Relentless increases that drove rents listed for in Manhattan and Brooklyn to record highs came to a screeching halt this fall, the latest report from the real estate brokerage Douglas Elliman finds.
The average apartment for rent in Manhattan in November cost $5,249 monthly and the average in Brooklyn was $3,964, mostly unchanged since the runup in rents ended in the late summer.
But both numbers remain near record levels, up 20% from the a year ago. And prices are likely to drift only slightly lower next year, said Jonathan Miller, who writes the monthly report, which also covers northwest Queens.
“Rents have been moving sideways, but I think those that are expecting an improvement in affordability will be disappointed,” said Miller. “Plateauing of rental prices doesn’t mean they will start falling.”
New Yorkers and even transient remote workers seeking apartments simply can’t afford to pay more for housing, he says.
The steep rise in rents that began in early 2021 was driven by several factors, according to an in-depth analysis City Comptroller Brad Lander issued last month.
Those include job gains during New York’s recovery from COVID, the end of pandemic flight, and the fact the city is not adding enough new housing units to keep up with demand. He also speculates that purchases of rental property by private equity firms might be removing apartments from the market, though the evidence of that so far is only anecdotal.
Miller thinks that remote work may also be pushing up rents, as people move to New York while working jobs based in other cities. Locally, office occupancy on a typical workday remains low, reaching 50% of its pre-pandemic share for the first time last week.
The comptroller’s study showed that increases in asking rents were the highest in New York among the 20 largest U.S. cities during the 12 months starting in August 2021. (Just one-third of the housing units in the city are market-rate, while one third are rent-regulated and the rest are owner-occupied.)
Landlords will hold off on cutting asking rents for as long as possible, instead offering concessions such as one or two months of free rent first, says Hal D. Gavzie, executive vice president of residential leasing at Douglas Elliman. The share of landlords offering concessions jumped to 16% in November in both boroughs.
In a forecast issued this week, the online real estate firm StreetEasy predicted that the lack of a significant number of new housing units means “relief in rent prices will be slow to come.”
StreetEasy, too, points to work-from-home as a factor, noting that its surveys show New Yorkers increasingly want to live by themselves without roommates, pushing up demand.
Both Miller and Gavzie maintain rents will decline sharply only if there is a significant economic downturn as a result of the Federal Reserve Board’s decision to raise interest rates to combat inflation.
“But who wants to hope for greater affordability and job losses?” asked Miller.
