More cannabis, better housing market? How LI's economy might change in 2024

Modest increases in the price of food and other staples, falling interest rates, a shortage of both affordable housing and workers and uneasy consumers — all will affect how fast Long Island’s $208 billion economy grows in 2024, experts said.

Local economists predicted the region's growth rate is likely to be slow but steady as it was before the COVID-19 pandemic struck in early 2020.

They are calling for the gross domestic product — the sum of all goods and services produced in Nassau and Suffolk counties — to climb between 1.5% and 2.3% over last year. That compares with a growth rate of 2.2% between 2021 and 2022, according to the most recent data from the federal Bureau of Economic Analysis.

“On just about every dimension of the economy, we will see improvements over 2023,” predicted John A. Rizzo, an economist and Stony Brook University professor. “Inflation is largely under control, and I don’t see any signs that will change. We’ve avoided a recession,” which was the top concern this time last year.

Rizzo and others said declining interest rates will encourage people to buy houses and for homeowners to refinance their mortgage. Businesses will dust off their expansion plans now that the cost of borrowing is less.

Still, the insecurity that people feel about their immediate financial future is a concern because consumer spending accounts for about 70% of economic activity.

“The economy is pretty good, but most people don’t seem to believe it,” said economist Richard Vogel, dean of Farmingdale State College’s business school. “Consumer spending was strong around the holidays but there is this economic malaise that could affect spending in the new year.” — James T. Madore

Wind energy

Long Island began receiving its first power from offshore wind in 2023 — starting with a single turbine from the South Fork Wind Farm some 35 miles east of Montauk Point on Nov 30. By next month, the full 12-turbine, 130-megawatt array is expected to be producing enough to power some 70,000 homes on the East End and beyond and costing average customers around $1.30 a month. The first utility-scale project in federal waters (an earlier five-turbine array for Block Island is in state waters), the South Fork project marked an important step in the state’s plan for a completely green-energy grid by 2040.

But the picture for offshore wind for Long Island, the state and the United States took several unexpected turns in 2023, most stemming from increased prices for turbine materials, product shortages and higher interest rates. In response, developers including Orsted and Equinor asked New York State to increase the amount of money they’d receive for their already-awarded power contracts to help cover some of those higher costs. The state Public Service Commission rejected the request, but the state recently reinstituted an expedited rebidding process for their projects, Sunrise Wind and Empire Wind in an effort to respond to their need for a higher “strike price” for energy.

Despite challenges, New York state and the federal government are pushing forward with offshore wind, which is slated to be the primary energy source to replace fossil-fuel generating plants by 2035. The state is still optimistic that it can have at least 9,000 megawatts powering the state by that time. The South Fork Wind Farm, which is contracted to the Long Island Power Authority grid, is the first in federal waters, and a critical milestone in the plan to decarbonize the grid. — Mark Harrington

Labor and employment

In 2023, the country saw a banner year of labor activity in several industries, ranging from the successful contract negotiation by Teamster-represented UPS workers, to the months-long strike by Hollywood writers and actors, to ongoing struggles of unionized Starbucks workers.

That momentum will continue into the new year as workers, particularly younger Americans, see union victories and dissatisfaction at their own jobs, said Mary Anne Trasciatti, director of labor studies at Hofstra University.

“Labor organizing and labor activism tends to happen in waves,” she said. “It’s kind of a carpe diem moment for labor. I think we’re going to see workers demanding more from employers and see other workers do that and get more as a result.”

Locally, too, workers on Long Island, in New York City and Westchester will see the state's minimum wage increase to $16 on Jan. 1. 

 And a new rule from the National Labor Relations Board will offer more protections for some contract workers, and more potential liability for some employers.

Under the rule, set to go into effect Feb. 26, an employer can be considered a “joint employer” if  it hires contract employees from a third party including a staffing agency, if they meet certain criteria — and both the employer and agencycan be held liable for unfair labor practices. 

“If that staffing agency wasn’t paying its employees properly, the company that reached out to the agency is on the hook for that, potentially,” said employment attorney Nicholas Melito with Meltzer, Lippe, Goldstein & Breitstone in Mineola.

The rule can also apply to franchisers and franchisees. — Victor Ocasio

Home sales

Long Island home prices reached records in 2023, even as mortgage rates at one point climbed to their highest level since 2000.

Next year, with interest rates expected to drop, real estate watchers anticipate moderately higher prices because there will still be too few homes available for sale.

The Federal Reserve signaled in December that it is done raising its key interest rate and expects to cut the benchmark three times in 2024. The Fed’s looser outlook helped bring mortgage rates back below 7% at the end of the year. A rule of thumb in real estate is that as interest rates fall, prices rise.

Jonathan Miller, CEO of Manhattan appraisal firm Miller Samuel, expects that to be the case on Long Island, predicting a percentage increase in the median home price in the “mid-single digits.” He expects 2024 to be a year of incremental change, with more properties coming to market but in a trickle, not a surge.

“There’s not an ‘aha’ moment where inventory will flood in and prices will drop,” Miller said. Inventory “will still be inadequate. Bidding wars will still be a thing.”

Deirdre O’Connell, CEO of Daniel Gale Sotheby’s International Realty in Cold Spring Harbor, said she believes homeowners who put off moving for financial reasons will be more motivated to list next year. Higher mortgage rates had given homeowners with low-rate home loans little motivation to move. 

“We need more homes to sell,” O’Connell said. “We have this solid buyer pool, and they just don’t have enough to choose from. As interest rates continue to settle, I think we’re going to see some of the sellers who have stayed put ‘just because’ move on with their lives.” — Jonathan LaMantia

Apartments

Historically, a limited supply of apartments has led to high rents on Long Island.

But recent development — and more in the pipeline — is expected to keep rent hikes in check next year and keep vacancy rates — now at 5.2% — elevated, according to CoStar, an analytics firm that focuses on larger landlords, not homeowners who rent out space.

The new supply has tempered the annual rate of rent growth, which CoStar says is relatively low, but will start climbing and hit about 3% by mid-2024. The average rent on Long Island is now $2,794 and may reach $2,895 by the end of 2024, CoStar said.

“Rents are expected to continue only inching upward,” said Victor Rodriguez, the firm’s senior market analyst.

Eric Alexander, executive director of Vision Long Island, a downtown planning organization,  estimated there are about 10,000 apartments in the middle of the planning process, with development underway in Baldwin, Central Islip, Glen Cove, Hicksville, Melville, Port Jefferson, Riverhead and Westbury.

“If we can get more projects constructed, if the banks lend, and we get more multifamily units in, that would stabilize rents,” he said. “We can’t anticipate rents going down, but if there are more units in the market available, that generally stabilizes [rents in] older units.” — Sarina Trangle and Jonathan LaMantia

Health care

The region’s aging population will propel the health care industry, which is expected to grow while also consolidating, economists said.

Several hospital systems are undertaking multimillion dollar additions, including Northwell’s $560 million surgical pavilion at North Shore University Hospital and Catholic Health’s $500 million addition at Good Samaritan Hospital.

NYU Langone is working toward a full merger with Long Island Community Hospital in Patchogue, and Long Islanders should expect to see other smaller, independent medical facilities get scooped up by provider networks.

There’s no consensus on how consolidation impacts pricing, according to John A. Rizzo, a professor in the public health program at Stony Brook Medicine. Larger groups may pass off savings achieved by negotiating better prices with suppliers and streamlining operations. However, they also may not feel pressure to keep prices competitive when they have such a large market share, he said.

That said, people should expect health and insurance costs to rise.

Hospitals are fiscally stressed: they’ve been paying more for contract workers and to attract talent while taking in less from elective procedures, which fell during the pandemic and have since shifted to outpatient settings, according to Wendy Darwell, president and CEO of the Suburban Hospital Alliance of New York State, a trade group.

Inflation has also impacted the sector.

“As physician and hospital costs go up, that means insurers’ costs go up, and that is going to get passed on, to some extent, to the patient,” Rizzo said. “You’re not going to have major changes, and certainly no declines, in the cost of health care.”— Sarina Trangle

Retail

Americans remaining cautious about the economy will continue to slow their spending on goods in 2024, economic experts said.

“You can see the weakness in specific areas like apparel, department stores, home improvement, home furnishings. And this has been the dynamic for quite a while now,” said Sarah Wyeth, sector lead of Consumer & Retail at S&P Global Ratings in Manhattan.

But consumers have been spending more on experiences, such as dining out, traveling and seeing movies in theaters, which are activities that were curtailed or eliminated during the pandemic, experts said.

“We’re going to continue to see some return of service spending at the expense of goods spending,” said Scott Hoyt, senior director of consumer economics at Moody’s Analytics, a Manhattan-based economic research provider.

Grocery price inflation has fallen since 2022, when it hit highs not seen in more than four decades, but it is still inflated over pre-pandemic rates.

Grocery price inflation in 2022 peaked in August, at 13.5%, Hoyt said. In November 2023 it was 1.7%.

“For perspective, in the five years leading up to the pandemic … grocery store inflation by this measure averaged 0.2% per year,” Hoyt said.

So, consumers, even those in the middle- and upper-middle classes, are trading down to cheaper products, leading to increased sales of supermarkets’ private-label, or generic, goods, said Jeff Metzger, publisher of Food Trade News, a Columbia, Maryland-based publication.

On Long Island, the high cost of living is spurring more consumers to seek savings on food, which is helping to fuel the growth of discount grocers.

German discount grocer Aldi will open three more stores on Long Island in 2024 — in East Northport, Medford and Central Islip. —Tory N. Parrish

Cannabis

Zoning restrictions will limit the rollout of recreational pot shops on Long Island.

At least two dispensaries are slated to open in Farmingdale, which has the only state licensed brick-and-mortar recreational shop on the Island, Strain Stars, according to Hugo Rivas Jr., co-founder of the industry trade group, Long Island Cannabis Coalition. Little Beach Harvest, a dispensary licensed by Shinnecock Indian Nation, is open in Southampton.

But regulators are expected to issue hundreds more retail licenses in 2024, and authorized vendors already outnumber storefronts that can be used by dispensaries under local zoning rules, Rivas said.

His group is pushing towns that allow dispensaries to loosen their restrictions, and other localities to permit pot shops.

“We’re going to be working with a lot of towns,” Rivas said. “We’re trying to help out in every way .. to get the industry to come to fruition on Long Island.”

Riverhead’s Business Advisory Committee is exploring potential adjustments to its zoning code. The town of Babylon is proposing reducing the distance requirement from retail pot shops to residences from a radius of 1,000 feet to 750 feet, opening up dozens more potential sites for dispensaries. Officials say this would provide a balance between allowing more sites for marijuana sales and keeping homeowners happy.

It’s unclear whether these towns and other will enact zoning changes. 

— Tara Smith, Carl MacGowan, Joe Werkmeister, Denise Bonilla and Sarina Trangle