New York City homeowner Tina Larsson watched for nearly a decade as a new subway station was built right across the street from her brick midcentury co-op on Manhattan’s Upper East Side. The excavation blasts shook her walls and sent dust spewing into the air; the noise and disruption choked off business to once-busy restaurants and shops.
It was, in short, a terrible mess.
Then in January, the heavy construction machinery suddenly disappeared, the sidewalk scaffolding was taken down, and the endless clutter seemed to vanish overnight. After nearly a century of starts and stops, the $4.5 billion Second Avenue subway—one of the nation’s most notoriously delayed large-scale transit projects—was finally open for business. It was sleek, modern, and even festooned with original Chuck Close portraits. Now, Larsson, 51, and many of her longtime neighbors, are finally ready to reap the real estate rewards.
Prices in Larsson’s building have shot up about 60% over the last three years—a bonus for existing owners and a burden for local renters, who may soon be priced out of the market. Larsson attributes the appreciation to her building’s close proximity to one of the three new stations on the subway, which now connects the far east side of Manhattan to the rest of the city.
“The people who are buying [here now], not only in this building, are very well off,” says Larsson, CEO of the FolSon Group, a consulting firm that advises co-ops and condo associations on efficiency and management. “The people who bought [years ago], I doubt they could buy now.”
New York City’s Second Avenue line isn’t the only high-profile public transit initiative with the potential to fundamentally transform its local real estate market—in ways both good and bad. Home and rental prices are on the rise near the New York City line as well as in cities across the nation, like Los Angeles, Charlotte, NC, and Phoenix, where long-anticipated mass transit lines or extensions have opened or are in the works.
These new lines can remake struggling neighborhoods or sleepy communities on the outskirts of city centers, having become suddenly desirable for young and old new residents alike. Or, as is the case in New York, they can make healthy housing markets into very healthy, super hot ones. Close to the stations, new housing and shopping developments typically rise. Restaurants, new businesses, and offices crop up, bringing jobs to the area.
Not all is smooth riding, however. While homeowners often benefit from higher property values, longtime renters can find themselves pushed out of rapidly gentrifying and ever more expensive areas. And the character of these communities is often irrevocably transformed.
In New York over the last year, median home listing prices on the East Side near the three new subway stops at 72nd Street, 86th Street, and 96th Street, have risen 4.6%, according to a realtor.com® analysis of ZIP codes along the Second Avenue subway line.
That’s a bit lower than the annual home price appreciation on the West Side of Manhattan, at 6.7%. But home prices on the East Side near the stops went up 11.1% in the last three years. Now they’re expected to rise higher and faster.
This represents pent-up demand in a neighborhood that for years had become a full-fledged construction zone. Rents of one-bedroom apartments went up 6.3% in ZIP 10028, near the 86th Street stop, and 5.9% in ZIP 10128, near the 96th Street stop, according to Apartment List data.
“Properties saw a premium right before the line was finished, because people anticipated the uptick in value as soon as the construction hassle was over,” says New York-based real estate appraiser