Despite a deadly pandemic raging, turmoil in the financial markets, and staggering job losses, rental prices are going up to new heights—instead of down—in New York City, aka the U.S. epicenter of the coronavirus crisis. What’s going on?
In April, average rental prices reached record highs in Manhattan, Brooklyn, and trendy northwestern Queens, according to a recent Douglas Elliman report. But that’s misleading, says real estate appraiser Jonathan Miller, who wrote the report. In fact, he believes that rents are actually falling amid the pandemic.
The problem is the report looked only at newly signed leases, which represent just a third of the rental market. It didn’t include lease renewals, where existing tenants often have more leeway to negotiate down monthly rents. With the state’s stay-at-home orders in place, renters unable to view many potential apartments in person, and folks losing their jobs at a rapid clips, more tenants are choosing to renew their leases and ride out the pandemic in place.
That explains why the number of tenants signing new leases to move to new abodes plummeted about 71% in Manhattan, nearly 67% in Brooklyn, and roughly 65% in Queens.
“Rents are not rising,” says Miller. “Lease renewals is where the action is happening. That’s where the landlords and tenants are negotiating rent reductions and rent deferrals pushing the rent payment down the road because of job losses, wage cuts, and recently being furloughed.”
Meanwhile, the folks signing new leases typically have the money to move to the city from elsewhere during the crisis. And since they’re often wealthier, they can afford those higher rents.
In Manhattan, average rental prices shot up 7.4%, to hit $4,503 a month. Even with concessions, which are discounts used by landlords to lure tenants, the median rental price was still up 4.8%. Inventory in the priciest of the city’s boroughs was down 14.4%.
Brooklyn saw average rent prices shoot up a whopping 10.3%, to $3,533 a month. The number of rentals in the borough fell 27.9%,.
Meanwhile in Queens, average prices surged 9%, to hit $3,266 a month. Inventory fell almost 29%.
(Only the northwest Queens neighborhoods of Long Island City [where Amazon had originally planned to locate one of its new headquarters before pulling out of the deal], Astoria, Sunnyside, and Woodside were included in the analysis.)
Miller expects that New York City’s rental market will return to some semblance of normalcy once the city begins to reopen. But when it does, rents could be noticeably lower and concessions could become more widespread. Fewer folks will be able to afford those high, monthly housing bills if they’ve lost their jobs, side hustles, or other forms of income.
This could force landlords to be a bit more flexible—at least until the economy rebounds.
“As we transition from a pre-COVID-19 to a post-COVID-19 world, the economic damage caused by the virus, high unemployment, and lower wages is expected to have a detrimental impact on rents,” says Miller. “Everything drops a notch or two at least initially.”