Realtor Perspective: How Congestion Pricing May Affect New York City Real Estate

A core aim of the congestion pricing initiative is to reduce traffic, improve air quality, and fund public transportation improvements. While the immediate presumption for residential real estate in Manhattan, particularly south of 60th Street, might be that the added cost of entering the area could deter prospective buyers, the situation is nuanced. For one, the congestion pricing zone encompasses some of the city’s most desirable and opulent real estate, where the prestige and convenience of location could outweigh the additional commuting costs for car owners. Moreover, properties within walking distance to major business districts and amenities may see an increase in value as the demand for more accessible and environmentally friendly living options rises.

“In areas inside the ‘zone’ below 60th, I anticipate it may bolster values. I think that these neighborhoods downtown will have less traffic, noise, and pollution, hence be nicer to live in, while continuing to provide a high quality of life without needing to cross the line,” said Keller Williams NYC real estate agent Laura Cook. “According to my research, when London implemented something similar, it increased property values inside the zone approximately 3%, which equated to an additional $13 billion across those properties.”

Reduced vehicular traffic could make these neighborhoods more desirable for residents who value the convenience and quality of life that comes with less congestion. Consequently, apartments, co-ops, and condos within the congestion zone could see an increase in value, as demand for these properties rises among buyers looking to capitalize on the enhanced living conditions. However, this may not be true for all.

“However, there is also the possibility that congestion pricing could deter certain buyers, particularly those who heavily rely on personal vehicles for transportation,” said Keller Williams NYC real estate agent Christine Guillen. “The prospect of additional toll costs for commuting into the congestion zone may be perceived as a financial burden, leading some prospective buyers to reconsider their options and potentially favor properties outside of the affected area.”

BOND New York managing director Brian Hourigan acknowledged that the financial burden created by toll costs could significantly cause shifts in the demographics of the affected zone’s region. He noted that although the additional costs that come with the new initiative likely won’t price out middle-class white-collar homeowners, lower-income rent-stabilized tenants and those living in subsidized housing who commute to and from work outside the zone will be significantly burdened. “Those same economically vulnerable populations will be disproportionately impacted by higher cab and ride-share prices, which will take these new taxes into account, and as a result, might choose to move outside the affected areas for the purpose of commuting with less financial strain,” he stated. 

The congestion pricing scheme is set to redefine what buyers prioritize when searching for homes in New York City. Traditionally, factors such as proximity to work, neighborhood amenities, and the quality of local schools have dominated decision-making processes. However, the introduction of congestion pricing could elevate the importance of accessibility to alternative transportation options and the home’s location relative to the congestion zone. Buyers may start valuing properties based on their potential to minimize commuting costs and environmental impact, leading to a recalibration of what makes a property desirable.

Laura Cook suggests that congestion pricing could increase the desirability of the uptown market based on the changes in the behavior of those who travel to Manhattan from other towns or neighborhoods. “Those driving in from Queens, New Jersey, and counties north of Manhattan, etcetera, seeking to experience city culture, cuisine, or nightlife may choose to stay north of 60th, which could invigorate those neighborhoods,” she said. “Similarly, those choosing to live in Manhattan may feel incentivized to ditch their wheels and commute exclusively by train, which might lead to an increase in demand for neighborhoods like Hamilton Heights, which are only a few quick express stops from Midtown and below.”

Christine Guillen emphasizes that, more generally, buyer preferences will be a key factor in determining the impact of congestion pricing on real estate prices. “Buyers who prioritize convenience, access to public transportation, and urban amenities may be more willing to pay a premium for properties in areas with reduced congestion. However, those who rely heavily on personal vehicles or prefer driving may be more hesitant to purchase properties within the congestion pricing zone,” she said. 

Realtors, recognizing the shifts in buyer priorities and the potential to capitalize on the congestion pricing plan, are already adjusting their sales pitches. The approach of marketing properties with the benefit of “avoiding congestion pricing” showcases a strategic pivot. This tactic not only addresses the immediate financial savings but also emphasizes the advantages of proximity to extensive public transit networks. Consequently, realtors might find a new selling point to attract buyers who prioritize environmental concerns and wish to reduce their carbon footprint, alongside those looking to optimize their living expenses in the city.

“Realtors may leverage the congestion pricing issue to attract buyers who may not have previously considered certain properties or neighborhoods,” said Guillen. “By framing the discussion around how congestion pricing impacts commuting costs and quality of life, realtors can effectively engage with buyers who may be seeking alternatives to traditional car-centric living. By offering thorough market analysis and information on transportation options, realtors can help buyers make informed decisions that align with their preferences and lifestyle needs.”

Realtors will find themselves at the forefront of adapting to these changes, tasked with crafting marketing narratives that resonate with evolving buyer sentiments. They may leverage the congestion pricing plan to attract buyers who value sustainability and are drawn to the lifestyle afforded by living within the congestion zone.

“I have seen some agents note on listings ‘avoid congestion pricing’ in properties north of 60th, though I don’t think congestion pricing will create many new buyers we wouldn’t have otherwise worked with, but it may impact their priorities,” said Cook. “I think properties close to the train will have even more appeal than they already do, especially if the money funds improvements to public transportation and elevates the system as a whole.”

For neighborhoods with limited public transit options, concerns arise that home values may decline due to increased commuting costs into Manhattan.“The prospect of additional toll costs for commuting by car could make living in neighborhoods with poor public transit access less attractive to buyers who prioritize affordability and convenience. As a result, housing prices in these areas may adjust to reflect the perceived decrease in desirability and increased cost of living associated with higher commuting expenses, said Guillen. 

But the affordability aspect of these neighborhoods could counteract the negative effects. “It is hard to quantify how much of a hit property values might take because neighborhoods further out are already a place people go for affordability due to the further proximity,” Cook acknowledged. 

Long-term, the issue could potentially spur innovative solutions, such as developing new transit routes or enhancing existing ones, potentially mitigating negative impacts on these neighborhoods over time. 

It is hard to say how real estate surrounding the zone may be impacted. Hourigan notes that congestion pricing may benefit these neighborhoods. “Property values immediately surrounding the new tax zones might feel a slight benefit/bump from folks who would have previously been ambivalent about living in midtown versus one of the non-impacted communities (for example, Upper East Side or Upper West Side), but now that there’s an extra financial consideration south of 60th Street, [some] might prioritize purchasing or renting just outside of that zone to reap the benefits of a ‘core’ Manhattan neighborhood without an extra necessary commuting cost to travel home via car,” he said. 

But home demand in these areas could also be negatively impacted due to increased traffic as drivers seek alternative routes to avoid tolls. Consequently, real estate desirability might undergo a complex shift, with some areas facing downward pressure on home values due to increased congestion and others, particularly those well-served by public transport, experiencing heightened demand.

“It may have a slightly negative impact on properties right on the line, around the upper 50s and lower 60s, especially those not near a train stop, as they will be penalized for taking a car even a handful of blocks, to take in a Broadway show or dine in a restaurant over the line, despite the length of commute being short,” said Cook. She added that people might be incentivized to move to different neighborhoods so that they can visit stores, restaurants, etc. without crossing the line. 

The congestion pricing plan may also catalyze interest in alternative housing markets within the city. For instance, neighborhoods previously overlooked due to their distance from Manhattan could gain popularity if they offer convenient public transit options to the congestion zone. This shift could lead to a more balanced distribution of demand across boroughs, potentially easing the pressure on the city’s most sought-after areas and encouraging more equitable urban development.

“As commuters seek alternative routes to avoid congestion fees, neighborhoods adjacent to the congestion zone may experience higher levels of traffic congestion,” said Guillen. “This increased traffic could potentially impact the desirability of these areas, particularly for buyers who prioritize convenience and quality of life. The FDR Drive and West Side Highway, which are excluded from the congestion zone, may experience an uptick in traffic volume as commuters opt for these routes to bypass the congestion zone and avoid paying tolls. This increased traffic could lead to congestion and potentially longer commute times on these highways, affecting the overall attractiveness of neighborhoods located nearby.”

Given these dynamics, strategic considerations will play a crucial role in real estate decisions post-congestion pricing implementation. For buyers, decisions may hinge on weighing cost savings from avoiding tolls against premiums for properties within or close to the congestion zone. Sellers and realtors will need to adapt their marketing strategies to highlight the unique advantages of their listings, whether that’s proximity to public transit, exemption from congestion pricing, or access to amenities offsetting frequent car travel.

“Over time, the real estate market may adapt to the implementation of congestion pricing as buyers, sellers, and real estate professionals assess its long-term impact,” said Guillen. “Market perception of the benefits and drawbacks of living within the congestion pricing zone will influence buyer behavior and, consequently, property prices and values.”