How New Yorkers Lose Money and What to Do About It?

There are three reasons why life in New York City is difficult. New Yorkers overpay for their purchases. New Yorkers are underpaid money for their work. New Yorkers are simply unlucky. Let’s look at the most striking examples of each of these three phenomena.

Overpayment

The housing market is a clear example of how New Yorkers overpay for what they need. New Yorkers are paying twice as much to buy a home. Due to the unreasonably high income required to obtain a mortgage, the price of real estate in the city does not correspond to the actual income of city residents. Housing in the city is priced as if the median income of New Yorkers were around $150,000, when in reality, the city’s income is half that. Here’s how it works.

In New York City, the median income required to qualify for a mortgage is almost twice the actual median income of city residents (for 2024, $74,694/$211,970).⁽¹⁾ Nationally, the two figures are virtually identical (for 2024, $83,730/$89,649).⁽²⁾

Considering that property values are determined not by the average buyer’s income but by the average income required to qualify for a mortgage, this focus has allowed real estate prices to nearly double. Although the average income of New Yorkers is almost the same as the average income of all Americans (in 2023, $75,000/$76,170),⁽³⁾ real estate in New York City costs almost twice as much as in the US (in 2023, $325,000/$675,000).⁽³⁾

That is, the average home price in New York City should be half as high and roughly the same as the national average. Prices should follow the incomes of potential buyers, not the financial policies of banks, which merely act as intermediaries issuing mortgages for home purchases. This is how it works nationally. But in New York City, it’s the opposite.

The cause of what’s happening in New York hasn’t been officially investigated. However, in a private conversation, a well-known realtor currently running for elected office in New York State told me the following. One reason could be government action. In the early 2000s, laws were passed allowing buyers to purchase a home using one loan for the purchase of the property and a second loan for the down payment and closing costs. We’re talking about so-called subordinate loans. These are the secondary loans sitting behind the primary mortgage, with varying payback terms (deferred, forgivable, or monthly installment). New York became one of the states where such loans were widespread. This enabled banks, and ultimately Wall Street, to drive property prices skyrocket. Subordinate loans were used to deviate the required income for a mortgage from the buyer’s actual income. As a result, the purchase of an average home in New York City results in a financial loss for the buyer of approximately $300,000!

Underpayment

The minimum hourly wage is a classic example of how employers underpay New Yorkers for their efforts. Since 1969, the growth of the minimum hourly wage has not kept pace with the growth of labor productivity in New York City.⁽⁴⁾ This means that for 57 years, New Yorkers have been paid less than they actually earn. In 2025, the minimum hourly wage that corresponds to real productivity should have been $23.27 per hour.⁽⁴⁾ However, the minimum wage set by the authorities has varied from $15.50 to $16.50.⁽⁵⁾ This means that every hour New Yorkers lose more than $5. For an 8-hour workday, the loss is at least $40. And for a 40-hour workweek, New Yorkers are underpaid about $200. Over the course of a month, workers’ financial losses amount to more than $800. New Yorkers are underpaid at least $10,000 a year!

It’s clear that employers are deliberately underpaying workers and using this shortfall to boost their own profits. Since 1969, New York State has passed more than 20 ordinances increasing the minimum hourly wage.⁽⁶⁾ However, each time, the established wage level failed to reflect actual productivity and did not eliminate employers’ ability to underpay employees.

Bad luck

Committing a crime is a common mistake that later leads to financial misfortune. In New York State, there are 9.1 million working-age people. Of these, 2.1 million have some kind of criminal record.⁽⁷⁾ The annual income of these convicted individuals is 15%-20% less than that of individuals without a criminal record. Individuals (1.6 million) convicted of minor crimes lose approximately $5,600 annually. Individuals (518,000) convicted of felonies lose $6,900 in income annually.⁽⁷⁾

These financial losses are caused by three main factors. Convicted people take longer to find work than others. Employers often deny convicts high-paying positions. Convicts are prohibited from obtaining many licenses. This closes their access to certain sectors of the economy.

In 2017, authorities attempted to address the problem by developing a special mechanism to conceal criminal records for certain categories of prisoners. However, only 0.2% of the total number of prisoners eligible for this privilege were able to take advantage of this opportunity.⁽⁸⁾

The above are just examples of common situations that lead to losses. Dozens of financial traps are encountered daily in New York City. To avoid these problems, it’s necessary to improve the situation.

How to stop losing money?

The three examples above are clear: build your own home in the New York City suburbs with cash or a personal loan but don’t buy a home with a mortgage. Don’t work for less than $22 an hour. And don’t commit criminal offenses. But what should you do in other situations where your money is slipping through your fingers?

New York State leads the US in teaching economics and personal finance in schools.⁽¹⁰⁾ Many businesses and even government organizations offer financial literacy courses for their employees. For example, the New York City administration does this.⁽¹¹⁾ However, all this financial education isn’t aimed at solving these problems. What’s needed here is more practical wisdom and… political will.

References

https://finance.yahoo.com/news/minimum-income-buying-house-nyc-170332782.htm

https://www.fox5ny.com/news/nyc-middle-class-income-salary-2024

https://www.attomdata.com/news/most-recent/q4-2024-home-affordability-index/

https://finance.yahoo.com/news/american-households-median-income-rose-202000427.html

3. https://www.newyorkfed.org/medialibrary/media/research/regional_economy/charts/Regional_NYC

4. https://www.epi.org/blog/proposed-new-york-state-minimum-wage-increases-would-lift-wages-for-more-than-2-million-workers-through-2026-minimum-wages-would-range-by-region-from-16-35-to-21-25-per-hour-by-2026/

5. https://www.ny.gov/new-york-states-minimum-wage/new-york-states-minimum-wage

6. https://dol.ny.gov/history-minimum-wage-new-york-state