has been on the rise in Brooklyn since 2005, when the East River waterfront was re-zoned to allow for residential development in the neighborhoods of Williamsburg and Greenpoint. In the years that followed, the number of construction projects increased rapidly until 2008, when the financial crash occurred.