Metropolis

10 Reasons New York City’s Rental Market Has Gone Haywire

A brownstone in the West Village
Don’t even think about it. Scott Heins/Getty Images

If more than 300,000 people left New York City between 2020 and 2021, as the U.S. Census Bureau announced in March, then why is it so damn hard to find an apartment right now? Those somber census estimates, which showed a population decline of 6.9 percent in Manhattan, 3-plus percent in the outer boroughs, and 0.5 percent in Staten Island, are all the more perplexing in light of the crazy testimonies you hear from people who are on the hunt. It is, the real estate reporter Bridget Read writes for Curbed, a season of “abject indignity” for the city’s renters. The median rent in Manhattan inched toward a record $4,000 in April, according to one real estate market report, and the vacancy rate plumbed new lows.

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Sky-high rents in New York City usually aren’t headline material, but all parties agree something out of the ordinary is underway. Below are 10 potential explanations for why things might have gotten so crazy.

1. Household formation

The figure that matters for determining the numerator in the city’s rental market isn’t people; it’s households. The New York City rental market is categorized by an unusual degree of cohabitation between unrelated adults, because housing here is very expensive and the housing stock is poorly matched to the city’s demographics. Those shared quarters are a rite of passage; a crucible of hustle, romance, and the arts; and a simple way to get by—but few consider them an ideal long-term setup. After a long and challenging two years (that coincided with a huge windfall for anyone who owned stocks), many New Yorkers may feel the time is right for a life change.

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This change might be motivated by people breaking up with their partners or getting fed up with their roommates, but the result is the same: a greater number of bidders for the same number of apartments. (And yes, despite the construction outside your window, it is basically the same number of apartments: New York City builds fewer new housing units per capita than almost any of its peers.)

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2. Remote work

One obvious reason New Yorkers might want more room in 2022 is that their homes have become their offices. In various surveys, the city’s business districts have among the lowest office occupancy rates of anywhere in the country. But turning vacant offices into housing is slow and expensive—turning a second bedroom into an office is faster!

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3. Pied-à-terres

Pied-à-terres have historically been a red herring in New York City housing discussions, since the total number of “seasonal” apartments makes up only a tiny fraction of the city’s housing stock (even if it may be high on parts of Park Avenue). But if you are looking to explain how so many people could officially leave New York but not create a glut of open apartments, it seems like a no-brainer that some high-income households are hanging on to their place in the city even though the census says they’ve bought a farm upstate.

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Last month, the city’s Housing and Vacancy Survey reported that 353,000 units were vacant and unavailable for rent in 2021, up from 248,000 in 2017—and that number doesn’t include apartments whose occupants were away “temporarily,” and so probably undercounts the number of new urban vacation homes. To get a sense of how that stacks up, the city has about a million unregulated rental units—so an additional 75,000 unavailable apartments would more than counterbalance any population flight.

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4. Which apartments are vacant anyway?

That same survey made headlines with the finding that 10 percent of Manhattan apartments were vacant and for rent in 2021—but almost all of those apartments were on the high end of the city’s price spectrum. And that finding, which suggests a renter’s market, is tempered by another statistic: The total citywide vacancy rate was just a point higher in 2021 than in 2017, not nearly enough to account for the census population loss figures. More recent figures from the real estate industry show plunging vacancy rates—as low as 1.5 percent in Manhattan, according to appraiser Miller Samuel Inc.

5. Destination New York

New York City is a corporate HQ but it is also, more and more, a place for consumption. It’s the capital of American arts and culture, the country’s largest dating pool, a massive tourist attraction, and by far the easiest place in the country to live without a car. It wouldn’t be surprising if for every family that vacated their high-priced apartment for a suburban school district, there were a highly paid young professional taking advantage of remote work to live in the big city at last.

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Consider this from the New York Times: “In June 2020, Zillow Group, the real estate website, announced that employees could move anywhere in the country and never return to an office. The company now has more than 300 employees living in New York City, a 15 percent increase compared with two years earlier, according to a company spokeswoman.”

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That puts a pandemic gloss on a long-standing trend in American cities: prosperous, smaller households replacing bigger families. This is a big reason that hip neighborhoods like Williamsburg, Brooklyn, or Lincoln Park, Chicago, have fewer residents now than they did at midcentury, despite new construction: The same buildings are being occupied by smaller (often childless) families. It’s another reminder that households are the all-important numerator here.

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6. COVID deals expiring

Back in the day, everyone in New York City used to move on May 1. As you might imagine, it was a total shitshow. While some seasonal trends persist, that tradition is happily obsolete. But one thing that happened beginning in the spring of 2020 was the rental market cratered, and tenants for once found themselves in a strong negotiating position. In 2022, it’s the revenge of the landlords, as pandemic deals expire and those who cashed in on once-in-a-lifetime bargains are back on the market.

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7. Outdated data

Speaking of which, the summer of 2021—when the census population estimates were taken—was a long time ago! Yankee Stadium was only letting in 11,000 fans a game. The American Museum of Natural History was a vaccination center. You needed to show your vaccine card to eat at restaurants, and wear a mask in stores and on the subway.

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The New York City Planning Department calls the census counts a “temporary, pandemic-related phenomena,” and maybe those trends have already reversed. Net permanent address change requests are now back at 2019 levels, according to an analysis by the news site the City, which suggests that the outflow has at least stabilized, if not reversed.

8. Unskew the census

What if the Census Bureau simply got it wrong? True, its projection of a New York City population drop is corroborated by other sources, like this Brookings study that shows home prices increasing faster in the suburbs than in the city, or credit file research from the Cleveland Federal Reserve, or IRS records that also show significant departures. But you don’t need to look that far back in history to find the census screwing up its population estimates: When they counted New Yorkers in the recent decennial census, it turned out their annual estimates over the previous decade had underestimated the city’s population by 550,000 people! In making its 2021 population estimates, the census relied partly on the same 2010 data that informed those faulty projections, because of COVID-related delays.

9. The 2019 rent stabilization law

In 2019, the New York state legislature strengthened its rent stabilization laws. Economists have long argued that rent control provides security for some but drives up the price of unregulated housing for others.

10. Airbnb

The perpetual villain of the New York City rental market is going to keep eating up apartments, because the city has all but banned the construction of new hotels. That turned out to be pretty shortsighted: The tourists are back, and they need somewhere to sleep. Even if it’s someplace you might have lived.

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