The Brief History of New York's Economy

Overview

New York is a story about position. It holds the best natural harbor on the East Coast and the only near sea-level break through the Appalachian Mountains. For over 1,000 years, whoever controlled those routes controlled the wealth. This is a working history of New York's economy for investors and home buyers, told through four forces that still drive real estate: property ownership, trade and industry, the business climate, and taxation.

A Brief Economic History of New York

1. around 1000 to 1500

   Before Europe

   The land that became New York was organized around its rivers. The Haudenosaunee, the confederacy of the Mohawk, Oneida, Onondaga, Cayuga, and Seneca, farmed corn, beans, and squash across central and upstate New York and governed themselves under the Great Law of Peace, one of the oldest participatory governments in the world. The Mohawk held the Mohawk Valley, the natural corridor west, and the Lenape lived around the lower Hudson and the harbor that would become New York City. Land was held and worked in common, and value came from controlling the river trade routes, the same corridors that would carry the state's wealth for centuries.

2. 1609 to 1776

   Dutch and English Colonial New York

   Henry Hudson sailed up the river that bears his name in 1609, and the Dutch built New Netherland around the fur trade, buying beaver pelts from the Haudenosaunee and shipping them to Europe. New Amsterdam was founded at the tip of Manhattan in 1625. The Dutch granted large estates along the Hudson under the patroon system, the biggest being Rensselaerswyck near Albany. England seized the colony in 1664 and renamed it New York. The manor system kept much of the Hudson Valley in a few hands, and the port at the harbor grew steadily on trade.

3. 1776 to 1860

   Revolution and the Erie Canal

   After independence, New York City became the busiest port in the country. The decisive event was the Erie Canal, finished in 1825, which connected the Hudson and the harbor to the Great Lakes and the Midwest. Freight costs between Buffalo and New York fell by roughly 90 percent, and the canal made New York City the commercial capital of America. Upstate cities boomed along the route, and Buffalo, Rochester, and Syracuse grew as canal towns. Wall Street grew into the financial center of the country. One piece of infrastructure reset the value of land across the entire state.

4. 1860 to 1929

   Industry, Immigration, and Finance

   New York City became the gateway for immigration, with Ellis Island opening in 1892, and that labor built a manufacturing and garment economy. Wall Street turned into the financial center of the world. The skyline, the subway, and the great commercial buildings rose in this era. Upstate ran on industry: Kodak in Rochester, General Electric in Schenectady, and steel and grain in Buffalo. Property meant dense urban real estate downstate and factory towns upstate.

5. 1929 to 1975

   Mid-Century Peak and Crisis

   The Depression hit New York hard, then the Second World War and the postwar years pushed the city and its suburbs to a peak. Long Island and Westchester filled with new homes. Manufacturing began a long decline, both in the city and upstate. By 1975 New York City reached a fiscal crisis and nearly went bankrupt, a turning point that forced a reinvention.

6. 1975 to present

   Finance, Reinvention, and the Divide

   New York City rebuilt itself around finance, insurance, real estate, media, and later technology, and its property became among the most valuable in the world. Upstate took the opposite path, losing factories as the wider Rust Belt did, with Buffalo, Rochester, and Syracuse shrinking for decades. The defining fact of the state economy today is the divide: a global city downstate and a much slower upstate, under some of the highest income and property taxes in the country.

Where New York Stands Today

A thousand years of river-trade position, then the Erie Canal, then Wall Street, built one of the largest and most unequal economies in the country: a global financial city downstate and a slow-growth upstate, under high taxes throughout. The history explains the divide. The current numbers change every quarter. For the live New York market, property taxes, and what homeowners and investors should know right now, see the New York overview.

What the History Tells Investors and Home Buyers

• New York is not one market. Downstate runs on global finance and scarcity, upstate on local employment and much lower prices. Risk: applying New York City assumptions to an upstate purchase. Resolution: underwrite upstate property on the specific city's job base and anchor institutions, a hospital, a university, a state employer, rather than on statewide or downstate trends.
• Property taxes here can rival the mortgage. Long Island and Westchester carry some of the highest property tax bills in the country. Risk: budgeting on price alone. Resolution: get the actual tax bill and the reassessment history before you offer, and underwrite the deal on the all-in monthly cost.
• Infrastructure still moves value. The canal, the subway, and the rail lines made fortunes by cutting the cost of distance. Watch where new transit and broadband are going, because access has set New York land value for 400 years.

This article is informational only and is not legal, financial, tax, or investment advice.