‘Screw this city’: There’s never been a worse time to rent an apartment in NYC

23 August 2022 - 12:36 By Jennifer Epstein and Paulina Cachero
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With post-pandemic demand sending New York rents to record highs, and vacancies near new lows, the typically tough task of finding an apartment towards the end of summer is becoming all the more fraught.
With post-pandemic demand sending New York rents to record highs, and vacancies near new lows, the typically tough task of finding an apartment towards the end of summer is becoming all the more fraught.
Image: 123RF/ scanrail

It’s the peak rental season in New York — and in the hottest market in decades, apartment hunters are fed up, frustrated and over budget.  

Open houses have been drawing hundreds of people and then going viral on TikTok. Some prospective tenants are applying sight unseen for multiple units that seem good enough, hoping that one landlord chooses them. Apartments are often renting for hundreds of dollars over their asking prices, which already were well above what they’d ever leased at before.

“I was like, ‘Screw this city,’” said Kelly Stamps, 26, who braved overrun showings for half a year before finally locking down a $3,495-a-month studio on the Upper east Side in June. “I was crying over an apartment and considering moving to Boston.” 

With post-pandemic demand sending New York rents to record highs, and vacancies near new lows, the typically tough task of finding an apartment towards the end of summer is becoming all the more fraught. July and August are traditionally the busiest and most-expensive months for rentals, according to appraiser Miller Samuel Inc. and brokerage Douglas Elliman Real Estate, as people look to move before schools start and professional obligations ramp up in September.

Bidding wars and record prices are leaving renters frustrated and without many options.
Bidding wars and record prices are leaving renters frustrated and without many options.
Image: Bloomberg

“It’s so intense. I’ve never seen anything like this before,” Compass Inc. associate broker Kimberly Jay said of the “frenzy” that she’s only seen get wilder over the past several weeks. She has been working in residential real estate for more than a decade.

The vacancy rate in Manhattan has hovered around 2% throughout 2022 and in July, the borough’s median net effective rent, which takes into account landlord incentives, was a record $4,100, up about a third from a year earlier, according to Miller Samuel and Douglas Elliman. Bidding wars, once rare for rentals, have happened for roughly one in five Manhattan leases signed this year. In July, winning offers were an average of almost 13% above the listing price.

The fallout from the pandemic market has pushed demand ever upward, from luxury Manhattan apartments to homes in the outer stretches of Brooklyn and Queens. Some renters are moving to the city after riding out Covid-19 lockdowns elsewhere, others are facing staggering rent hikes to renew apartments they secured at bargain prices, while still others are choosing renting over buying after a rapid surge in mortgage rates this year. 

Those factors have “made a difficult market even more challenging,” said Jonathan Miller, president of Miller Samuel.

He expects rents will plateau around this month’s levels but not drop unless there’s a shock to the system, such as a recession that comes with significant job losses.

See also:  The Snowballing US Rent Crisis Is Sparing No City or Income Bracket There have been some signs of a slight cool-down recently, which indicates people may be choosing to delay moves to New York or staying with family, said Hal Gavzie, executive vice-president of residential leasing at Douglas Elliman. 

“During June and July, we were just seeing an overwhelming amount of inquiries, calls, demand for every new listing,” he said. “And now it’s a noticeable decrease, but still very busy.”

Regardless, a small drop in demand isn’t likely to lead to a noticeable decline in rental rates, he said, since inventory is still low.

For renters, that means competition remains fierce.

Elena Milan, 26, hunted for a one-bedroom or studio in the $2,500 price range for more than six months. She submitted an application for at least six apartments, only to lose to people willing to pay more. “People are so desperate that they’re offering as much as $400 more each month to be the first on the list of applicants,” Milan said. She eventually landed an apartment, but only after she found a friend to live with to expand their search.

Douglas Elliman agent Max Kotler said he had a client who lost out on a Greenwich Village apartment listed at $8,500 in monthly rent. The accepted offer was around $13,000. “People are doing whatever it takes” to get rentals, Kotler said, adding that he eventually helped his client lock in a lease. 

Landlords, who in many cases had to be flexible during the pandemic, can now name their own terms, pushing the limits of what they can charge for both new tenants and lease renewals. They’re eager to make up for losses they experienced in 2020 and 2021 — and not minding any profits they can stockpile as a possible recession looms.

Developers are leasing their new buildings faster than anticipated. At Sven, a luxury tower in Queens’s Long Island City, 61% of the 670 market-rate units have been rented. The process got off to a rocky start when the Covid-19 omicron variant emerged just as leasing started late last year, but as the market heated up, so did the interest in the 71-story Durst Organization building, which is now filling 70 to 80 apartments each month.

Across Durst’s New York luxury portfolio, the July renewal rate was about 75%, better than the 60% to 65% that’s generally the industry standard for similar rentals, said Dan Mogolesko, the company’s senior vice-president of residential leasing and compliance. That’s even with substantial rent hikes, especially for renters who negotiated deep pandemic discounts.

“When we provide them the renewal offer, they of course have a reaction which is not very favourable,” Mogolesko said. “But then they’ll also look around at the market and see that, hey, we’re actually competitive with the market, or this is what the rest of the market’s doing in this price range” and decide to stay.

Scott Gunzenberger, 30, left New York entirely because of a rent increase at his Upper West Side one-bedroom. He and his now-fiancé snagged a pandemic deal in late 2020 that worked out to $3,075 a month for the apartment. But when it came time to renew earlier this year, their landlord offered them a lease at $6,000 a month. Aware of the tough city landscape, they headed to the New Jersey suburbs. 

“It was absolute absurdity,” he said. “I understand there’s a market for it, but it doesn’t seem to be worth it when that’s how much a monthly mortgage could be.” 

Those who stay have to make tough choices. 

After losing out on several apartments, Stamps, the renter who contemplated moving to Boston, bumped up her budget by as much as $800 a month to $3,500, but even then she struggled to secure a place. The studio she found on the Upper east Side was far from perfect, but after six months of competing, she felt she should sign the lease so it “wouldn’t go to waste.”  

Now, she is filled with regret. The supposed luxury building has no superintendent or staff to take out the trash, and her 450-square-foot studio is a far cry from the 1,700-square-foot condo she used to rent in Dallas for $3,285 a month. 

“It feels like every day in this apartment is a compromise,” she said. 

More stories like this are available on bloomberg.com

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