Is Brooklyn getting poorer?

by on May 6, 2014 at 10:09 am in Data Source, Economics | Permalink

At the median, yes, according to Daniel Kay Hertz:

I recently ran across a post from data-crunching blog extraordinaire Xenocrypt, which noted that from 1999 to 2011, median household income in Brooklyn fell from $42,852 to $42,752…

Furthermore in large parts of Brooklyn real estate prices are falling.  You can read more here, with interesting pictures.

The pointer is from Hugo Lindgren.

A.S. May 6, 2014 at 10:12 am

“the national median income rose over the same period from about $50,000 to $56,000″

That has since been corrected to stated that the national median income has FALLEN over the same period from $56k to $50k, so Brooklyn is actually doing better than the country as a whole, thereby rendering the premise of the article wrong.

Tyler Cowen May 6, 2014 at 10:18 am

Thanks for the catch, I have edited the mistake away…

mpowell May 6, 2014 at 2:29 pm

I don’t think it renders the premise invalid at all. It’s mostly just saying, “hey anti-gentrification folks, here are some trends you probably aren’t familiar with at all”. And I think both the median income trends and real estate prices would surprise people.

charlie May 6, 2014 at 10:14 am

This is a suprise? Too much reading the NYTIMES.COM and not enough walking around.

Michael May 6, 2014 at 10:39 am

It’s not a surprise but it’s a very big problem.

Home values from 1999 to 2011 in Brooklyn have skyrocketed to say the least. In Park Slope in the late 90s a brownstone would sell for $100k–now they sell for over 10x that. The median home values in all of west Brooklyn have skyrocketed to say the least.

There are plenty of takeaways from this, but the most important is that the gentrification of Brooklyn may have hit saturation.

charlie May 6, 2014 at 10:52 am

I’d agree the gentrificaiton of Park Slope may have hit saturation but that seems to be a fairly small part of Brooklyn.

bob May 6, 2014 at 11:23 am

This. When anyone outside of Brooklyn talks about Brooklyn they are usually referring only to the small portion that is hugely popular.

niko May 6, 2014 at 3:28 pm

and by “the very small portion that is hugely popular” we mean the part that is very close to the Broolkyn Bridge, and hence Manhattan (via, car, Taxi, bike or MTA). Basically, Manhattan has spilled off of the island, as that area was more affordable/accessible than going even further north.

dead serious May 6, 2014 at 8:36 pm

Gentrified parts of Brooklyn:
- Brooklyn Heights
- Cobble Hill
- Carroll Gardens
- Park Slope
- Prospect Heights
- Greenpoint
- Williamsburg
- Red Hook
- Bay Ridge
- Dumbo
- Fort Greene

It’s not just one or two small neighborhoods near the Brooklyn Bridge – though yes, many neighborhoods that have become popular are in fact closer to Manhattan. For obvious reasons.

Edgar May 6, 2014 at 10:16 am

Kay Hymnowitz’s interesting article on the Fukianese presence in Brooklyn adds a little color: http://www.city-journal.org/2014/24_2_chinese-immigrants.html

Peter May 6, 2014 at 4:49 pm

Hardworking Chinese parents in Sunset Park who secure better lives for their children by sending them to specialized city high schools such as Stuyvesant and Brooklyn Tech may soon find this a more difficult option. The city has proposed changing the schools’ admissions away from a strict reliance on test scores, to a more comprehensive process involving grades, classroom involvement, teacher recommendations and essays. One side effect of this change is likely to be a major reduction in Asian admissions.

Separately, the Hasidim are another rapidly growing group in Brooklyn who may be depressing the borough’s average income. Many of them tend to be quite poor.

Ed May 6, 2014 at 8:08 pm

The city may propose it but the test only admission policy is codified into state law. Also if California is any guide I suspect the Asian community will organize into a formidable block of opposition.

Steve Sailer May 6, 2014 at 9:09 pm

California State Senator Leland Yee, who led the defeat of a Hispanic plan to reinstate de jure affirmative action at UC, is not a man to be messed with.

Peter May 6, 2014 at 9:50 pm

I’m not so sure that the city’s Asian population would be able or willing to mount a strong campaign against the new admissions proposal. Many of the parents of the Asian children who apply to the specialized high schools are working class people with little money, who often don’t speak English. More than that, the fact that the student bodies are so heavily Asian would make organized Asian opposition seem like the complete opposite of fair play,a privileged group (in admissions terms) selfishly holding on to their privilege and not wanting to give others a chance. It’s hard to see politicians having much sympathy for them.

Ken Rhodes May 7, 2014 at 11:45 am

Peter, I had to chuckle at your phrase “a privileged group” to describe children of working class people with little money, who often don’t speak English. If their claim on admissions is working harder to get better grades and score higher on tests, I wouldn’t be the one to say “privileged.” I’d say “deserving.”

Warren May 6, 2014 at 10:21 am

But how many new people have moved in and how many at the higher end of the income distribution retired?

If a family has a new baby the average height of the household falls, but no one is shorter.

Orlo May 6, 2014 at 10:23 am

This doesn’t take into account that the census data are estimates; the margin of error for individual neighborhoods can be several thousand dollars for the income figures. See here, for instance: http://www.nyc.gov/html/dcp/pdf/census/puma_econ_08to10_acs.pdf#bk6 ($9,008 margin of error). So a $100 change is not strong evidence that ‘Brooklyn is getting poorer.’

Combined with the first comment, it seems a more accurate interpretation is ‘Brooklyn is not getting poorer as quickly as the rest of the US, probably.’

Dimitri May 6, 2014 at 11:39 am

Orlo: “This doesn’t take into account that the census data are estimates; the margin of error… can be several thousand dollars…”

,

Marginal Revolution usually ignores margins of error when highlighting selected reports and studies. Mundane facts tend to diminish otherwise provocative blog topics.

It ain’t easy cranking out a daily blog like this one, but margin of error should be one of the very first questions occurring to MR when browsing any kind of numbers, statistics, surveys, etc.
A Marginal Error Revolution is needed to weed out the vast amount of sloppy numbers in the media.

TJ May 6, 2014 at 10:36 am

A deeply suspect post: author defines away 10% increases in real-estate prices as “stagnation” and treats a 0.2% decrease in income in the borough as “getting poorer” while nationwide incomes fell by 10.7% in the same period. That’s what it means to get poorer.

Ed May 6, 2014 at 10:57 am

AS and TJ got it right, median incomes have been dropping everywhere in the US, so the data really shows Brooklyn doing relatively better than most places.

Another thing is that Brooklyn has a bigger population than all but a handful of American cities (over 2 million). The hypergentrification is concentrated in the neighborhoods in the northern part of the borough, where the commutes to Manhattan are reasonable. Over two thirds of the population of the borough could well be living in neighborhoods that are getting poorer. Gentrification has been spreading, but you hit a hard limit at the point where the subway trip to Manhattan hits 45 minutes.

Keith May 6, 2014 at 11:26 am

Interesting comment. How come a borough of 2 million people isn’t self-sufficient job-wise enough so that the commute to Manhattan doesn’t matter. In other words, why can’t the economic activity of Brooklyn cause Brooklyn to gentrify?

JWatts May 6, 2014 at 12:51 pm

“How come a borough of 2 million people isn’t self-sufficient job-wise enough so that the commute to Manhattan doesn’t matter. ”

I’d go with: Because it’s only 45 minutes from Manhattan. Essentially you’ve got the cause and effect pointed in the wrong direction. Brooklyn isn’t self-sufficient because it’s relatively close to Manhattan. It’s economically efficient for a lot of Manhattan workers to live there.

Setecq May 6, 2014 at 12:54 pm

Keith: Location, location, location. And in NYC, transit. All but one of the city’s subway lines are arteries to/from Manhattan, so Manhattan is still the geographic center of much cultural and economic activity. While NYC media outlets will occasionally run stories about young hip people who have no need for Manhattan, many of the people working in the city’s high-income fields— finance, insurance, real estate— still need to do so in Manhattan. And as much commercial development as has occurred in Brooklyn, it still hasn’t attracted major employers as e.g. Goldman Sachs’ expansion to Jersey City. (Though GS is investing in Brooklyn: http://www.crainsnewyork.com/article/20130509/TECHNOLOGY/130509856/brooklyn-navy-yard-goes-high-tech)

Finch May 6, 2014 at 1:56 pm

JWatts and Setecq have it. Brooklyn is a suburb of Manhattan, not in the sense that it’s low density, but in the sense that it has specialized.

Ed May 6, 2014 at 3:47 pm

Actually I think this has been a major failing of NYC’s economic development policy. There has been some effort made to develop business districts outside Manhattan, but alot more should have been done. Both the island and the subways that feed it have been getting overcrowded with office-workers and tourists. The central part of the city is too expensive, while neighborhoods in the outer outer boroughs stagnate.

Sam May 6, 2014 at 4:32 pm

As one small reason, big companies like to locate their offices in manhattan because it’s hard to commute to Brooklyn from other Burroughs. In fact, it’s often very hard to get from one neighborhood in Brooklyn to another without a car. If you locate your office in Manhattan, the pool of workers who can easily commute there includes a lot more of New York City (plus people who can commute in from Jersey/Westchester). So, the “best” jobs – ie the ones the gentrifiers have – are still in Manhattan.

Beliavsky May 6, 2014 at 11:10 am

I’d call $42,852 to $42,752 basically unchanged. I assume the data was adjusted for inflation. Depending on which inflation measure you use, you could say that real income has slightly increased or decreased. I wonder why Cowen did not use a more informative title such as “Brooklyn income about flat”.

Keith May 6, 2014 at 11:43 am

Tyler, if you are interested in a topic for a new book, I would suggest “An Economist Takes a Walk” where you pick a few cities and walk through them explaining what is going on from an economic perspective. You might want to start with San Francisco where, despite incredibly high real estate prices, certain chunks of the city look post-apocalyptic. Some neighborhoods right on the water are the worst in the city, while others inland are the best. If you could explain what is really going on, I would buy that book.

Dan in Euroland May 6, 2014 at 12:00 pm

Actually that is a pretty good idea. Kinda a neo-Jane Jacobs approach.

Just another MR Commentor May 6, 2014 at 11:45 am

Sounds like there’s some great buys in Brooklyn just another sign of the resiliance of the US economy. The real estate market is great right now and smart buyers should go in for this bargain Brooklyn property.

Bryan Willman May 6, 2014 at 12:04 pm

Once again we have to ask “how is income measured and what does it include” – are we to believe that the value of employer provided health insurance, transfer payments of various sorts, and so on remained dead flat, or dead flat at the median in all of Brooklyn for that time period? While they changed in interesting ways everywhere else in the US and basically everywhere else in the developed world?

If so, Brooklyn must be an amazing haven of cost effective health insurance and health care, hyper effective social support services, and amaziningly cost constrained public services….

jk May 6, 2014 at 12:49 pm

Looks like de Blasio’s rent control fantasies are coming true.

John Voorheis May 6, 2014 at 1:31 pm

Its unnecessary to rely on precompiled PUMA summary statistics – we can use the public use microdata files directly (via e.g IPUMS). Using the microdata allows us to a) look beyond the median and b) explicitly correct for household size (I’ll use an equivalence scale of the square root of the household size).

I haven’t done this for the 2000 Census yet, but comparing the 2005 ACS one year file to the 2012 one year (the most recent) file for Kings County yields the following, all in 2013 dollars:

at the 10th percentile:
2005 equivalized hh income: 7013.59
2012 equivalized hh income: 7250.14

at the 20th percentile:
2005 equivalized hh income: 11930.36
2012 equivalized hh income: 11930.13

at the 30th percentile:
2005 equivalized hh income: 17715.69
2012 equivalized hh income: 17577.00

at the 40th percentile:
2005 equivalized hh income: 24521.28
2012 equivalized hh income: 24021.89

at the 50th percentile:
2005 equivalized hh income: 31888.23
2012 equivalized hh income: 31256.10

at the 60th percentile:
2005 equivalized hh income: 40205.32
2012 equivalized hh income: 40255.26

at the 70th percentile:
2005 equivalized hh income: 50107.53
2012 equivalized hh income: 50740.42

at the 80th percentile:
2005 equivalized hh income: 64058.39
2012 equivalized hh income: 65868.25

at the 90th percentile:
2005 equivalized hh income: 86781.89
2012 equivalized hh income: 93216.10

Note that the income losses are local to the middle of the distribution – both the bottom and top are relatively better off in 2012 vs. 2005.

I’ll try and make this into a proper post with charts and stuff if I get the chance.

tylerh May 6, 2014 at 2:56 pm

please do.

This is really solid and unusual: the median is misleading about the most important change.

joan May 6, 2014 at 5:19 pm

Households in the bottom 10% are often not poor but are living off saving so one would expect their income to increase when the income of the top 10% does because both groups have income from assets.

John Pertz May 6, 2014 at 3:44 pm

There is nothing interesting here. The story of NEW BRooklyn has always been about a handful of neighborhoods-dumbo,williamsburgh, cobble hill, park slope, Brooklyn heights, carol gardens, bed sty in a small way, bushwick and Greene point. The boom is huge in those areas.

In the other neighborhoods it’s old Brooklyn as usual. What was the point of this post?

celestus May 6, 2014 at 8:15 pm

I would guess that part of the gentrification of Brooklyn is people moving into the neighborhood who aren’t necessarily higher income than the people who were living there before- they merely have their rent subsidized by the Bank of Mom and Dad.

Silas Barta May 7, 2014 at 7:14 pm

Huh .. wh … how do you live in Brooklyn on $45k/year? Is there like, a horde of rent-controlled households?

Floccina May 21, 2014 at 3:42 pm

Is the growing number Hasidic Jews a factor in this?

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