So the real issue is how many apartments are being left vacant by the owners, or only used rarely by the owners.
Which now looks pretty much like this: "In a large swath of the East Side bounded by Fifth and Park Avenues and East 49th and 70th Streets, about 30 percent of the more than 5,000 apartments are routinely vacant more than 10 months a year because their owners or renters have permanent homes elsewhere, according to the Census Bureau’s latest American Community Survey."
http://www.nytimes.com/2011/07/07/nyregion/more-apartments-a...
Per the article, 5% of Manhattan apartments now have absentee owners who don't rent them out. And below 96th street that figure probably doubles.
There are about as many seasonal or occasional use residential units as there are rent controlled units ~40k. That's out of more than 3.3 million residential units.
Just as articles about rent regulation usually focus on a rent controlled apartment, rather than the far more numerous rent stablized (~1 million) because they make for better stories, so too do empty floor is luxury building on fifth avenue.
But I fail to see much relevance to the larger housing market. Particularly as it relates to the type of working class people this article talks about.
It's definitely relevant to the overall housing market, because while 20 years ago the bankers and lawyers would have rented or purchased on the Upper East Side or Upper West Side, they're now (often) priced out and buying places in Brooklyn and the Bronx. 15 years ago I used to see a working class neighborhoods when I walked around on the far side of the river in Brooklyn, LIC or even Hoboken/Jersey City; now there are multi-million-dollar apartments there.
Any time you hear investment bankers talking about how they can't afford a 2-bedroom in Manhattan, something's gone seriously out of whack with the real estate market.
While the knock on effect you mention could have a legitimate effect, with only 1% of the apartments affected it's hard to believe it's terribly significant. Particularly since at the stratospheric levels we are talking about (high level bankers and lawyers) the substitutes for UES/UWS spreads include Long Island and Westchester rather than just other parts of the city.
Queens & Brooklyn dwarf Manhattan in size. Queens has only one or one and half neighborhoods with Manhattan exiles and even though Brooklyn has more, the non-trendy ares are still much larger.
This whole perception of a crisis is fomented by young, hip, creatives who think they have a good given right to live in the West Village. There's still plenty of safe, affordable rentals in places like Flatbush, Kew Gardens, Pelham Bay, and so forth.