New York City’s weak rental market is a warning sign for the city’s tax base. With some of the city’s wealthiest residents and neighborhoods emptying out in the face of pandemic and civil unrest — and many staying out — New York risks an urban crisis echoing the 1970s, a moment when the city could no longer take growth for granted.
In Lower Manhattan, housing vacancies are at a record 4%, while across Manhattan the housing vacancy rate is at a 14-year high. And while the New York metro area’s rising 2.7% vacancy rate may seem low, it does not account for those who left the city amidst the lockdown and have yet to terminate their lease, according to RealPage.
Vacancies were already running north of 6% in the city’s non-rent regulated apartments before the crisis. What is increasingly clear is the largest discounts on housing in New York City are now found closest to jobs and entertainment, a dramatic reversal from the recent norm.
New leasing activity is down across all five boroughs (by up to 70% year-on-year in Manhattan and Brooklyn), even as rental concessions are up and growing in value. The going rate for rents, while still high, represent a much smaller share of apartments and does not capture how landlords are cutting rent for existing tenants. Even still, it appears that fewer tenants are renewing their leases. As a result, many landlords are waiting to see how markets will shake out; short-term leasing is up 70% year-on-year, mostly in Manhattan. If there is no summer rebound, expect the top-line rent numbers to start reflecting the lackluster demand for the city’s housing.
All indicators suggest New York City’s rental market is likely to remain weak for some time. A quarter of rent-stabilized tenants, whose rents are now frozen, have not paid rent at some point in the past three months, and the coming end to crisis-driven government aid, such as the CARES Act, promises to further squeeze the rest of the city’s tenants and landlords.
Meanwhile, the city’s wealthiest neighborhoods lost between a third and half their population since the pandemic hit, and recent unrest has not helped to draw them or the rest of the estimated 420,000 departees back. House hunters are reportedly “swarming” New York City’s outskirts. Roadway Moving reports “insane” demand from residents moving out of New York City, consisting “largely of higher net-worth individuals.”
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