It’s no secret that New York is expensive AF. I mean, you order coffee at a local coffee shop and it could cost you over $30.00 for two lattes and a croissant.
But, you may be wondering why is New York so expensive? I know I have. Every time I pay rent I die a little inside and wonder why I have to spend so much to live here.
Well, I am about to reveal the inside scoop on why New York City is so expensive.
After all, stats show that the cost of living in New York City is 121% HIGHER than the national average.
So, I guess if you can make it here, you really can make it anywhere.
However, let’s examine the main reasons why NYC is so expensive.
This post may contain affiliate links. Please see my disclosure for more information. As an Amazon Associate, I earn a small commission from qualifying purchases.
Why is NYC So Expensive?
- Big Population
- High Demand For Housing
- High Paying Jobs
- Booming Economy
- Presence of Large Corporations
- World-Class Entertainment and Nightlife
- Popular Travel Destination
- High Construction Costs
- State Taxes
- Public Services
- Limited Parking
1. Big Population
One reason why New York is so expensive is that it has a large population that is densely packed into a relatively small area.
In fact, NYC is the most populous city in the country, with around 8 million people calling this place home.
These people are jammed into a 300-square-mile area and this creates high competition for food, housing, and land. So, prices soar ever upwards as more and more people need these services.
2. Big Salaries
One of the many reasons why people want to live in and around NYC are high salaries.
I mean, become a stock broker on Wall Street and you could be making 6+ figures within the first year.
This is mainly because NYC is the financial capital of the country. So, you have a lot of healthcare, banking, and real estate companies setting up companies here.
These large-scale businesses are willing to pay BIG salaries to anyone working for them.
The result? Locals have more money to spend on housing and goods, which jacks up prices.
3. Big Demand for Housing
Ugh, the struggle to find a good place to live is real. I frequently live in and outside the city and know all too well that the demand for apartments is high, especially in Manhattan and Brooklyn.
Now, because so many people want to live here, the price of rent only increases since there are only so many places to live.
This, therefore, increases the price of hotel rooms and apartments in the area. I pay around $1800.00 per month for a room in Hamilton Heights (Above 130th Street).
FYI, this is not a private apartment. So, I share the bathroom and kitchen with three other tenants.
So, yeah, one of the cons of living in NYC is that it’s super expensive.
4. Economic Boom
New York City’s vibrant economy makes it a magnet for companies and innovators from across the globe.
They are drawn to the city because of its dynamic cultural scene and the rapid exchange of ideas.
Plus, with a gross metropolitan product exceeding $2 trillion annually, the city’s economy is one of the biggest in the world.
This prosperity comes at a cost, as the influx of businesses and entrepreneurs leads to an increase in living expenses.
5. Popular Travel Destination
However, all that tourists means an increase in prices since visitors are often willing to spend a lot more money on lodging and cool things to do in New York City.
6. Lots of Large Companies with Headquarters Here
New York City is the corporate base for 53+ Fortune 500 companies. However, many other mega companies have a significant presence in this city.
Now, the financial influence of these gigantic corporations, allows them to acquire premium properties, thereby exponentially increasing the prices of various local commodities.
Yeah, we locals just don’t have the capital to compete with these mammoth companies and pay higher prices as a result.
7. Lots of World-Class Entertainment and Nightlife
New York City stands as more than a hub for businesses; it’s a vibrant center for the arts and entertainment.
It’s also home to bustling nightlife that includes the bright lights of Broadway and cheers for the Knicks that can be heard at Madison Square Garden.
The city is even home to 73 different restaurants with Michelin stars, making these epic places you must eat in New York City.
Additionally, there are over 25,000 venues where you can enjoy the best nightlife the city has to offer and even celebrate your birthday in NYC.
Yet, indulging in this endless array of entertainment, particularly in places like Manhattan, often requires a hefty financial investment from locals and visitors alike.
8. High Construction Costs
Hire anyone to do anything in NYC and it is stupid expensive. I had to call a plumber once and it cost me OVER $200 an hour.
So, I can’t even begin to understand how expensive it would be to build an entire building.
But, if you’re wondering why New York is so expensive, this is why. It costs a boatload of money to build anything in this city.
So, businesses need to recoup their loses and make a profit by charging consumers higher prices on everything from goods and services to leases.
9. Taxes Taxes Taxes
Anyone living here knows that taxes are stupid expensive. In fact, I started an LLC in New York and it cost me OVER $500.00.
Yeah, people in many other states can start up an LLC for as little as $50.00. Add in high sales taxes and income taxes and you can understand why people have to pay such high prices in NYC.
It’s also worth noting that NYC has its own income and sales taxes that are even HIGHER than those in the rest of the state.
So, better start looking up budget activities in NYC now!
10. Lots of Public Services
One reason why taxes are so high in New York City is that there is a wide array of public services available to residents.
See, the city offers a lot of well-run services like sanitation, maintenance of green spaces, law enforcement, traffic regulation, public transportation, and more.
But, to operate all of these services it costs a lot of money. So, people pay more money in taxes so that the government can keep things like the subway running.
11. No Parking
Finding parking in NYC is like trying to ride a unicorn…it’ll never happen. That’s why I always tell people NOT to bring a car into the city.
See, street parking is hard to come by and parking rules can be super complex. Additionally, if you want to park in a garage you could easily end up spending over $20.00 an hour.
So, if you have a car in NYC then this is yet another reason why it is so dang expensive.
If you’re living in New York City then you know how expensive public transportation is. As of right now, it’s $2.90 per ride to use public transportation.
Thankfully, if you tap with the same credit card, you only have to spend $34.00 per week on public transportation.
However, commuting expenses are still a major part of the household budget, especially since train tickets can often cost $15.00+ round trip.
Go to the grocery store and you’ll quickly understand why NYC is so expensive. I went to C-Town the other day and saw Siracha on sale for $6.00. Yeah, I almost choked.
But, it gets worse if you go to local restaurants. Eating at a DINER for brunch in New York City regularly costs $25.00 per person.
Or, if you opt for a bit of fast food from the Halal Guys you could end up paying $15.00+ per person for a Falafel platter.
Thankfully, portions in NYC are huge. So, you usually can take leftovers home with you for the next day.
Anyone living in the US knows how unaffordable health care is. I was hospitalized in New York for a double kidney infection one time and got charged $800.00 for an aspirin.
Eventually, the medical bills for a week stay in the hospital would cost me over $30,000, with no surgeries…in 2011.
But, it’s worse in New York City. Yes, we have some of the best hospitals in the world. But, all that high-quality healthcare comes at a cost.
So, without insurance (which is already upwards of $500.00 per person per month), New Yorkers will have to pay thousands of dollars for routine medical visits and/or hospitalizations.
Even for insured individuals, healthcare costs remain high due to deductibles, copays, and exclusions on specific treatments/medications.
New York City has a comprehensive public education system. However, due to the poor quality of some public schools, many families choose to invest in private/faith-based schools.
This comes with a high price tag since tuition for private schools starts at a few thousand dollars a year and can exceed $50,000 annually.
Furthermore, families usually have to pay additional money for school supplies, uniforms, and more.
Additionally, if you decide to attend classes at world-famous universities like NYU and Columbia, you can expect to spend over $80,000 a year on tuition, course materials, housing, meals, etc.
Local Tip: The high cost of education applies to public schools too since better schools mean higher taxes. This was the case for me and my family when we lived in Scarsdale, NY.
16. Energy Costs
NYC residents have to spend a lot of money on energy costs. After all, NYC in the summer is incredibly hot and humid.
So, the cost of running an AC unit or central air can get really high. The same goes for heating expenses in New York City during the winter since it can get quite cold.
This is especially true since city taxes on electricity are some of the highest in the nation.
Add to this a dense population that uses obsolete infrastructure and you have exceptionally high energy costs that are one of the many reasons why NYC is so expensive.
The cost of other utilities is also rising monthly, including water charges and gas rates.
Regulations are insane in NYC and often contribute to the high cost of living.
After all, an intricate tapestry of regulations impacts every aspect of life in NYC, from construction to zoning to employment.
These layers of bureaucracy can inflate operational and residential costs.
For instance, the city’s stringent building and zoning codes impose challenges and financial burdens on new developments.
This increases the cost of construction and the cost to the consumer since developers have to pay a lot of money to skilled laborers if they want to adhere to strict regulations.
Additionally, rigorous worker protection laws, including minimum wage requirements and compulsory paid sick leave, can increase costs to employers too.
Why is New York So Expensive FAQs
Is New York City overpriced?
Yes, New York City is VERY overpriced. Recent reports show that the cost of living in Manhattan is 122% more than the average cost of living in the USA.
In fact, the cost of living in Manhattan is 24% higher than in Honolulu and 31% higher than in San Francisco, which is the second and third most expensive city in the country.
What Kind of Salary Do You Need to Live in NYC?
To live in New York City you need a salary of around $70,000 per year per person. This way you will earn around $6,250 per month and can afford to spend $4,299 per month to live here.
When Did NYC Become so Expensive?
NYC became super expensive in the 1990s when it became a much safer place to live.
Because of this, rising incomes, and lower interest rates, housing prices rose.
However, a limited supply of apartments could not meet demand and prices only rose.
How do People Afford to Live in NYC?
Many people in NYC have roommates to help reduce the cost of rent. So, if you’re planning to solo travel through NYC then consider sharing a space with someone during your visit.
Have a look at my guide to backpacking around NYC if you want to learn how to save money like a local.