Second Homes Drive Town Economy

The second or seasonal home presence in East Hampton is dominant and growing. Consultants hired by the town to study its economic picture report that 63 percent of houses in East Hampton Town belong to second-home owners who, in 2015, paid 72 percent of the property taxes.

“This nonresident population brings its spending power to East Hampton and drives demand for a variety of different products and services,” said Russell Archambault of RKG Associates, an economic, planning, and real estate consulting firm from Virginia, in a report based on the town’s businesses and economy prepared in cooperation with Lisa Liquori of Fine Arts and Science, a planning consultant and former head of the East Hampton Town Planning Department.

The economic report, prepared in conjunction with separate studies of the town’s hamlet centers, suggests that the moneymaking machine in town is powered by the second-home economy, first, and tourism second. Officials hope that the deep dive into demographics, trends, and details will prove a valuable guide to discussion and forthcoming decisions about the future of the town’s commercial areas.

The overall economy of East Hampton, according to the report, outperformed the overall Suffolk economy, with growth from 2009 through 2014 indicating a strong recovery after the 2009-2010 recession. The leading industries are largely seasonal, particularly in Montauk, creating a high demand for labor during the peak season. The report states that the “lack of affordably priced housing is a threat to the seasonal economy.”

The results of the planning process were presented at meetings here from Thursday through Saturday. A separate story on those meetings will appear in next week's paper.

The consultants looked at trends over the last 10 or 15 years, including the age, ethnicity, and household income, among other factors, of year-round as well as seasonal populations. They also analyzed prominent industries identified by town officials — agriculture, fishing, maritime business, and hospitality — and their roles in the town’s economy.

The economic studies covered every area in town, with the exclusion of those in the incorporated Village of Sag Harbor that are within East Hampton Town.

Mr. Archambault did an analysis of retail businesses in the various commercial areas, including their future potential and the extent to which they do or do not serve the town’s residents and the second-home economy. He called tourism, second-home development, and hospitality a “core industry.”

Among the sources used in the analyses were the United States Department of Commerce, the Census, the U.S. Bureau of Labor Statistics, New York State Department of Taxation and Finance, and various county and town agencies, including planning departments.

East Hampton Town had a year-round population in 2015 of 22,202 residents, Mr. Archambault said. The town has a “slow-growing, but aging population” with a “high median household income, and growing higher.”

Year-round residents, whose number has increased in recent years, are generating more demand for services and amenities, according to the report. “Meanwhile, the town is seeking strategies to sustain future economic development and at the same time to better balance the flourish of tourism activities and the improvement of quality of life for local residents.”

Though Mr. Archambault concluded that there were no reliable estimates of the seasonal population change, “using information from the county Planning Department and elsewhere regarding the number of hotel rooms, campsites, day-trippers, hotel guests, seasonal guests, and second-home owners, he calculated a peak occupancy during the high season of 73,578 people here during a single overnight period.

From 2000 to 2010 East Hampton had a slow rate of overall population growth, less than 1 percent annually, with a projected continued slowdown, except in Springs, where the population increased by 3.3 percent during the 10-year period. Between 2010 and 2015, the population grew in every hamlet except for Wainscott. Montauk and Sag Harbor Village grew faster than the other hamlets.

And all of the hamlets, except for Springs, saw the number of residents between the ages of 25 and 54 decline between 2000 and 2015. “This is likely to lead to a shrinkage of business activities that primarily serve year-round residents,” according to the report, although “significant growth” in young people under 19 in Springs may provide “opportunities for family-oriented businesses and services.”

On the other hand, the consultant said, a significant increase in people 55 and older could create increased demand for “senior-oriented social services and public amenities.”

At $88,732, the town’s median household income is slightly below the median for Suffolk County. However, the median income here increased between 2000 and 2015, by almost 20 percent. The change, says the report, may be due to an influx of high-income residents and an “outflow of low and middle-income households, rather than an improvement across all income levels.”

Approximately 4,556 of the people who work in East Hampton live in the town, Mr. Archambault found, while 4,806 commute into East Hampton to work, and 5,232 East Hampton residents leave for jobs elsewhere. Approximately 685 residents work in Manhattan, while 224 Manhattan residents work in East Hampton, according to the study.

About 26 percent of the work force is self-employed here, a higher percentage than the 19 percent countywide, creating a “freelance economy, and entrepreneurship.” The top industries throughout the town, as expected, are tied to tourism and second-home development — “retail trade, accommodation and food services, construction, administration/support, and professional services.”

“Construction industry growth has driven recent job growth,” according to the study, and “East Hampton lacks employment in high-skilled professional services.”

In Montauk, the fishing industry “maintained stable growth during the 2005 to 2014 period,” according to the report, indicating “that it is likely to continue to support the growth of Montauk’s economy.” However, the report states “the industry needs support to remain viable.” The ability to process and package fish locally, at a packing house, “could add value to the fishing industry,” the report says.

The maritime industry over all, including sportfishing, sailing, sightseeing, boat charters, and marinas, is key to the economy and “looks positive,” but is tied to the ups and downs of the tourism trade, the report says.

Agricultural production is not a significant part of the town economy, Mr. Archambault found, but could play a bigger role in the future provided “there are changes that stabilize the economics of local farming operations.” However, the town’s 1,470 acres of farmland — 67 percent of which is protected and preserved — has “intrinsic benefits” in preserving the natural landscape on which the tourism and second-home economy depends.

“The economic outlook is strong for the town’s hospitality industry,” the report says, “but challenges from beach erosion, climate change, declining water quality, and home reservations could threaten this industry in the future.” There are 83 motels, resorts, and bed-and-breakfasts in the town, providing 2,523 rooms.

Vacationers’ retail purchases in East Hampton, Mr. Archambault said, exceed those that local households demand, with high sales “closely related to the spending of tourists and seasonal residents” on food and drink, home building, maintenance items, and the like. There is unmet demand by year-round residents for certain kinds of goods, which cause many to shop elsewhere or online. Additional retail businesses could potentially be supported here, the consultant concluded.

As for residential real-estate sales, which bounced back from the last recession, the supply has been keeping up with demand, based on the consultant’s analysis. The total sales value remained relatively stable between 2014 and 2016.