NYC’s urban model faces existential crisis in post-pandemic world
Manhattan needs its people back. But do the people need Manhattan? COVID-19 may not be a pause, as Gov. Cuomo puts it, but a rupture — one that has vast implications for New York.
For half a century, New York’s growth policy, stripped of some subtleties, has been as follows. Step one: Build up a dense corporate office hub centered around 150 blocks of Midtown Manhattan. Step two: Improve transit, so that you can move these millions of commuters onto the island of Manhattan every day in crowded metal tubes, and then, at the end of the day, move them back out.
This solved a bunch of problems that plagued midcentury New York.
First, middle-class flight from the city. We fixed that by moving people back and forth from Westchester, Long Island and New Jersey during the day. Second, working-class flight from Manhattan. Manhattanites who no longer walked to work from tenements to the docks or the Garment District could take the subway to new jobs in restaurants, retail, cleaning — serving a huge office market.
Yet this system was in peril even before the outbreak. Subways and commuter lines were beyond capacity at peak hours, and even off-peak. Developers had overbuilt, thanks to cheap global money.
Midtown’s prime-office vacancy rate last November was 10.4 percent, compared to 8.9 percent two years earlier — with “supply outpacing demand,” city economists noted, thanks to massive new construction at Hudson Yards and in Midtown East.
Now, both sides of this equation are irretrievably broken. No one has any idea how New York’s and New Jersey’s transit systems can resume moving nearly 3 million people on and off a dense island by this fall. The answer won’t be more driving. A 30 percent drop in pre-COVID transit would mean a doubling of vehicles on Midtown’s streets — a total standstill.
So: What happens to all those offices sitting eerily empty? It isn’t only a short-term problem. Even if we get a vaccine tomorrow, many commuters have found that they like staying home. JPMorgan Chase and Facebook — both, prior to this, planning new Manhattan office towers — are now saying people can work closer to home or at home.
That doesn’t mean five days a week, forever. But even employers and workers deciding they would rather work in an office only two or three days a week has huge implications for the future price of office space and MTA finances.
It has huge implications, too, for restaurants, stores, theater, hotels — all of which depend on business travel and on commuters spending a little extra time in Manhattan. Outer-borough restaurant and retail also depends on residents’ wealth — earned in Manhattan.
No one knows what’s going to happen. Maybe everyone will be back. If not, though, New York will need a new model. It’s possible that Manhattan may break up into smaller clusters, where more highly paid workers at tech companies, investment banks, law firms and hedge funds live within walking or biking distance to work, leaving less crowded transit to middle-income and service workers.
That’s fine, but means a rough transition. Manhattan as a dense office hub doesn’t work without armies of longer-distance commuters. Sure, you can convert office space into residential space over time, but the key is “over time.” It’s expensive, and it won’t happen in a plummeting real-estate market.
Any big change is a shock to the city’s tax system well beyond a few months. For its annual $66 billion in tax revenues, New York depends on high, and high-volume, property, income and sales taxes, all now imperiled. It could see double-digit adjustments, beyond what any one-year federal rescue can cushion.
It’s a shock to the region’s tax system. The only reason Long Island villages can afford sky-high spending on schools and police is that some taxpayers bring home six and seven figures from Manhattan, and because residential property is worth a lot. It’s worth a lot less if it’s less valuable to be close to Manhattan.
Facing an unknowable future, New York needs to be flexible now: Temporarily furlough non-frontline workers so it can afford to bring back some later. Sponsor aggressive testing on how safely people can stand next to each other, masked, for now, on transit. Let restaurants start deploying open-air dining to give people a reason to stay this summer.
The private economy is moving fast. But the city is still frozen.
Nicole Gelinas is a contributing editor of City Journal. Twitter: @NicoleGelinas
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