New York City's Congestion Pricing and its effects on NY Real-Estate
This past November, the Democratic Party gained majority control of the New York State’s Government. This shift in control has generated a number of new bills being passed by the State Legislature. On April 1, 2019, Governor Andrew Cuomo signed a particular bill into law, which sets congestion pricing tolls for driving in certain areas of Manhattan.
Mid-town Manhattan especially is notorious for its traffic. The average car speed for areas around midtown is only 4.7 mph. In fact, New York City’s congestion generally ranks it as the city with the third worst traffic in the world, only Los Angeles and Moscow ranked lower. The intent of this bill, is to help alleviate New York City’s traffic congestion issues by adding a toll (starting January 1, 2020, the amount of which has yet to be determined) for all drivers who drive anywhere in Manhattan south of 60th Street, excluding only the FDR drive and the West Side Highway.
With the introduction of this new toll many are speculating on the effect such a law will have on NYC Real-Estate. In 1998, Singapore implemented its version of a congestion tax through an Electronic Road Pricing (ERP) system. A 2015 Journal of Economics’ study published results demonstrating that implementation of this toll in Singapore caused a significant (up to 19%) drop in retail/commercial real-estate prices within the tolled area (although it had no significant impact on private offices or residential real-estates), compared to prices outside of that area.
The City of London also introduced a congestion pricing in 2002, charging motorists five pounds to enter the city’s central zone (and both the fee and the zone have been subsequently increased/expanded since implementation). In London’s case, residential real-estate in those zones, adjusted for market costs and controlling all other factors, increased in value by more than three (3%) percent over properties outside of the zone, over the five (5) years that followed.
Still others see this congestion zone as an opportunity, stating that while the property value in some areas may fall, other properties of the City will see a marked increase (such as leading to further commercial development in the other four boroughs). Fixing New York’s traffic problem could never be met with placidity, and the ripple effects of congestion pricing are certain to affect New York City’s real-estate pricing. Whether that change will be positive or negative is yet to be determined.
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