NYC Rents Have Dropped in the Last Year

According to StreetEasy, the average price of an apartment at the Enclave at the Cathedral, a luxury building in Morningside Heights, is $3,557.
The Enclave at the Cathedral, a luxury building that opened in Morningside Heights in 2016, offered one month free to renters who signed last fall.  (The Ink/Olivia Chang)

When Mandy Velez, 25, was apartment hunting last fall, she was looking on the Upper East Side in neighborhoods far enough north that she and her roommates could afford.

“I’d always lived uptown and had to travel a little more than everyone else,” she said, noting that she’d found that rents were higher in more central neighborhoods such as Midtown and Hell’s Kitchen.

She hadn’t seriously considered the Financial District, because she assumed rents would be beyond her budget. But when she and her two roommates came across a listing for a $3,400 two-bedroom apartment on Gold Street that could be converted into a three-bedroom, it seemed like the perfect fit, especially because it was only a ten-minute walk from her roommates’ Time Inc. offices at One World Trade.

“It was a good amount of space, the right amount of rooms and the right price,” said Velez. That coupled with a discounted flex wall and waived fees were all the incentives she needed. She and her roommates moved in last October.

Velez isn’t the only renter enjoying lower than usual prices. New York City apartment rents are down, according to a February earnings release from Toll Brothers, a luxury real estate developer. Since January 2016, Manhattan and Brooklyn prices are down 3.4 percent and 1.5 percent respectively, according to the report.

Gabby Warshawer, director of research at CityRealty, a small New York real estate company, said the reason for the trend is a surplus of new apartments on the market. “It’s rooted in basic supply and demand,” she said. “There’s more supply than demand.”

A wave of building has contributed to the supply. Since January 2016, Manhattan apartment inventory rose almost 14 percent, according to the Toll Brothers report, while Brooklyn supply rose nearly 25 percent. The new buildings have brought thousands of new apartments and condos to the market, raising vacancy rates and giving apartment seekers more options.

“Renters are in a much better place than they have been, but it’s still not cheap,” Warshawer said. The price drop, however, has not done much to alleviate the city’s high demand for affordable housing as most of the rent drops are in buildings charging rates at the higher end of the market.

According to a recent rental report by Douglas Elliman, a residential real estate brokerage in the New York City area, the median rent in Manhattan was $3,369 in January, not including concessions like a month of free rent or a waived security deposit. Such benefits are becoming more common to attract renters, with more than 30 percent of city leases offering concessions, according to the same report.

“I think it’s a combination of rents being pushed to a certain point, and tenants are pushing back,” said Hal Grazie, director of leasing at Douglas Elliman.

Columbia University senior Jennifer Petrovich, 21, is one such tenant.

After taking a semester off and learning she was ineligible to apply for student housing, Petrovich began searching at the last minute for an apartment in Morningside Heights near campus. She was looking for an apartment that offered both a good value and certain amenities.

“I really wanted floor-to-ceiling windows, just for more light, but essentially for more bang for your buck,” she said, adding she was “rejecting a bit more of the hole in the wall, closet places.”

Petrovich found what she was looking for in a luxury building, where concessions are especially common. When she signed a Sept. 1 lease on a studio at the Enclave at the Cathedral, her 13th month was free. Other perks include an on-site gym, a concierge, a rooftop, a doorman, theater room and study rooms. Although she declined to say how much she paid in rent, a concierge at the Enclave said studios in the building typically go for $3,200.

Several city realtors said that landlords like concessions because they can write the discounts off on their taxes. Concessions also allow landlords to maintain higher rents and then negotiate renewals at higher prices. And if landlords simply lowered rents rather than offer concessions, banks might inaccurately assume a building decreased in value.

The concessions also help landlords avoid high vacancy rates. “They don’t want to be losing money with vacant apartments,” said Mike Jeneralczuk, CEO of Undorm, a brokerage that caters to students. “Sometimes with first-time renters, they’ll give you some crazy incentives just so they have people in the building.”

Some speculate the softening market could mean it’s headed for a crash, but there may be an upside to the ease in rental prices, said Warshawer.

“In some ways it can be viewed as a healthy thing for the market because prices were at record highs,” she said.

Grazie of Douglas Elliman said he’s not exactly sure when this trend will end, but he expects concessions to go down in April, when more people move and landlords have less reason to offer enticements.

If prices continue to go down, developers may choose to sell apartments, rather than rent them.

“Based on market conditions like these, a typical game time decision for developers is to make a last-minute construction switch from rentals to condos,” Stephanie Bazbaz, a project manager at Bazbaz Development, said in an email.

Although renting in the city is becoming less expensive, buying has gotten more costly. A recent Douglas Elliman report found that the median sales price for coop and condo apartments in Manhattan has risen 27.9 percent since 2007.