When the who’s who of New York real estate convenes tonight for the 110th annual banquet of the Real Estate Board of New York, they will have a lot to celebrate. New York’s real estate market, for all the problems it still faces, is booming. Earlier this week, the city’s Department of Finance released data showing that the estimated market value of all real estate in the city grew by 9% last year, as the Sun’s David Lombino reported yesterday. That increase comes on the heels of a 14% increase the previous year and a 16% spurt the year before that. By late 2005, the city was on track to issue a record number of permits for all types of construction. Not since the 1960s and 1920s has the city witnessed a boom of this sort.

Not only that, but the dynamics of the real estate market are changing, and that’s changing the city, especially in respect of residential property. As we first noted in our October editorial, “New York’s New Electorate,” the percentage of New Yorkers who own their own homes has been increasing steadily for more than a decade, to 32.4% in 2002, the latest year for which data are available, from 27.7% in 1999. Look for that number to increase yet again when data for 2005 are released later this spring. Following rent reform in 1997, more New Yorkers are also paying market rates for their apartments.

These changes are leading voters – and thus politicians – to focus more on good government, even if there’s still room for improvement sometimes at City Hall. Anthony Weiner figured that out and came within a hair’s breadth of winning the Democratic primary in last year’s mayoral race by appealing to the sensibilities of the ownership- and market-rate-renting classes.

Many factors have contributed to the current real estate boom. In 1996, Albany repealed the so-called Cuomo Tax, which had been on the books for 15 years imposing a 10% levy on real estate transactions worth more than $1 million. Almost immediately, the repeal was sparking tremendous activity in a market that had suffered under the tax’s distortions for too long. The precipitous fall in crime rates begun during the Giuliani administration has helped by making the city more livable, in all boroughs. Neighborhoods have been improving – and real estate values increasing – across the city, in neighborhoods no one would have expected a decade ago. The zoning process has become more predictable and easier to navigate, and Mayor Bloomberg is in the middle of a drive to make the city’s notoriously complex building code more comprehensible and less costly.

No boom goes on forever (watch the warning in price of gold, we say). And some problems still bedevil New York’s real estate market. Despite a record building push, residential units are still in short supply after years of anemic construction. Even as the number of available units has increased dramatically since 1980, the vacancy rate has been falling, a sign that the market still harbors a lot of pent-up demand that drives up prices. The building boom will only be partial comfort to apartment hunters, since all the new construction is offset by a dramatic increase in the number of demolitions of old, outdated units.

Zoning work also remains to be done, particularly in converting industrial land to residential use to reflect the land-use needs of today’s New York. And the building code transformation will remain incomplete until the City Council acts on the next round of improvements this year. Despite these spots of peeling paint, however, the city’s “house” is in good shape. Members of the Real Estate Board aren’t the only New Yorkers with cause to celebrate the market.