Why Rent In NYC Is Out Of Control Right Now

We saw the number and it was crazy. It is literally doubling what we pay now. We never expected so much. I mean, that was a real shock to us. This apartment is not worth $3,500. There is nothing worth $3,500 in New York City. Rents in New York City are at an all-time high. As of June 2022, the median asking

rent

citywide reached $3,500. That's about a 35% increase from 2021. The median asking

rent

is $4,100 in Manhattan, $3,200 in Brooklyn, and $2,600 in Queens. Half of renters in New York City spend more than 30% of their income on rent and one-third of renters spend more than 50%.

My mom called me the other day and said, "You're 31, you should own property." And I literally said, "With what money? Because it all goes to my rent." In 2021, New York City surpassed San Francisco as the most expensive city in the US to rent a one-bedroom apartment. As the city enters the most competitive rental market in a decade, it is increasingly difficult to find affordable housing. I'm going to filter for two bedrooms, which is what I live in now for $2,250, which is what I'm paying now in my current neighborhood. And there is nothing. There are literally no coincidences.

Some tenants who obtained discounts due to the pandemic see their rent increase by at least 30%. For market-rate apartments, rent increases are unregulated, meaning landlords can charge as much as they think they can get on the open market. My name is Kacie Cleary. I'm 39 years old and my rent went up $700. My name is Thelma Rose Annan. I am 32 years old and my rent increased by $2,100. My name is Ernestina Siu. I'm 23 years old and my rent went up $2,100 a month. So what is causing these unprecedented rent increases? Is there an end in sight? New York has been expensive for a long time.

And that has to do with demand,

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? People want to live here. I watched an episode of Oprah with my mom about how to make a vision board. So I did one when she was 17 before college, and I had New York there in Manhattan. It's all here. You have all walks of life. Anything you want, any cuisine you want. You have Broadway, museums, everything. Add to this a persistently low housing supply, and you have a recipe for an extremely expensive city. After the pandemic hit in March 2020, New York City's population dropped by approximately 340,000 people. Renters are fleeing New York City, leaving a record number of apartments empty in Manhattan.

And as vacancies increase, rents go down. During this period, rental inventory reached levels not seen in more than a decade. The last time rents in New York saw such a significant drop was during the 2009 financial crisis. When the pandemic hit, many of us millennials, Generation Z, laughed that we can finally afford to live in the city we we love so much. At the height of the pandemic, a third of listings in New York City offered rental concessions in the form of a month or more of free rent. Being a homeowner at the beginning of the pandemic was pretty scary.

There were so many unknowns, and when New York City started shutting down, this concern arose: Well, what about all of our units? Will our tenants be able to pay the rent? What is going to happen? We have many expenses as small property owners, our mortgages, our municipal bills. Ernestine, a recent college graduate from California, moved to New York in January 2021 to begin her first job for CNBC's "Fast Money." New York City was empty at the time. People were far from the city. She and her roommate found a two-bedroom apartment in Manhattan's East Village for $2,250. In fact, we achieved a lot.

I think we got a month or two off the rent. So our rent was really discounted. And also our apartment has a washer dryer in the unit, which you don't find much in New York City unless you pay a premium. Kacie and her husband had been living in her one-bedroom Upper East Side apartment since 2015 and received a $450 rent cut during the pandemic. We really seriously considered moving and looking for a new apartment, something with better space for the same price. But our landlord came back and said we would reduce the rent to X amount, so we were very happy.

Thelma has lived in New York since 2018. In 2020, she reached a personal milestone and got her own one-bedroom apartment. Then I found this apartment on StreetEasy for $1,882 and it was a one bedroom. And I thought it was an incredible price because you can never find that in New York. So I instantly jumped on it and then it increased to $2,400 the next year. There have been many times when I had oatmeal for dinner because I needed to pay the rent. And when the pandemic happened, I was not only able to find this place, but also afford it because it became affordable.

She was so excited. But that looming presence of the rent going up again was always in the back of my head. In mid-2021, New York City began to come back to life as vaccines became available and restrictions were lifted. New York City is dead forever. That was the proclamation last year when sidewalks across the city emptied and many small businesses closed their doors forever. But today new data shows an awakening. Rents skyrocketed as tenants lost the bargaining power they had at the height of the pandemic. I've been in business for 13 years and I've never seen a rental market like this.

I've seen it competitive, but not when there are bidding wars for rental properties. My original rent was $2,250, so they are saying if I want to renew my rent, it will be $4,395. So yes. I actually updated my page because I thought it was a mistake, looked at the number and started laughing. $3500, $3500, $3500. I had to keep repeating it out loud because it was such a ridiculous number that I thought, this can't be possible. This has to be a joke. We got a new lease increase. We really want to talk to the owner and discuss an option - can we negotiate a little or is there some wiggle room?

And they simply responded within 15 minutes saying no, they had already given us a preferential rate on that $700 increase. Therefore, they were not willing to give in at all in the negotiations. We didn't think our apartment was worth 2700. It's small and doesn't really have all the amenities. 4th floor walk-up, $2700, is also our preferred rate, where it is actually $3100. Now, with very low inventory, owners can charge much higher rates and certainly offset some of the losses they suffered. during the pandemic. I think some of the misconceptions people have about New York City landlords is that each one of them is a huge institution that's just making a profit when in reality there are a lot of small landlords, especially in Brooklyn and Queens, that maybe maybe they live in one. unit and rent the other, and depend on these tenants to offset their mortgage and expenses.

Of the city's nearly 3.6 million units, two-thirds are rentals. About 1 million are rent stabilized, meaning rents can only be increased by a fixed amount each year. But even those lucky enough to live in rent-stabilized units are seeing larger-than-usual rent increases. In June 2022, the New York City Rent Guidelines Board approved a 3.25% increase on one-year leases and a 5% increase on two-year leases, the highest rent increase in almost a decade. The fastest growing district has been Manhattan. In terms of pricing, Manhattan was also the hardest hit and we are now seeing prices up 40% year over year. That would have been something I thought was a typo years ago, but now it's a sad reality for people living in Manhattan trying to cope.

If I'm already checking the boxes for what makes a great tenant, I have a full-time job. I make more than six figures. I am single, calm. And I can't even afford to live here. Who is the real estate market for? So when we got the lease renewal and the mail, we knew

right

away we weren't going to do this. In fact, we found a great one that we liked. He ended up at Kew Gardens in Queens. We started applying and later that day I was terminated from my position and role. And you know, anyone who knows New York City needs proof of employment and pay stubs for offer letters.

And at that time I had none of that. Kacie and her husband left their Upper East Side apartment and moved into an Airbnb in the Bronx. We thought it was the best option for us because it allowed a lot of flexibility. They offer short term leases which was really nice. It was almost like a sublease. We said no to $700 and thought about that. But I think in hindsight I would have done a little more research and looked at different apartments and tried a little harder to make a decision. Before we said no to our landlord, we realized that after all was said and done, the Airbnb itself actually cost almost as much as the rent increase would have been from that $2,700.

As I look for an apartment, I get frustrated because I clearly see the benefits of what the districts have and what others don't like. What am I giving up? Do I give up having access to easily get food or do I give up being able to walk to a doctor? Do I give up my safety because some neighborhoods are safer than others? For a whole week I was breaking down, looking at the prices. One day, I literally called my mom and said, Mom, I feel like a failure. I can't even afford to live in the city.

We have made a deposit, so the ideal is not to spend another one. Is the agent here yet? Can you imagine a full bed here with your desk? Yeah. I feel like my dad's would fit here and then, I could have a full bed, but then, I need something for my closet. I love it, but I am. I don't know if I can afford it, honestly. So my roommate and I looked at three or four apartments before we found the one we have now and just got approved for. And that process was crazy. In fact, we applied for apartments that we didn't even know if we wanted to live in just as a backup for security because it was so competitive.

There is even one apartment where we had to put down a $1,000 deposit just for our application to be considered. You know, as a real estate agent in Manhattan, Brooklyn and Queens, we're seeing that apartments are on the market for less than a week and would be rented at the first showing or the first open house. The quickest place I had ever rented was in Bed-Stuy and had a backyard. It was a two-bedroom rental with a backyard. We had previously rented it for $2,700. We put it on the market for $3,000 and we had about 75 people at the first open house and it rented that day and I think it rented for $3,600.

Another challenge for New Yorkers is the requirement to earn 40 times the rent when applying for an apartment, with the average rent in Manhattan being around $4,000. That means the minimum income to qualify for an apartment at that price is $160,000. The median household income in New York City is $67,000. If an applicant does not meet this requirement, he must find a guarantor who earns at least 80 times the rent to sign his lease. So my roommate and I toured this apartment. It was $4,800 for two bedrooms and one bathroom in downtown Brooklyn, and it had everything we wanted. But we didn't meet the criteria of earning 40 times the rent in our income.

When I first moved into this apartment, it was $1,882 a month and I made $65,000. I was privileged to be able to pay that rent requirement, but since it wasn't 40 times what I needed a guarantor, that's something that was embarrassing to deal with as a 29-year-old who has a master's degree, you know. , I proved that I can do it on my own. But here is an obstacle that makes no sense and seems very classist to expel certain people. With inventory rising right now, we're seeing a lot of that inventory coming from people who are being left out of their pandemic deals.

About a third of the city's inventory right now comes from those people. We thought about Jersey City, which is really cool. It is not ruled out. I mean, they're all very close to New York. That's kind of a wait and see thing. But we're willing to do it in Brooklyn, Queens. I mean. Kacie is waiting until she finds a new job before she starts apartment hunting again. There are so many remote opportunities now. Who knows where I'll end up? It could be in New York. I could be in Boston or Philadelphia, but I'm really open to anything.

So. and here is myresume. It's a joke. Thelma's lease ends in September 2022. She will not renew. You know, I remember at the beginning of the pandemic how scary that was and how I mean, if you were here, it was very empty and scary. So seeing New York come to life again has been incredible. And then not even being able to continue experiencing that joy simply because I can't afford to live here is ridiculous because I'm like, okay, so what's next? It looks more like I'm going to pack up my stuff and go to Europe and work remotely there and wait for housing to calm down in New York.

Thelma ended up buying a one-way ticket to London. Hopefully she can come back once the market has cooled down a bit and I can find a place or I don't know, maybe I'll officially become a London girl. Who knows? Ernestine is moving to Brooklyn with her roommate. Her share of his rent will be $2,200. I love her. I love it. I was really against Brooklyn at first, but I actually love this area. I like this area better than where I originally live now in the East Village. I love what it's like to be by the water. There are so many cute restaurants around and it seems like it's easier access to healthy things I can do in everyday life.

So when we signed this lease for our new apartment, the startup costs were $10,000. That includes the security deposit and the first month's rent. But what really baffled us was the broker's fee, which was $2,000. I had to dig into my savings and my savings literally... Like a big chunk of it just disappeared. So I'll have to change my lifestyle a little and save where I can. So it's just small compromises you have to make. They are just commitments. It's really a strange feeling, not having a fixed place right now and feeling like a nomad. So it's hard to think about where I'll be in a few months and where we'll settle.

And also my cat. I want to make sure my cat is happy. It really comes down to supply and demand. There are a lot of people who want to live in New York and with the number of apartments there are in New York, there just aren't that many. And that imbalance will cause the unaffordability we are seeing across the city. The finish line keeps moving and I wonder: what is the purpose of continuing to run this race? With the US economy on shaky ground, there is a chance that rents in New York City will begin to normalize.

We're going to see a lot of inventory coming online, so it would be people moving out of town or a lot of construction going on or something happening with the demand side. If there's a big loss of jobs like in a recession, things like that, where people just couldn't afford what they could afford before, that would also lead to prices falling. So one of these two things has to give. The balance is beginning to tip towards buying. So if you look at the rent versus buy analysis, I think with rents being at an all-time high, it's really worth looking at why am I spending $5,000 to rent when I could have the same apartment for less?

I think the hardest part during this process was the mental strain it put on me. It was difficult to choose between paying the New York City premium for the opportunities here or just moving home and saving money. I am optimistic. I think this is a temporary solution and something has to break. I think at some point the mayor will have to do something and we will have more opportunities and more apartments available. Being able to have this for two years has been very uplifting and inspiring. I feel almost unstoppable and I feel very grateful. And I see New York come to life.

But at the same time, New York is coming to life. They're expelling me at the same time. You know, "Tough New York" is a saying and it's true, but I feel like we're getting beat and you can only be as tough as you can.