So many New Yorkers have left the city that rents could keep stay wildly cheap for the rest of the year
- Rents in New York declined at the fastest annual rate on record in January, according to StreetEasy.
- In Manhattan, the median rent fell 15.5%. In Brooklyn and Queens, it fell 8.6%.
- Two experts weighed in on how long New York rents may stay this low.
- Visit the Business section of Insider for more stories.
For once, Big Apple housing prices aren’t so big.
Rents in New York City fell in January at the fastest annual rate on record.
According to a report by StreetEasy, median rent dropped 15.5% year over year in Manhattan to $2,750. In Brooklyn and Queens, median rent dipped 8.6% to $2,395 and $2,000, respectfully.
The main culprit is the number of apartments on the market, left vacant by New Yorkers who moved to other parts of the city, the suburbs, or even out of the state.
StreetEasy found that in January, inventory in Manhattan was up 124%, with 32,845 empty units, compared with a year ago. In Brooklyn, it rose 114% to 20,076 empty units, while Queens recorded an 83% increase to 7,635 empty units.
And though more residents are coming back to the city and signing leases since the hardest-hit period in spring 2020, they are not filling all the empty apartments. Landlords are desperate to fill them — so they are dropping rents dramatically to do so.
“Even though demand has relatively risen since the pandemic first started, we’re still seeing that there’s been relatively more supply on the market,” Nancy Wu, a StreetEasy economist, told Insider.
Rents are so low, in fact, that millennial New Yorkers are ditching basements and roommates for luxury apartments at $1,000-plus discounts, as Insider’s Hillary Hoffower reported this month.
“Asking prices and monthly rents are coming down quickly, which means that landlords and sellers are finally facing reality. With inventory levels as high they are, there’s currently no end in sight when it comes to falling NYC real estate prices — good news for buyers and renters hoping to secure a good deal this year,” the StreetEasy report said.
Rents will continue to fall until 2022
Wu said she didn’t see rents bouncing back anytime in 2021.
“Rent will continue to be lower than they were a year ago for the full year,” she said. “Even with the vaccine coming, it’s not going to magically make the huge glut of inventory go away. Prices will continue to fall until the inventory settles a bit, more people come back to the city, more jobs are recreated from the loss of small businesses, and the city returns, somewhat, back to where it was before the pandemic started.”
There is a possibility that rents could begin to bounce back in 2022, Wu said, something renters should keep in mind while they source out deals over the course of the year.
Because of the high vacancy rates, landlords are offering very attractive leases with concessions, like free months of rent, that would have been unheard of a year ago, Stefani Berkin, a real-estate broker and the president of the brokerage R New York, told Insider. But once the city bounces back, those rental prices will likely go back to market value, leaving renters with limited options: try to negotiate a lower price, pay the higher rent, or move out.
Renters are “getting very expensive apartments for a much more affordable monthly rent because they’re signing a 12- or 18-month lease with three or four months free,” she said. But when the lease comes up for renewal, she added, “you don’t want the management company and/or the landlord to turn around and say, ‘OK, in order for you to renew, we are bringing it right back up to market rate’ — which would be a very steep jump.”
One way to prevent that from happening, Berkin said, is to work with a broker to design a structured lease that, if the tenant decides to renew, will lay out the rent price for the next two to three years.
Recently, she said, one of her clients signed a lease for a $5,250 one-bedroom apartment on the Upper East Side that would have rented for about $7,000 last year. The deal was structured so that even if the market bounced back, and the client decided to renew next year, the rent would be $5,500, and then $5,750 the year after that. That negotiation prevents the landlord from raising rents dramatically to market levels when NYC’s housing market recovers.
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