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Impact of COVID-19 on NYC Housing Crisis

Proposal

People's lives and health have been devastated by the COVID-19 pandemic. The economic downturn has been caused by the efforts taken to contain the virus. Uncertainty surrounds its severity and duration at this point. An increase in the severity of the financial crisis might have an impact on global financial stability according to the most recent Global Financial Stability Report. Risk assets' prices have plummeted since the pandemic's onset. Risk assets have fallen by 50% or more during 2008 and 2009, which was the height of the recent selloff. For example, many equities markets have experienced losses of 30% or more at the bottom of the market. Credit spreads have risen sharply, particularly for companies with weaker ratings. Short-term funding markets, particularly the global market for US dollars, have also shown signs of stress.

This has left many residents on the verge of being forcefully evicted from their houses into the streets. The federal government 2-year eviction moratorium has already expired, and landlords are coming forward to file eviction cases. Reports identify that the judiciary is receiving more than 2000 eviction cases every week, revealing the seriousness of the issue. Statistics further reveal the devastating impact of the pandemic on the housing crisis in NYC by highlighting that over 596,000 families are remaining behind on rent. There were more than 110,000 cases of eviction filed during the pandemic (Cohen, 2021). Consequently, the risk of eviction and rent debt continues to threaten people of color residing in NYC. Further evidence reveals that the mission to bail out the indebted residents is experiencing revenue gaps which is threatening the ability of the real estate market to accommodate the low-income earners around the city and also those who have been suspended from their current place of work (Rahmaniani and Mohammadmoradi, 2021).

Problem Statement

What is the problem -Description of the problem?

As the pandemic continued to worsen towards the middle of the year, many residents were willing to leave the city to embrace suburb life as they found it more affordable and could acquire spacious spaces (Suyin Haynes, 2020) With many vacant houses, the landlords came up with the initiative to lower rental prices to attract more residents to mitigate the increasing number of empty homes.

Why is it a problem? -the basis of the problem

Current literature reveals that although this motive encouraged many people to take advantage of the reduced prices, many suffered from the risk of eviction as the rental prices soon increased (Cohen et al., 2021). Many renters were yet to receive their jobs back after being suspended from mitigating the pandemic.

What is the magnitude of the problem:

Research shows that although the housing crisis and rent unaffordability were still present before the pandemic, as the city had recorded a 59% increase in the number of occupants in the city's shelter between 2009 and 2019, the pandemic has played an integral part role in exacerbating the issue. In connection to this, the pandemic is blamed for intensifying economic inequality margins and housing prices.

Justifications for the research project

The study aims at bridging the existing gap from past scholarly literature by developing knowledge on the impact of Covid-19 on housing crisis in the New York City. The study aims at analyzing the issue of increasing housing crisis in New York City during the pandemic and the impacts the situation is having on tenants, landlords and the real estate market in general.

Hypothesis

The hypothesis derived for the study is based on the research question which determines the effect of Covid-19 pandemic on housing crisis in New York City.

Null Hypothesis: Covid-19 Pandemic did not elevate the housing crisis in New York City.

Alternate hypothesis: Covid-19 Pandemic elevated the housing crisis in New York City.

Goal Statement

The goal of the paper is to establish the impact of Covid-19 pandemic. This will assist in enhancing a deeper understanding on the financial implications of the pandemic particularly after the government shifted more focus on the containment of the pandemic.

Methodology

The study will utilize quantitative research in collection and analysis of data.

Literature Review

Searched Categories	Scholarly Journals	Books	Total
Covid-19 New York City housing crisis Theoretical framework Impact of Covid-19 on housing	7 1 4 2	2 1 1 1	9 2 5 3
Total	14	5	19

Introduction

The study will use literature analysis as the methodology to analyze other researchers' opinions on the issue and the recommended strategies that can be followed to navigate the problem comprehensively. The literature analysis will also provide insights into the extremity of the housing crisis and the pandemic in NYC.

Review

Due to tenants' incapacity to fulfill their contractual obligations, Boshoff (2020) claims that the pandemic has a detrimental influence on housing availability. Since property owners were forced to remove their properties from the market to reduce the risk of a loss on their investment, the supply of residential housing units declined sharply, and some buyers delayed making a purchase until after the pandemic's uncertainties were resolved. The retail and hotel industries in the United States were most severely affected, while the office sector in Asia was most severely affected (Milkeva, 2021). Investors and landlords experience challenges in maintaining their mortgage return due to the pandemic effect, which was proved (Avakyan, 2020) Similarly, the pandemic had a detrimental effect on Turkish home mortgages (Christie, 2020).

Even before the coronavirus epidemic, New York City was experiencing unprecedented levels of homelessness; however, the spread of the virus has only served to exacerbate the city's preexisting social problems by having a disproportionately negative effect on the city's homeless population (Beard, 2020Since the outbreak of COVID-19 in New York City, the scarcity of private, secure spaces for the city's homeless population has exacerbated the spread of the virus, increasing hospitalizations and deaths. COVID-19 has been found to be particularly dangerous for people who live in congregate shelters (Chen, 2020)

The residential real estate market in New York City is still being transformed by the new Coronavirus. There was a significant difference in the number of deaths and cases in New York City during the early 2020 pandemic outbreak compared to other areas of the United States because it is a densely-populated area. Domestic revenue levels and trends, as well as foreign flows to developing economies, were already deemed insufficient to meet the Sustainable Development Goals prior to the COVID-19 crisis occurring (SDG) (Sayun, 2020).

Widespread job and wage losses during the COVID 19 pandemic increased housing precarity dramatically. COVID-19 infection, complications, and death were especially prevalent among people of color, low-income populations, and other vulnerable groups in society. More vulnerable populations have a greater chance of being infected with COVID-19 and becoming victims of homelessness, which can lead to a cycle of poor health. It is more common for low-income residents and minorities to be evicted and suffer severe health consequences during pandemics. A pandemic requires protecting those most at risk of contracting, spreading, and dying from infectious disease. Protecting those who are most susceptible to infectious disease is part of this effort. (Chernick, 2021).

Low- and intermediate countries may find it difficult to fund their public health, social, and economic responses to COVID-19 because of their high levels of public debt and the added strains caused by the pandemic on all key sources of development finance. Observations so far point to large-scale loan and equity flows from developing nations, which are occurring in tandem with a decline in remittances and are having a ripple impact on domestic finance (Cohen et al, 2021).

Major concerns arose when the pandemic began in early 2020. This so-called "great equalizer" had major economic consequences that disproportionately affected the low-income population (Green, 2021). Across the country and the rest of the world, financial insecurities rose because of the loss of jobs and businesses. Millions of people were unable to pay their rent because of this, resulting in a housing crisis. The government's sanctions on moratoriums in the first months and the disparity in access to anti-eviction advocacy groups affected different areas differently.

The real estate market in New York City will be negatively affected by COVID-19 for the foreseeable future, at least until July 2020. COVID-19 infections have slashed the volume of the New York City real estate market by over 35 percent and lowered the average sale price by around 27 percent in just five months since the first cases were recorded (Gupta, 2021). After only five months, the pandemic has already reduced the value of a home by the equivalent of a seven-year expected return on an investment in residential property. Contrasting this is the predicted rise in home values prior to the COVID. In addition, these average effects aren't spread out evenly across the city's one- and two-family dwellings. Instead, they tend to cluster in low-income areas, where infection rates are higher, and sales volume is lower due to the lower value of the homes (Manski, 2021).

A rise in the unemployment rate has a considerable impact on home sale prices due to the income effect. This is especially evident in the second pandemic wave. Unemployment in New York City surged by more than 8 percentage points in comparison to pre-pandemic levels, indicating an average loss of $50,000 in housing values in the city (Cohen, 2021). Homes in densely populated areas with high rental rates are less vulnerable to rising infection rates, but their income effect on value is significantly greater. The pandemic's first wave of cases had a large impact on the market price of homes in the bottom quartile of the pre-COVID local price distribution, but there was no major impact on prices during the second half of 2020.

Increased likelihood of catastrophic setbacks, which in turn increases our vulnerability to pandemics and climate change and other international public calamities such as Ebola and ISIS. While tax revenues remain the only long-term feasible source of funding for many government services, no single source of project financing can take on this problem alone. Official development finance is a key countercyclical driver (Rahmaniani and Mohammadmoradi, 2021).

The Emergency Rental Assistance Program and a large presence of the former in New York helped to alleviate the situation, but renters there were still in a state of emotional upheaval as a result. Renters in the lower- and middle-income brackets were more likely to report difficulties in their landlord-tenant relationships as a direct result of the eviction moratoriums. These moratoriums had an unintended effect on some demographic groups, according to the study. Even though they prevented many people from becoming homeless during the pandemic months, their relationships with their landlords were strained as a result. As a result, more research is needed to determine the causes of the outbreak (Reina, 2021).

Summary and critique

The literature outlines the impacts of the Covi-19 pandemic on the social and economic status of people. Among the areas that are discussed in length include decline in income with a clear comparative analysis provided on hos the effect has been felt during the Covid-19 pandemic compared to other times in history where there has been pandemics such as ISIS and Ebola. This evidence reveals the challenge that is lying ahead for the real estate market to overcome. It also shows the dilemma that the residents are currently facing, where they are left with the option of remaining on the property illegally or ending up on the streets with their families. However, there is a wide research gap evident in the literature in that the issue of housing is not addressed at length as one of the factors that was stimulated by the development and spread of the Covid-19 pandemic.

Discussion

There is a severe lack of public information on this topic, despite the fact that a new wave of the virus is now having an effect on the real estate market. This is almost the only study that is now accessible on residential real estate in the United States that investigates the effect of COVID-19 shutdowns and reopening on property prices in the country.

D'Lima et al. (2020) conduct research on the impact that corporate shutdowns and restarts have on the economy of the United States. The authors employ a method that is known as difference-in-differences identification when they are attempting to calculate the effect that COVID-19 will have on the price of single-family residences throughout the United States. As a direct consequence of this, individuals are able to achieve a higher level of accuracy. In its place, a methodology known as "hedonics" has been used. Hedonics is founded on the notion that demand for houses can be segmented into certain property attributes, such as square footage or land area, and that this segmentation may be done mathematically. When doing a linear regression, the natural logarithm of the house's price is used as the dependent variable. This allows us to determine the degree to which the price of the home is elastic in proportion to the home's advantages and disadvantages. An equation based on hedonics is used here as a means of approximation.

There were two indications for each property transaction: the first indicated whether or not the state was closed at the time of the sale, and the second indicated whether or not the sale took place in an open state (Beard, 2020). These researchers cluster the data themselves at the level of the zip codes, and they take into consideration the fixed effects that zip codes have. The researchers found that there was a statistically significant negative effect on pricing when the plants were shut down, and that there was an even bigger negative impact when the facilities were restarted after being shut down (with elasticity of approximately 0.9). They were of the view that the reopening of the company had a negative impact due to the fact that not all limitations were immediately abolished.

According to Zhao (2020), who examined both the aggregate and micro implications of COVID-19 on the US housing market, data at the aggregate level reveals a fundamental break in home demand when mortgage rates declined after March 2020. Zhao found this to be the case after analyzing both the aggregate and micro effects of COVID-19 on the US housing market. This was seen after the year 2020. Products and services are much more costly than they were before to the onset of the Global Financial Crisis (GFC). In addition, Zhao (2020) points out that individuals with the greatest and lowest incomes have seen the largest rises in the demand for housing. Demand has grown over time in urban and suburban areas, while it has dropped in more rural places. This trend can be seen in urban and suburban areas. When the flu outbreak first began in New York City, a significant number of landlords either did not charge broker fees or gave free rent for one month. Those deals are no longer available, and rental prices are already climbing by double digits in a significant number of places throughout the country. Over the course of the last year, New York City's rental prices have increased by an average of thirty percent.

Since the beginning of the Covid-19 pandemic in New York City, there has been a considerable rise in the market rents that are being charged. A spike in rents is likely to occur after ten years of significant population growth combined with measures that restrict the supply of homes. According to what I found and described in a recent report, considerable new home development took place in very few of New York City's high-opportunity neighborhood areas throughout the 2010–20 decade. Despite rising rents and prices, new housing building was prevented in many other locations due to more restrictive zoning and mapping of historic districts. This prevented the market from reacting to the situation in any meaningful way.

Even though it seems like the worst of the COVID epidemic is behind us, the housing issue in New York City is still a problem that has not been handled and continues to become worse. The most economically disadvantaged families and areas in New York City are the ones bearing the brunt of this debt. Since the city reopened this summer, New Yorkers have racked up billions of dollars in outstanding rent arrears. Despite some early improvements that resulted from the city's reopening last summer, the housing situation in New York City is still considered to be in a dangerous state. The cost of one month's rent is out of reach for many people, and an even greater number are behind in their payments by many months (Beard,2020).

Renters who are currently behind on their payments face the risk of falling farther and further behind in the coming months. From January to March 2021, 68 percent of renters who were behind on their housing payment showed little to no faith in their capacity to pay the rent for the next month. In the event that you are behind on your rent payments, you will continue to struggle to meet your financial obligations. The pandemic has contributed to the already precarious housing situation of people of color by making it worsening factors such as racial segregation and other long-standing and persistent forms of racial discrimination. The decline in employment that has been caused by the pandemic has made things even more difficult financially for families of color. As a direct consequence of this, the burden of paying off the mortgage debt that developed during the COVID period falls disproportionately on these families.

The response of the housing market in New York City to the Covid-19 earthquake should be used as a model for the rest of the city. Among the actions that were taken by that state was a halt to the practice of cutting off people's electricity supplies, aid with rent payments for property owners, and an extension of the state's existing hotel voucher program in order to move homeless people living in shelters into hotels. Housing investments in New Hampshire are not only essential for the ongoing fight against the pandemic (which is now ongoing), but they are also seen as a potential catalyst for addressing the state's decades-old health inequities.

As a consequence of the development of these brand-new low-cost housing units, the rent responsibilities of thousands of families will be alleviated; yet, families may be required to wait for years before a unit becomes available. In order to assist New Yorkers with their pressing housing requirements, the federal government provides assistance in the form of rent subsidies and vouchers. Even before the pandemic, it was clear that these activities would not be enough to meet the needs of the community. Because the City has increased the reach of its local rental assistance programs, a greater number of people will now be qualified to receive aid. To actually fix the city's housing crisis and not merely return to the levels they were at before COVID, it will need a significant amount of assistance and coordination from local, state, and federal institutions.

References

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Beard, V. (2020). COVID-19: Poverty, housing, homelessness–A broad view and a picture from West Michigan. Housing, Homelessness–A Broad View and a Picture from West Michigan (May 28, 2020).

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Chen, J. A., Zhang, E., & Liu, C. H. (2020). Potential impact of COVID-19–related racial discrimination on the health of Asian Americans. American Journal of Public Health, 110(11), 1624-1627.

Chernick, H., Copeland, D., & Reschovsky, A. (2020). The fiscal effects of the COVID-19 pandemic on cities: An initial assessment. National Tax Journal, 73(3), 699-732.

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